Business Relationship Dissolution- The impact of relationship properties

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Mid Sweden University Östersund 07.01.2011 Department of Social Science

Business Administration

Business Relationship Dissolution-

The impact of relationship properties

Bachelor Thesis

Author: Ulrike Tenner

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I

Abstract

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II

List of figures

Figure 1: The influences of the dissolution ... 4

Figure 2: Characteristics of exit strategies ...10

Figure 3: Framing the business relationship ending process (model 1) ...11

Figure 4: Framing the business relationship ending process (model 2) ...12

Figure 5: The summarized overview of the theory ...14

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List of tables

Table 1: Relationship development... 1

Table 2: Reasons for business relationship dissolution ... 8

Table 3: Factors influencing business relationship dissolution ... 9

Table 4: Exit and voice strategies in interorganizational buyer-seller relationship ...11

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VI

List of abbreviations

B2B Business to Business

B2C Business to Customer

CEO Chief executive officer

JIT Just in time

LSE Large scale enterprise

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1 Introduction

Nowadays Relationship Marketing is a very important aspect of Business Administration and can be regarded as one of the most important developments in the last 20 years. The goal of Relationship Marketing is to implement the customer or other stakeholders in the company and create a long-term relationship with him/her (Alajoutsijärvi, Möller, Tähtinen, 2000). The purpose of this idea is the increasing profitability of the customer or stakeholder. It also se-cures the company to be in the future successful by knowing that customers and stakeholder trusted them in the first place.

But like in marriages relationships not always fit and relationships are not made for eternity. But how to end a relationship appropriately? Improperly managed conflicts and problems often lead to a weakening of the relationship and even to counterproductive business disso-lution (Alajoutsijärvi et al. 2000). This small research field of Business Administration is the focus of the Bachelor Thesis.

1.1 Relationship Developement

To identify the relationship dissolution it is important to integrate the phase in the whole con-text of a buyer-seller interaction. The model of Perrien, Paradis and Banting (1995) sets five phases of a relationship. The following table shows this relationship development in an over-view.

Phase One Awareness

Phase Two Exploration 1. Attraction 2. Communication 3. Development 4. Norm development 5. Development of cooperation

Phase Three Expansion

Phase Four Commitment

Phase Five Dissolution

Table 1: Relationship development

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ex-2 pectations are formalized (norms are defined as "expected behaviors"). The last subphase is the development of cooperation and the planning expectations.

In the expansion phase the interdependence of both parties increases based on their mutual satisfaction.

Phase four (Commitment) is declared as a phase that encompasses the explicit recognition of the exchange as a continuous process. Hence, it leads to an institutionalization of the rela-tionship. Inputs (meetings, communication, etc.), durability and consistency (resources in-volved to sustain the relationship) are major concerns at this phase.

The final phase (Dissolution) is a relatively unknown process due to a lack of empirical mar-keting research on the topic.

1.2 Problem formulation

As the chapter of background already claimed there is a lack of empirical marketing research on this topic. This statement was made in 1995 by Perrien et al. By now more and more re-searcher focused on different ways of describing the dissolution process and came up with different approaches to fill up this deficiency. This Bachelor Thesis spotlights the current state of research and focuses especially the two questions which were center of attention in the research –

1. How does the dissolution process in business relationship works?

2. What impacts do properties of a business relationship have on the disso-lution process?

1.3 Purpose of the study

Research of long-term relationships with customers and other stakeholder groups has been underdeveloped in mainstream marketing management literature (Alajoutsijärvi et al. 2000). There is a gap in researching the dissolution of relationships in business. In the last years this gap was filled up by new research cases. However, this gap is still not closed and there are still many questions unanswered. The purpose of the Bachelor Thesis is not filling up the gap but trying to answer some questions. It provides the reader with an overview of the cur-rent theories that where developed and spotlights the previous mentioned questions.

For the management of the disengaging company, it is necessary to understand what type of strategy can be applied in dissolution, so that any negative consequences affecting both partners and the network can be avoided. (Alajoutsijärvi et al. 2000)

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1.4 Limitation of the problem

Because this research is a wide and still not fully discovered field some limitations are ne-cessary in order to stay focused.

Researcher focus mainly on two different dissolution models – the dissolution between a company and a customer (B2C) and the dissolution between two companies (B2B). This dif-ferentiation is important because interorganisational business relationship endings differ from consumer switching behavior. The two different aspects hinder a single model from sufficien-cy describing both kinds of relationship ending (Tähtinen, 2004). Therefore The Bacholor Thesis focus only on B2B.

Furthermore business relationships are usually connected by a legal contract. But legal mat-ter will not be a part of in this thesis.

1.5 Disposition

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2 The relationship properties and the dissolution process

As the sociologist Simmel (1950 p. 123) has stated, it takes two parties to form and maintain a relationship but only one to end it. This means that the actions of one actor are sufficient to dissolve a relationship, even if the other actor still wishes it to continue. Of course, there may be situations when one partner is not able to end a relationship although he/she wants to. It may be too dependent on the other partner or experience some other reason which hinders him/her. Despite this, it may be said that an actor may end a relationship but not start one on its own (Tähtinen, 2001 p. 47).

For a better understanding of the complex process a simple figure is proposed (Figure 1). It illustrates that the properties of a relationship as well as the reason of dissolution are influen-cing the dissolution itself. In addition the properties are influeninfluen-cing the reason as well.

In the following chapter all three parts will be shortly presented. The main focus is on the dissolution process itself which will be presented last.

Figure 1: The influences of the dissolution

2.1 Properties of the relationship

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5  Activity links

 Resource ties  Actors bonds.

The Activity links embrace activities of technical, administrative and marketing kind. The re-source ties describe the exchanging and sharing rere-sources which are both tangible (e.g. ma-chines) and intangible (e.g. knowledge). The actors bonds are created by the people who interact and exert influence on each other and form opinions about each other.

Within these connections properties evolve. Those twelve properties are somewhat overlap-ping and do not readily lend themselves to clear-cut definitions. In the following all twelve properties of Gummsson (2002) will be briefly explained.

Collaboration

This is a fundamental property of a functional relationship. Collaboration can be linked to one single deal or to a continuous relationship. The degree of the collaboration is closely com-bined with the degree of competition. If there is a high degree of collaboration and a low gree of competition the foundation of a long-term relationship is shaped. As soon as the de-gree of collaboration becomes insignificant and the dede-gree of competition takes over it be-comes imperative to either divest the relationship or to consciously work for a reinforced rela-tionship (Gummsson, 2002. p. 22).

Longevity

As already mentioned a long-term relationship is very important to the field of Relationship Marketing. It is the opposition to Transaction Marketing which focuses only on single interac-tions. As the researcher of Relationship Marketing advise long-term relationships are more effective to all participants in the business world and by now very common in the B2B (Lyly-Yrjänäinen, Velásquez, Suomala, Uusitalo, 2010, p. 61).

Commitment, Dependency and Importance

This combined property is important particularly in JIT production systems. Dependency is apparent in emergencies. For instance in a production company when the supplier of raw material is in traffic and is not able to deliver on time the dependency of the supplier is in this emergency doubtable. There are three levels of dependency and commitment in customer relationship which will not be presented here but for further interest Gummsson (2002) ex-amines them.

Trust, Risk and Uncertainty

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Power

This property is still an undervalued concept in the marketing literature (Gummsson, 2002). Power in relationships is usually not symmetrical. The weaker party may feel used, but the relationship still can work when there is no better alternative for the weaker party (Gummsson, 2002. p. 24). A company in a new market may be short of components and the supplier has the power. Porter‟s five forces show this, too. If the company is facing a supplier or buyer force it usually has difficulties to lead the negotiations (Hollensen, 2007).

Frequency, regularity and intensity

A fixed timetable is a part of a long-term relationship. The parties of the relationship can have weekly, monthly or annually interactions. This also affects the pattern of the relationship. For instance long-term relationships can be frequent but not particularly intense.

Adaption

Adaption can be far reaching as the years pass by. Termination can be very costly for one or all parties and can result in a large investment that is customized to the particular partner. For an adaption there must also be trust in the business partner to avoid disinvestments. It can‟t be used otherwise. Because of this high involvement of risk for some companies adap-tion is not even an opadap-tion but for other companies it is crucial.

Attraction

At this point a marriage metaphor is useful. Before the involvement in a relationship a certain attraction between the two parties has to exist. Halinen (1997, p. 270) found out that attrac-tion between companies may require a combinaattrac-tion of raattrac-tional financial motives and psycho-logical factors.

Closeness and remoteness

Closeness can be given physically, mentally or emotionally. The psychic distance influences the interaction rapidly (Hollensen, 2007) because of the cultural similarities. Also closeness strengthens the feeling of security and strengthens the relationship.

Formality

The better the parties know each other the more it becomes informal. Informality in B2B is a necessity supplement to formal agreements. With the informality parties are able to trust each other more. Negotiations and exchange of information may lead into major deals. How-ever, the formal aspect must be heeded at all time.

Routinization

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Content

It is usually described as an economic exchange. One party provides goods while the other party provides money. In new marketing and management theories relationships are more joint value creation and interactions. Additionally the content of a relationship contains now more knowledge and information than just goods and money.

Personal and Social Properties

Personal properties can be age, sex, profession, education, ethnicity, personality type, geo-graphical and social mobility, personal traits, etc. It is usually difficult to analyze in which way this property is having an influence because the personal and social properties usually pro-vide a great variety.

Often the question is asked which property is the most important one. It can‟t be answered that easy. It is helpful to think of Pareto Optimum and zoom in on the properties that count for the main part of the benefits of Relationship Marketing. Most properties are fuzzy entities which overlap in several respects. They moderate each other and a ranking would be mis-leading. General properties of relationships can contribute to the evaluation of a relationship and its development – but do not serve alone as a basis for marketing strategies and deci-sion making. Even if they highlight an interesting phenomenon they must be put into context

(Gummsson, 2002. p. 27).

For the empirical investigation in this Bachelor Thesis there will be chosen only three proper-ties for the investigation –

 Longevity  Power  Formality.

As the literature of Relationship Marketing states longevity is very important to the relation-ship. It could also influence the process of dissolution in a significant way because the longer a relationship the closer the connection of the partners could be. This can be different from short-term relationships.

The power in a relationship is taken as an investigation variable because it seems very in-fluencing into the dissolution process. The communication and the acting of a weak party during the process could significantly differ from the communication and the acting of a strong party. There is a difference between a weak and a strong disengager in a dissolution process expected.

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8 an informal form of address “Du”. If there is a difference between in addressing the business partner it may alternate the dissolution process. This can be expected because if the busi-ness partners have an informal form of an address the closer the relationship is and a close relationship may dissolute in a different way than just a random relationship.

Further information of the empirical investigation is given in the method chapter (chapter 3.1).

2.2 The reasons of a dissolution

Since the reasons of dissolution are not in the main focus of this research it will be presented very short. The reader still has to remember that the reason is still an influencing variable of the dissolution process. But reasons differ dramatically from each other and a generalization in literature is difficult.

Freeman and Brown (2004) conducted a theoretical research and collected several important reasons which appear crucial among the current literature. In the following table (Table 2) the different reasons collected by Freeman and Brown (2004) can be seen:

Reasons Sources

Change in management Goldman (1995)

Completion in project Alajoutsijärvi et al. 2000 Loss of business due to financial

prob-lems Gassenheimer et al. (1998)

Parties finding their needs better served elsewhere

Gadde and Mattson (1987); Gassenheimer et al. (1998)

Change in personnel Alajoutsijärvi et al. 2000 The nature of business has changed Gassenheimer et al. (1998)

Table 2: Reasons for business relationship dissolution

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Constructs _Sources

Single Factor

Service failures, pricing,

Changes in personnel Keaveney et al. (1995), Perrien et al. (1995) Antecedent conditions,

com-mitment Hocutt (1998)

Relationship value Gassenheimer et al. (1998) Dissatisfaction Mittal, Lassar(1998), Ping(1995)

Holistic Factor

Factors existing when entering

the relationship Duck (1981), Halinen, Tähtinen (2002) Factors related to unfavorable

episodes (e.g. bankruptcy)

Halinen, Salmi (1999), Halinen, Tähtinen (2002), Michell et al. (1992)

Factors related to lack of mod-erators (e.g.exit barriers, alter-native partners)

Heide, Weiss (1995), Steward (1998), Hali-nen, Tähtinen (2002), Halinen (1997) Table 3: Factors influencing business relationship dissolution

Another model on relationship ending describes three factors that lead to a divorce –  The handling of precipitating events (e.g., episodes of conflict);  Attenuating factors

 Predisposing factors.

This framework based on Halinen and Tähtinen 2002 investigations. This research focuses on predisposing factors, described as existing, static factors that increase the possibility of relationship breakdowns (Halinen & Tähtinen 2002).

2.3 The process of dissolution

2.3.1 Communication strategies

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10 dissolution and therefore be able to take actions that might still save it. In such situations Alajoutsijärvi et al. (2000) state that the dissolution of a relationship is a joint decision, addi-tional break-up costs and emoaddi-tional disturbance can be avoided by proper dissolution man-agement.

The model of Alajoutsijärvi et al. (2000) explains the four different types of communication strategies which are proposed in the following matrix (Figure 2). This model was developed by a multiple case study.

1. self-oriented and direct 2. self-oriented and indirect 3. other-oriented and direct 4. other-oriented and indirect

Figure 2: Characteristics of exit strategies

In the first matrix spot the “self-oriented and direct”-strategy is presented. If a disengaging company uses this type of strategy it is typical that they hurt the business partner, use a rap-id way of disengagement and secure their own interests (disengaging company). By using this type of dissolution the company should be sure about their dissolution decision because they might damage the disengager‟s network identity and leaves no doubt about the relation-ship continuity.

The second way of disengaging is the “self-oriented and indirect”-strategy. With this strategy is still a possibility of hurting the business partner but the whole process of dissolution takes more time, enough time to adjust. It also secures the disangager‟s interests and it damages the disengager‟s network identity. The difference to the “self-oriented and direct”-strategy is the increasing uncertainty of the business partner of the relationship‟s continuity.

The third strategy is the “other-oriented and direct”-strategy where the center the avoidance of hurting the partner is. It is a fast way of dissolution and in order to avoid hurting the disen-gaged company needs by giving up some of its own interests. Instead of damaging the dis-engager‟s network identity they try to avoid this. Like the “self-oriented and direct”-strategy the dissolution leaves no doubt about the relationship‟s continuity.

The fourth and last strategy in this model is the “other-oriented and indirect”-strategy. In this combination it is also important to avoid a hurting of the business partner and it also takes longer than in direct-strategies. It is enough time to adjust to the business partner. But with the adjustment it is possible that the disengager has to give up some of their own interests. In this strategy there is a total avoidance of damaging the disengager‟s network identity. Also there is an increasing uncertainty of the business partner if the relationship still continues or if the relationship ends.

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11 specific division of the communication strategy which becomes more important in the model-ing of the dissolution process.

Other-oriented Self-oriented Indirect Disguised Exit

Silent Exit Pseudo-de-escalation Fading away Cost escalation Withdrawal Direct Communication Exit Revocable Exit Voice Negotiated farewell Mutal state-of-the-relationship talk

Changing the relationship

Attributional conflict Diverging state-of-the-relationship-talk Changing the partner Table 4: Exit and voice strategies in interorganizational buyer-seller relationship

2.3.2 The stages of dissolution

How to describe a process of business relationship ending, while considering both the as-pects of time and the multiplicity of actors involved? As a relationship ending is not an event, but a process (Tähtinen, 2004). Process is defined as „„a sequence of events or activities that describes how things change over time‟‟ (Van de Ven, 1992). Thus, the meaning of process in this study is not only a linear sequential model of development, but a multiple progression of streams of activities that unfold as the relationship develops over time (Tähtinen, 2004). In the following two models will be proposed – a sequential and multiple progression one. But there is no preference of one of them. They are used equally in the literature.

The first model is presented in Tähtinen (2001) and is shown in the following figure (Figure 3).

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12 The names of the stages clarify what happens in every stage. For further description to every stage the paper of Tähtinen (2001) offers deeper information.

Noteworthy is that the stages presented here are a combination of all the stages the dissolu-tion process may engage. Not all the stages occur in all dissoludissolu-tions, and their order of ap-pearance may vary. The properties of the relationship and the reasons for its dissolution af-fect the process, its stages and their order of appearance (Tähtinen, 2001). The second model acknowledges the variety of the dissolution process. It is more generalized than Tähti-nen (2001) and doesn‟t give an exact order the process engages. Thus, the model will con-ceptualize the process through several stages which are shown in the following figure (Figure 4, Täthinen 2004).

These stages are not in a special order instead they are in a circle and more connected than in the sequential model. This also shows that these stages differ in each dissolution and dif-fer from company to company.

Figure 4: Framing the business relationship ending process (model 2)

The consideration stage is composed of the actors‟ decision-making behavior in which the question of continuing or ending the relationship is asked (Tähtinen, 2004). It is closely con-nect to the reason of the ending the relationship.

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13 and therefore the existing resource ties, actor bonds, and activity links erode (Tähtinen, 2004, p. 335).

The disengagement stage may need to be proceeded by the enabling stage, which involves all actions aimed at making the ending of the relationship possible by lowering the exit bar-riers or reducing the importance of the attenuating factors (Tähtinen 2004).

The sense making/aftermath stage refers to all actions that are performed in order to explain the process and mentally safeguard the actors during it (sense making) or after it (aftermath). The models are more of a collection of possible stages that the ending process might en-counter. In some endings, restoring actions, for example, may not be performed at all and the order of the stages may also vary.

However, the stage description helps to divide the complex process into shorter time periods (Tähtinen 2004). By describing actions with the use of the different actor levels allows a more detailed description of the complexity of the process. This also explains why the stages may take place partly simultaneously because different actor levels are performing the actions.

2.3.3 The level of actors

The empirically grounded models of the level of actors (Tähtinen, 2001, 2004) describe the ending process by dividing it into six stages as illustrated in the Figure 3 and Figure 4. These stages are performed by the four actor levels –

 Individual level  Company level  Dyad level  Network level.

In every stage of the process it depends on which actor level is especially involved. The indi-vidual level is usually the initiator of the dissolution. He/She will eventually express his/her intention in the company and with this the company level is reached. When the company members decide to end the relationship they might contact the opposing company and with this the dyadic level is achieved. Further, the company decides to look out for new suppli-er/buyer and searches for new offers the literature speaks of the network level.

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14 process. In any of these situations proper management is needed in order to avoid negative consequences to any of the actors involved.

In the research subject of how relationships end could be more models than presented here. But the named models are the most common ones and established ones and also used by other researcher as there theoretical foundation.

2.4 Summary of the theory

To summarize the theory of relationship and the ending of it the following figure (Figure 5) is given. The grey colored boxes are in the focus of attention in the investigation. The model shows that the process as a whole has many influencing factors and can complicate the dis-solution process.

Figure 5: The summarized overview of the theory

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15 20 references which illustrates the lack of valid relevant literature. Only research papers fo-cus on this subject and only very few books mention it.

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3 Method of the research

3.1 Design of the research

As already said in general the theory still shows a lack of investigations. Therefore this re-search was made to find more evidence of the link between the properties of the relationship and the process of business relationship dissolution. Due to the literature analysis it can be seen that no investigation was made in Germany. So the design of the study is laid out for an investigation in Germany.

To get a better understanding of a dissolution process and the impact of relationship proper-ties Bortz and Döring (2006) recommended generally the use a qualitative research method in such cases. Due to the fact that the current literature is still rare and knowledge of this complex process is still not fully discovered researchers are in the stage of collecting infor-mation. So it is more interesting to explore the process than getting a statistical proof of it. The foundations of the statistical (quantitative) analysis are the information and the variety of collected data. At this point of the progress of the research accomplishment it is more useful to perform a qualitative analysis to explore and understand the process. Unless research is more advanced quantitative analysis is not conductive.

Qualitative analysis, especially explorative research, can be carried by case studies. A useful method is the interviewing. With this it is possible to identify influencing patterns and discover the theory in empirical evidence. Getting information which is not considered in the current literature can be discovered by semi-structured interviews. Semi-structured interviews are very flexible and a variety of results can be expected through them. With open questions the interviewee might give new hints towards yet not discovered variables which influence the dissolution process and in what way relationship properties are influencing.

The research is divided into three parts –  Pilot study

 Main investigation  Analysis system.

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17 In the main research actual business men in a SME were asked. The interview partners are CEOs of the company and closely connected to the process of dissolution. In explorative analysis it is hardly significant how many participants the investigation contains (Bortz & Döring, 2006). Therefore the main investigation has four interviewees and the pilot study one.

In order to avoid conducting factors it is possible to develop a procedure of the interview (Appendix 1). Therefore the consistency between the four interviews is given. The proce-dure-structure of the interview is divided into three parts –

 Introduction  Interview itself  Closure.

3.2 Data collection

The recruitment of the participants was mainly in Germany in the region of Eastern Germany. The economical structure is similar to the economical structure of Middle Sweden, having a lot of companies which belong to SME. Nevertheless the region has in contrast to Middle Sweden more inhabitants and a significant amount of LSE companies, like DHL, DowChemi-cals and BASF. A possible interviewee should fulfill the two conditions – work for a SME and the SME should be located in Eastern Germany.

One participant is asked if he/she knew business men who work for a SME. Of a list of poss-ible interviewees, participants were chosen who fulfill the two requirements mentioned be-fore. Out of these, four CEOs agreed to arrange an appointment for interviewing.

3.3 Development of research questions

The investigation is made for the collection of information for a better understanding of the dissolution process. Because of this issue it is recommended an interview with a semi-structured form as mentioned in chapter 3.1.

The Investigation will be close to the Bortz and Döring (2006) which suggested a division into micro- and macro-structure. The macro-structure of this investigation is the classification of the relevant questions into three head topics. In the micro-structure those head topics include specific investigation questions. The head topics will also help to structure the interview –

 General information

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18 Saunders, Lewis and Thornhill (2003, p. 267) describe also a checklist of semi-structured interviews. This checklist was used to prevent form mistakes and to assure the usual re-quirements.

One of the main reasons of the investigation is to see the impact of the properties to the dis-solution process. Since the investigation was held in Germany the three properties which were introduced in chapter 2.1 are mostly interesting.

To keep the reader on track it is possible to give information what is expected from each property of the relationship. The interpretation will therefore be easier to follow. In this inves-tigation each property has a certain influence to the dissolution process (see chapter 2.1). It can be also seen as three hypotheses which will be investigated and either will be accepted or rejected.

But before the main investigation can be analyzed the pilot study was evaluated. The impact of the pilot study and the possible correction of the interview layout will be shown in the next chapter.

3.4 The impact of the pilot study

The reader can find the first version of the interview layout in the appendix (Appendix 2). Af-ter the inAf-terviewee answered the questions, some parts of the layout needed to be changed. In the following the changes will be divided into the three interview subtitles.

The first part of general information was answered as expected. Therefore no changes are necessary.

The second part of the information of the relationship needs to be shaped a little different. In the following the questions are getting fixed one by one.

Question II.1 is too general because a business man can think of many different occasions

and dissolved relationship. As a result it will be directly asked for a long-term dissolved rela-tionship where the interviewee was the active part and the dissolution was extraordinary. Since the interviewee has to think of one particular case he/she usually thinks of an extreme case. This can be seen positive and negative. Positive is the fact that the dissolution is close in mind and the information is not only superficial and special variables which could be in-fluencing are clearer to identify. On the other hand and negatively is the chance and danger that there is a loss of validity. But at this point the positive aspect seems more profitable and the risk will be accepted.

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Question II.6 needs to be changed in the formulation because the interviewee had

difficul-ties with it. If the question requires “yes“ and “no” interviewees see the simpler answer in “no” in order to avoid further explanation. This on the other hand could hide important information and maybe an influencing variable. But it is crucial for the research to really think about any influence. Therefore the question needs to be rewritten into a “W”- question to give the inter-viewee the opportunity to think deeper and explain the influences.

In the third part where questions about the dissolution process itself were asked also showed some missing parts which needed to be changed.

Due to the fact that business men, who lead a company, are usually very talkative they tend to talk more about one question than they are supposed to. Since the questions are all open questions the interviewees could offer more background information with their answer. This leads to some overlapping information and they repeat themselves because the questions are very closely connected. To avoid this and save time for the interviewer and of course the interviewee a few questions become unnecessary and only need to be asked when the inter-viewee gives short answers. (question III.1 and question III.4) Otherwise the answer to these questions will be added later from another question information.

Another special case is question III.2 and question III.6 should show the difference be-tween the strategy they thought of and the actual development of the process – a classical actual-theoretical-comparison. Unfortunately this doesn‟t get recognized by the interviewee and seems for the interviewee a doubled asked question and could lead into dissatisfaction of the interviewee. As a result those questions will be combined into one question.

In question III.3 can be a chance of misunderstanding. It was asked about “how” they com-municate and it will be answered what communication channel is used. Therefore the ques-tion needs to be more specified and even divided into two quesques-tion parts. The interviewee should answer first which interests are more important and then will be asked how he/she tells this the opposing company.

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3.5 Possible source of error and potential short comings

3.5.1 Possible source of error

During the preparation of the Bachelor Thesis two possible sources of error seem to appear during the empirical research. In the next chapter they will be explained one by one.

Cutting a clear line between all properties is nearly impossible. All twelve properties are in-fluencing the process of dissolution and moderating each other. But taking all twelve va-riables is not possible because the number of independent vava-riables would be too high and this could cause a loss of reliability. With respect to this issue the investigation is been made. The reader of the thesis is supposed to keep this in mind.

Another possible source of error is already mentioned in chapter 3.4 when the participants will be asked to think about a dissolution process where they have been the proactive part. They can decide on their own which relationship they take as their case. Usually in this case they remember cases which were extreme and negatively affected and that could lead into a loss of validity. Also for each case only one relationship will be presented. The interviewees are not allowed to answer the questions with their general experience.

3.5.2 Potential short comings

Nine of the properties are not analyzed and only three of them will be investigated. It is cru-cial to understand that the other nine properties could also be influencing the dissolution process but within this study only three properties are possible to investigate.

Furthermore is fundamentally to know that the generalization of a qualitative analysis is pos-sibly weak because the study only investigates four CEOs of SME in Eastern Germany. The third short coming is the reason of the dissolution process. Of course it is an influencing factor but due to the fact that this study is limited in time and extent the reason is not an in-vestigated variable

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4 Main Investigation

4.1 Conditions of investigation – Development

The procedure of main investigation is similar to the procedure of the pilot study. The men-tioned sheet of the interview procedure was used (Appendix 1). Before starting the interview the interviewees received information about the research field and the intention of the inter-view. The actual interview was performed either right after the contacting or an appointment was arranged. In case of a telephone interview it was also asked if a Dictaphone can be used so the interview isn‟t interrupted because of the notes taking. After the phone call the information were written into the interview sheet.

If the interviewee is interested in the research it will be offered to send the investigation out-come by mail.

During all interviews the interviewer was the same person. This lowers the variety of the in-vestigator artifacts.

The next chapter contains the findings of the interview. It will be evaluated in the same order as the interview of the main investigation which can be looked up in the appendix (Appendix 3).

4.2 Results

4.2.1 General information

When the interviewee is asked what the company engages in it is in regard to the industry concentrated to. The interviewees answered as shown below –

 Interviewee 1: Medical equipment industry  Interviewee 2: Custom manufacturing industry  Interviewee 3: Furniture industry

 Interviewee 4: Chemical/ renewable resources industry.

The companies can be arranged in different position of the supply chain. The following figure (Figure 6, Lyly-Yrjänäinen, Velásquez, Suomala, Uusitalo, 2010, p. 16) shows a classical supply chain of a producing industry which is the foundation of the sorting of the companies.

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22 The position of the company in the supply chain can be seen in the following but may vary from the ideal figure shown above.

 Interviewee 1: OEM – Retailer – Customer

 Interviewee 2: System Supplier – Wholesaler – Customer (OEM)  Interviewee 3: OEM – Retailer – Customer

 Interviewee 4: Raw Material Supplier – System Supplier – OEM

The first interviewee orders a machine from the OEM. The company is reliant on this ma-chine to perform a patient treatment in which the patients are indirect the customer. The second interviewee delivers single piece manufactured products to the wholesaler who closely cooperates with the customer. The third company takes orders from the customer and passes this order to the OEM which produces the furniture and delivers the product to the company three. The fourth company orders raw material from its supplier. The material of biodegradable waste will be burned and its produced derivatives will be passed to the OEM. All four companies are SME companies and have between six and 75 employees who are in contrast to the pilot study where it was a LSE and had 500 employees. All the interviewees are the chief executive officers of the company and are responsible and liable for the man-agement concerning the company. Three out of the four interviewees said additionally that they are responsible for nearly everything in this position. They also claimed to have a great power in their company.

4.2.2 Information about the relationship

The interviewees were asked to think of relationships to other companies. Therefore the tionships are B2B relationships. Additionally some more conditions are connected to the tionship they had to think of. The interviewees were supposed to think of a long-term rela-tionship with an extraordinary ending. The relarela-tionships lasted from two years until a still ex-isting relationship which is resting until today. When the relationship still was an active one the interaction with the business partner was in all four companies a continuous one - from a weekly interaction up to a monthly interaction between the business partners.

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23 A further question of the interview was the question about the sensed power between the business partners. The answers differed between the interviewees. Interviewee 1 sensed a very symmetric power. In contrast the second interviewee answered that the power was clearly with the wholesaler and the customer. Interviewee 3 reflected that the power was equal between both business partner as well as the fourth interviewee. He/ She regarded the power as well balanced.

The most important question in this part of the interview was the influence of the relationship properties on dissolution process. The interview partners all answered differently. Intervie-wee 1 spoke in the dissolution process always of a good relationship which was highly ap-preciated. The second interviewee spoke of a polite reflection and of a great commemoration of the network. The third interviewee clearly answered with a “no.” and referred to other fac-tors which were more important than the relationship interaction but he/she didn‟t mention them yet. Interviewee four only said that the relationship was considered within the ending process.

4.2.3 Information about the ending process

As already said in the theory the reasons can differ dramatically from each other. All four interviewees gave different activator of the dissolution process, which are listed below –

 Interviewee 1: 80% financial aspects; 20% Problems of concession  Interviewee 2: No correct fit in the machine of the cutomer

 Interviewee 3: Costs higher than utility, loss of Quality

 Interviewee 4: Quality of raw material was not compatible with other mate-rials.

When asked about the ending process interviewee 1 was the initiator of the dissolution within the company and contacted the other CEOs to discuss the procedure. They first summed up the relationship with the OEM and clarified the discrepancy between the two business part-ners. Secondly they started to build up a concept of future plans. After the decision was made they called in for a meeting with the business partner and opened up their thoughts towards the dissolution of the relationship. During several personal meetings the conversa-tion contained also discussions about the way of ending and restoring thoughts.

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24 didn‟t work out. If the prototype doesn‟t fit in the customer‟s model, the interviewee 2 called a meeting within the company and built up a committee. Within the committee they discussed how to tell the wholesaler and customer. They are highly interested to show the customer that they are a high-qualified company but their machine outfit is not able to produce the giv-en conception of the customer. Furthermore they recommgiv-end the wholesaler and customer to look for other proposals which can produce the special conception of the product.

Interviewee 3 ended the process very short. First he/she stopped ordering products from his/her business partner and secondly composed a letter in which the opposing company was informed that the interviewee is not going to order further goods.

When interviewee 4 decided to dissolute the relationship he/she first contacted a legal advi-sor since the relationship is enforced by a contract. After the check up of the adviadvi-sor that the business partner cannot impose sanctions against the interviewee he/she contacted the business partner. Within meetings the interviewee stated that the delivered products are not compatible with other products and therefore a further cooperation wouldn‟t make any sense. Since the business partner was amicable and understanding there were no further meetings necessary.

The question about the orientation of interest and how it was communicated created different answers within the interviews. Interviewee 1‟s orientation was the self interest which seemed for the interviewee 1 way more important than from the business partner. The interviewee 2 had the same opinion but also thought about the interests of the customer and communi-cated this with politeness but also decisive. Similarly interviewee 3 also put the interests of him/her and of the customer first and showed this clearly towards the business partner. Only interviewee 4 considered both business sides equally and communicated this politeness. Moreover the communication channel during the dissolution process was almost similar. In-terviewee 1 and the company had several personal meetings. The company of inIn-terviewee 2 had some correspondence and personal meetings. In contrast interviewee 3 who only wrote one letter of notice. Interviewee 4 also used correspondence and personal meetings.

Following actors were involved in the dissolution process. The bold words are the sides of the interviewed companies.

 Interviewee 1: CEO – Regional Manager/ District Manager

 Interviewee 2: employees + CEO – customer/ CEO of wholesaler  Interviewee 3: CEO – CEO

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25 The length of the dissolution process varies. The list below shows the different length –

 Interviewee 1: six months

 Interviewee 2: three months (but iterative process)  Interviewee 3: one day (sending the letter)

 Interviewee 4: four weeks.

4.3 Discussion of interfering variables

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5 Interpretation of the investigation outcome

5.1 Comparing the outcome with the dissolution theory

The first investigation purpose was the better understanding of the dissolution process. After the case studies some interesting facts appeared. Because of didactical reasons it will be categorized in four parts which are the same as in the theory.

5.1.1 Reason

As the theory (chapter 2.2) already claimed and as already seen in the results part (chapter 4.2.3) the reasons differ dramatically between each other. Only one single variable seems to be the same – the investigation showed that the reason is always an economic one. This could draw the conclusion that economic aspects seem to be more relevant than relationship aspects. In the modern economic world survival seems to be more relevant than loyalty to one single supplier/buyer of several. Yet this statement is only a suggestion and needs of course more proof.

5.1.2 Communication strategies

Furthermore the communication strategies show differences, too, but by comparing the theory with the empirical results some similarities are recognized in a certain way. All four interviewees can be settled into different categories of exit strategies mentioned in the theory (chapter 2.3.1).

As seen in the investigation the communication strategies strongly depend on the position of the company in the supply chain and also depends strongly if a company faces a supplier or buyer force (see Porter‟s five forces in chapter 2.3.1 or Hollensen, 2007, p.105). Interviewee 3 is self-oriented and very direct by sending only one letter without any further discussion between the business partners. It was a rapid disengagement and he/she left no doubt about the relationship continuity. But there seems no need for that because he/she is in a strong position. The power in the furniture industry is obviously at the buyer. The supplier market is highly competitive and the interviewee 3 can easily search for a new supplier.

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27 The following table (Table 5) shows how the interviewees can be implemented into the theory. This also shows that the theory can be confirmed with this investigation in Germany.

Self-oriented Other-oriented

Direct Interviewee 3 Interviewee 4

Indirect Interviewee 1 Interviewee 2

Table 5: Implementing interviewees into theory

5.1.3 Stages

In the theory two models were proposed which generalize the process of dissolution. The investigation showed two different scenarios. Three interviewees (interviewee 1, 2 and 4) follow the model of Tähtinen (2001), which can be looked up in chapter 2.3.2. The dissolution process was sequential and followed the stage by stage process. Interviewee one even had restoring thoughts in the decision-making stage. All four interviewees are attending the net-work communication stage by negotiating with other companies. They do that during the whole dissolution process.

Only one interviewee (interviewee 3) differs in process and therefore in the stages. Several stages weren‟t passed by the interviewee. Only the assessment stage, network communica-tion stage, decision making stage and aftermath stage was attended by him/her and the dya-dic communication stage and the disengagement stage were also used but in comparison to the other three extremely short.

The question comes up why there is such a difference between them? The assumption can be made that again the network connection is an important influencing factor because the two different sceneries show two different industry structures. The industry of interviewee 3 has a high competitive supplier market and the buyer can choose between them. If he/she is unsatisfied with one supplier he/she doesn‟t need to negotiate. But simply chooses a new supplier with better conditions. On the other hand the industries of the other three are very limited and have only few suppliers or few buyers. There is more attention in the dissolution process needed and the decision has to be made very carefully.

These two different process sceneries maybe giving a hint why the first published model of the stages (Tähtinen, 2001) was reshaped into the second presented model (Thätinen, 2004).

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28 time. Still it is very difficult to generalize the process in its stages because every dissolution has a lot of independent variables and a small amount of depended variables. Therefore there can always be a discrepancy between the ideal and real process. Tähtinen (2001, 2004) already claimed this problem in the literature.

5.1.4 Actors

In the dissolution process only CEOs or comparable positions are involved which allows the assumption that in SME only the CEOs are reliable for this kind of management.

However, if the theory of the level division and the reality are compared it can be seen that the investigation proves the theory. All interviewees give (without knowing) the same in-volvement in the dissolution process as the model describes. With this investigation the as-sumption can be made that the model of level involvement is valid and reliable.

5.2 The impact of relationship properties on relationship dissolution

This chapter again refers to the theory (chapter 2.1) again. However, the investigation didn‟t show the expected results. To summarize the expected results of properties they are listed below –

 Longevity: a long relationship implicate a careful dissolution process  Power: influencing the communication strategy and the process

 Formality: as soon as “Du” an other-sided communication strategy is used.

It seems there is a conflict of objectives. On one hand the relationship properties need to be isolated from each other to be observable because the interfering variables can be mini-mized. But on the other hand each property is moderated by other relationship properties due to the fact that the properties can‟t be cut clear from each other. A clear cut which is claimed in the first objective of isolation of the properties is not possible.

Another problem within this investigation is the discrepancy between the answer of the inter-viewee and the actual action of him/her. This discrepancy cannot be determined. They might say that they eventually respect the relationship in the dissolution process just because it is socially required and polite to honor the relationship. But if they really act this way is doubta-ble.

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29 investigation is needed. The next part explains the assumptions and is divided into the cate-gories of the investigated properties.

Longevity

Even if a relationship is a long-term relationship short-term events seem to be more domi-nant when decisions are made to dissolute from the business partner. Within the dissolution process the relationship seems to be honored but does not influence the ending intentions of the disengager.

Power

The Power seems to influence the dissolution process partial. Companies with a great power seem to use a single-sided and direct communication strategy. For example the interviewee 3 who has clearly the buyer power and according to Porter‟s five forces is in the position to lead the ending negotiations. In contrast to that is interviewee 2 who is clearly in the weaker position and if he/she ends a relationship he/she uses more likely an indirect communication strategy which can be either direct or indirect.

Formality

The cultural imprint of Germany is very strong and the formal form of address is always and at all time used. Even in the modern business world it is very common but some differences can be observed which is shown in the results chapter (chapter 4.2.2). The formality is so similar in Germany that the impact on the dissolution process is not significant. With the in-formal address the relationship dissolution might differ but in Germany the form of address is hardly used and with this the property loses its influence. But this phenomenon can only be seen in Germany. In other countries can this property might show significant impact on the dissolution process.

In case of further research on the impact of the relationship properties some arrangements need to be considered. The method needs to be different from the chosen one. Moreover the ambiguity of the literature needs to be taken into account. Possibly psychological and even legal literature can be conducted.

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5.3 General interpretation

Since the investigation was a semi-structured interview and the interviewees had the chance to answer the question freely some further interesting facts and interpretation opportunities are collected. It is still to remember that only assumptions can be made based on single ex-pressions by the interviewees. Those will be presented in the following.

If a reason has a more technical background the dissolution process is more both-sided. It seems that the disengager is more interested that the business partner is satisfied with af-termath. In contrast if the reason has a more financial background like pricing the disengag-ing companies seem to focus more on themselves and seem to prefer sdisengag-ingle-sided dissolu-tions.

The aspect of the power distance appeared to be a crucial in the relationship. If the intervie-wees were asked about the power three intervieintervie-wees (interviewee 1, 3, 4) answered that the two parties are equal treated in the relationship. On the other hand interviewee 2 answered with no doubt that his/her customers clearly have the power. If the two options of answers will be compared it is obvious that they can be put into two different parties of a business relationship – the purchaser and the contractor. Interviewees 1, 3 and 4 are more or less customers but interviewee 2 is producing for the customer. Considering the supply chain this could be a hint. Purchasers maybe just pretend to be symmetric in power by saying this in the interview. But in the position of a purchaser they say what they want otherwise they look for new supplier. A supplier is trying to sell his/her products and does almost everything to satisfy the customer and tries to keep him/her. The only exception is given when the supplier is the monopolist or the oligopolist because than clearly the supplier wouldn‟t care. But in all industries which were investigated the purchaser seemed to have more power than the con-tractor.

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6 Conclusion

As the literature analysis shows the current research of this field is still rare. Furthermore the theory matches practice only partially.

Theory shows the reasons of dissolution differ but it appears in the investigation that eco-nomic interests seem to be more in the center of attention. Personal or relationship related interests are only secondary and just in exceptional case the dissolution reason. Companies put economic interests first and don‟t acknowledge relationship properties to a relevant ex-tent. Supporter of Relationship Marketing always claim to maintain a long-term relationship because it will bring more economic advantages than having short-term relationships. But as soon as a relationship reaches its end all these advantages seem to disappear and the dis-solution process seems to have other more important factors than the common foundation of relationship.

The outcome of the investigation clearly proves the theory of the dissolution process itself. For instance the stages of the process differ from each other but the theory captures this variety and generalizes the process well enough. Nevertheless the process still has a high amount of influencing (independent) variables which yet are not fully explained.

The level of actors and the communication strategies in the theory can be found in reality as well. The ideal world of the theory matches the real world in this case very clearly. Additional-ly the investigation showed that there is a difference in communication if the initiator of the dissolution is a supplier or a purchaser.

More difficulties cause the influencing variables of the dissolution process. The relationship properties and their impact on the process are still very fuzzy and only vague assumption can be made within this research. The main problem of this outcome is the conflict of objec-tive mentioned in chapter 5.2 and the resulting problems in the method. The method used in the study is adequate for the dissolution process itself but not for the impact of the properties. However, some interesting outcome factors appeared during the research which were not expected in first place. For instance is the industry and its properties an important influencing factor for the dissolution process. The theory of Porter‟s five forces seems to be crucial. It depends if the disengaging company faces a supplier/buyer power or not.

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32 Still not all aspects of the dissolution and its influencing factors discovered. Future studies, both theoretical and empirical, should try to enlighten the further impacts on the dissolution process.

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III

List of references

Alajoutsijärvi, K., Möller, K. & Tähtinen, J. 2000, 'Beautiful exit: how to leave your business partner', European Journal of Marketing, vol. 34, no. 11/12, pp. 1270-1289.

Bortz, J. & Döring, N. 2006, Forschungsmethoden und Evaluation, Springer-Medizin-Verl, Heidelberg.

Dwyer, F., Schurr, P. & Oh, S. 1987, 'Developing Buyer-Seller Relationships', vol. 51, no. 2, pp. 11-27.

Freeman, S. & Brown, E. 2004, 'The Influence of national culture on dissolution communica-tion strategies in Western vs. Asian business relacommunica-tionships: A theoretical model', Supply Chain Management: An International Journal, vol. 9, no. 2, pp. 169-182.

Gummesson, E. 2006, Total relationship marketing, Butterworth-Heinemann, Amsterdam [u.a.].

Halinen, A. & Tähtinen, J. 2002, 'A process theory of relationship ending', International Jour-nal of Service Industry Management, vol. 13, no. 2, pp. 163-180.

Halinen, A. & Tähtinen, J. 2002, 'Outlook Research on Ending Exchange Relationships: A Categorization, Assessment and Outlook', Marketing Theory, vol. 2, no. 2, pp. 165-188. Haugland, S. 1999, 'Factors Influencing the Duration of International Buyer–Seller Relation-ships', Journal of Business Research, vol. 46, pp. 273–280.

Hocutt, M. 1998, 'Relationship dissolution model: antecedents of relationship commitment and the likelihood of dissolving a relationship', International Journal of Service, vol. 9, no. 2, pp. 189-200.

Hollensen, S. 2007, Global marketing, , Financial Times Prentice Hall, Harlow [u.a.].

Holmlund-Rytkönen, M. & Strandvik, T. 2005, 'Stress in business relationships', Journal of Business & Industrial Marketing, vol. 20, no. 1, pp. 12–22.

Lyly-Yrjänäinen, J.,. Velásquez, S., Suomala, P. & Uusitalo, O. 2010, Introduction to Industri-al Management, , Tampereen Yliopistopaino Oy, Tampere.

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IV Perrien, J., Paradis, S. & Banting, P. 1995, 'The Dissolution of a Relationship', Industrial Marketing Management, vol. 24, pp. 317-327.

Pressey, A.; Mathews, B. 2003, 'Jumped, Pushed or Forgotten? Approaches to Dissolution', Journal of Marketing Management, vol. 19, pp. 131-155.

Saunders, M., Lewis, P. & Thornhill, A. 2003, Research methods for business students, , Prentice Hall, Upper Saddle River, NJ.

Tähtinen, J. & Halinen Kaila, A. 2000, Ending exchange relationships: What do we know about them?, .

Tähtinen, J. 2001, The Dissolution Process of a Business Relationship, , OULU UNIVERSI-TY PRESS, Oulu.

Tähtinen, J. 2004, 'The Process of Business Relationship Ending – Its Stages and Actors', Journal of Market-Focused Management, vol. 5, pp. 331-353.

Tähtinen, J. & Vaaland, T. 2006, 'Business relationships facing the end: why restore them?', Journal of Business & Industrial Marketing, vol. 21, no. 1, pp. 14–23.

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V

Appendix

Table of Appendix

Appendix 1: Interview Procedure ... V Appendix 2: Interview of pilot study ... VI Appendix 3: Interview of main investigation ... IX

Appendix 1: Interview Procedure Material/ Preparation

 Perhaps a Dictaphone with additional batteries

 Paper with Pencil and additional pencil

 Sheet of paper with the interview questions

Beginning

 Being thankful for the attendance

 Telling the approximate time of interview (20 – 30 min)

 Again informing the interviewee of topic of the investigation, perhaps giving more information when needed

---Starting Dictaphone---

 Asking for approval for taking notes or using the Dictaphone

 If disapproval, giving the information that it might take longer when taking notes and Perhaps --- ending Dictaphone---

 Giving the consideration that the anonymity is given

 Answering the question to the best of the knowledge

 If something is unclear, please ask

 Telling that interview is divided into 3 parts

 Any further questions before beginning

INTERVIEW itself

Closure

---Ending Dictaphone---

 Any questions?

 Being thankful for the attendance again

 Telling that it is very helpful for the research

 If interested into the findings of the research? Email address

 Saying goodbye and hoping not being to disturbing in the day-to-day business

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Business Relationship Dissolution- The impact of relationship properties