role of channel-partner in effective relationship

Volume:1, Number:1, May-2011 Page 57

www.theinternationaljournal.org

ROLE OF CHANNEL-PARTNER IN EFFECTIVE RELATIONSHIP

DEVELOPMENT: PERSPECTIVES AND INSIGHTS FROM INDIA RETAILERS

Author

Mr. Arun Kumar

ABV – Indian Institute of Information Technology and Management,

Morena Link Road, Gwalior – 474010, Madhya Pradesh, India

Prof. Deepali Singh

ABV – Indian Institute of Information Technology and Management,

Morena Link Road, Gwalior – 474010, Madhya Pradesh, India

ABSTRACT

Much of the hype was fueled by the potential for companies to directly sell to customers by

eliminating the intermediaries. But for many customers, established relationships with

distributors and resellers and dealing with a live salesperson prevailed over buying

electronically. As a result, many enterprises today find that the face of their company is

presented to customers via third-party sales channel partners, not by their own employees.

The overall purpose of this work is to contribute to an effective use and application of Partner

Relationship Management (PRM) between channel partners and the firm. This study tries to

find out the criteria used by the organizations in the selection of partners. The study was

carried out in Gwalior and Jaipur region covering the major retail stores in these areas. In

addition to this to find out the effects of various parameters on industry relations, different

industry professionals dealing in PRM were interviewed. Finding indicates that long term

business agreements and adequate time for planning and sharing of cost saving ideas are the

important criteria for partnership. Traditional values (commitment, trust and cooperation) are

most important that partners expect in their relationship with the firm. Most of the Retailers

do not use PRM for making strategic alliance. Challenges and bad practices have been found,

which an organization encounters in trying to maintain the balance between the various

channel partners. Finally on the basis of the challenges, a set of steps were proposed to make

PRM a success. A framework was proposed for successful PRM implementation and their

effects on an organization were cited.

Keywords -: Partner Relationship Management, strategic alliance, partnership



I. INTRODUCTION

Partnership is an inter-organizational relationship to achieve shared goals of the participants

[16], the main reason as identified in previous study [18] is to gain competitive advantage in

the market place. Previous researchers have suggested a two way classification of partnership

as internal and external [11]. Marketing, information system strategic planning as well as

outsourcing are some of the areas where importance of partnership has been discussed in

previous studies [9, 16, 22].Many of the companies have adopted alliance strategy for many

years through different models of collaboration, in a previous study done in context of PRM

indicates that the success rate of alliance strategy is only 50% or less [23, 17, 10].

The main reasons for failure as identified by some of the researchers were incapability of

partners in performing their specified duties which was leading to dissatisfaction which

ultimately lead to a alliance broken up [14, 13, 19, 7, 12, 3, 2, 5]. So while selecting the

partner a company should do a careful scrutiny to know each and every aspect in minute

details which may cause failure of the strategic alliance [6] .The initial phase of this research

will serve as a knowledge platform to establish a development approach to measure critical

factors affecting partner relationships in organizations. The main focus of this work is to

contribute to an effective use and application of Partner Relationship Management in

organizations.



Figure 1: From Traditional to Collaborative Value Chains (Source: Author)

II. OVERVIEW OF INDIAN RETAIL SECTOR

During the last decade the global retail has changed at a faster pace than ever before. The

growth of organized retail is varying in different countries based on a lot of factors such as

culture, socio economic conditions etc but still there is ample scope for organized retail in the

fast emerging economies like India. The major contribution towards total retail business till

now was from food and grocery segment, whereas in organized retailing the major

contributor is apparel and footwear segment (Indian Retail Industry Report, 2009).

Figure 2: Size of Indian retail and organized retail ($ billions),

Source: IBM Corp., global retail industry 2007

III. LITERATURE REVIEW

Partnerships are defined as purposive strategic relationships between the firm who are

independent, shares harmonious goals, knowledge of high level of mutual interdependence

and strives for mutual benefit. They join efforts to achieve goals that each firm, acting alone,

could not attain easily. The formation of these alliances and partnerships is motivated

primarily to gain competitive advantage in the marketplace [1, 21]. Partnerships can afford to

new technologies or markets; make available a diverse range of products and services;

economic feasibility in joint research and/or production; risk sharing; access to skills which

are complementary in nature and access to knowledgebase beyond the boundaries of the

firms[20]. However, prescriptions for the formation of such partnerships often overlook the

drawbacks/hazards of such relationships. When an enterprise has resolved to form a strategic

alliance, it should then carefully select the partner and the different types of deceitful

behavior of alliance partners also have to be controlled [6] in order to ensure success.

Researcher believed that there exists no optimal standard in the partner selection procedure;

instead, one should consider the industrial property, relative capability, and complementation



of resources and organization compatibility for each other [8]. Some researchers have

stressed the compatibility of organizations between the partners [25] whereas others have

emphasized that complementary skill is the most important when selecting a partner, while

mutual trust and commitment on finance are also essential [24]. Literature suggests that

turbulence in markets, resource constraints, market uncertainty, fast technological change,

economies of scale, prior involvement in strategic alliances, risk sharing and consolidation of

market position are the most common types of drivers that influence the propensity of firms

to enter into strategic alliances. Competitive forces also play a critical role in strategy

formulation in organizations. All these factors can be grouped into two broad categories- firm

characteristics and environmental characteristics- that mostly influence the propensity of

firms to enter into strategic alliances. This is essential for selecting an appropriate partner for

establishing an alliance that matches the original motivation [4].

Strategic planning of a firm is also influenced by partner trust and the success of electronic

cmmmerce strategic planning enables firms to achieve the strategic benefits of electronic

commerce [15]. The above discussion points to a research gap in existing theory about the

criteria used by the organizations in the selection of partners. Critical factors, which translates

into a requirement of better understanding of the structure of PRM. Thus, the following

research objective was formulated for the research “Channel-Partner Relationship

Management: An Indian Perspective”. This research paper is arranged as; firstly a brief

introduction to PRM as well as overview of retail sector is given, followed by literature

review, research methodology, findings, conclusion and discussion followed by limitations

and future research lines.

IV. RESEARCH METHODOLOGY

A survey was used to study the PRM awareness among organizations, the perceived

improvements in organizational effectiveness and the importance of different critical success

factors. The measures for organizational effectiveness and critical success factors were

correlated in order to identify which success factors might have an effect on business

performance. The survey was constructed using tested questionnaire. Please refer to appendix

for the questionnaire. The character of the questions makes them suitable for quantitative

analysis. 10 retailers from Gwalior and Jaipur were randomly selected. Each retailer was

contacted personally in order to find a person responsible for the Retailer’s information

systems to send the survey to. Among 15 only 10 retailers responded successfully. The

overall purpose of this paper is to build a knowledge platform about PRM adoption among

retailers. The purpose has been broken down into two questions:

Q1. Finding the PRM Awareness in retailers and find out their strategies to build a successful

partnership?

Q2. Which factors are critical for effective utilization of PRM, among Retailers?

List of Retailers which were targeted for the study in the Gwalior and Jaipur Region is given

below.



Table 1: List of retailers under study

S.No. Name of the Retailers Location

1. Vishal Mega Mart Gwalior

2. Salasar Gwalior

3. Grah Sangrah Jaipur

4. Sharma Stores Jaipur

5. Subhiksha Jaipur

6. Utsav Jaipur

7. Santoshi Jaipur

8. Quality King Jaipur

9. Orbit Hyper Market Jaipur

10. Krishnam Jaipur

The measures for organizational effectiveness and critical success factors were found in order

to identify which success factors might have an effect on partner selection.

The questionnaire is filled by HR (Human Resource) managers in retail sector. The

questionnaire is tested in this sector then final questionnaire was made. The survey was

designed for the Retailers having Retail outlets in different locations. Our interest was to

investigate all types of retail stores in Gwalior and Jaipur region. A Likert scale (1-5) was

used, where five is the highest score. The critical factors were measured in question 5, 6 and

7 of the questionnaire to measure critical success factors; the survey was complemented with

independent variables. One five-point scale (1-5) was used; where five is the highest score

and other is 3 point scales (1-3), where three is the highest score. In addition to this an

qualitative approach was adopted to find out the implications of channel-partner relationship

management. To find out effects of various parameters on industry relations, different

industry professionals dealing in partner relationship management such as Atos Origin, Divas

Software and Aegis Logistics Ltd. were interviewed. The companies whose professional are

interviewed are given below.

Table 2: List of PRM Solution Providers under study

S.No. Name of the Company

1. Siebel (PRM7)

2. Allegis

3. BackWeb(Sales Accelerator)

4. ChannelWave( ChaneelWave 1.0)

5. Partnerware(Partnerware extended enterprise 1.5)

6. Webridge(In focus and Extrabyte)

V. FINDINGS

However, not all respondents filled out the section of the survey covering critical success

factors. There are three possible reasons for this. First, retailers had not having knowledge of

PRM. Second, retailers had not operated their system long enough to evaluate the benefits.

Volume:1, Number:1, May-2011 2


Third, the survey was very extensive and the performance section was placed at the end of

the survey. There was no overlap between the retailers in the survey and the retailers in the

control group, the majority of the retailers had not adopted PRM.

Survey Results Question 1 –: The question was asked about their PRM implementation in

their retail outlets.

Figure 3: PRM Awareness and Preparedness

These results show the PRM adoptability in different retail stores.

Survey Results Research Question 2 –: This figure shows the implementation of PRM in

various retail stores, above 70% of retailers among sample size did not implement the PRM.

Figure 4: Implementation of PRM

Survey Results Research Question 3 –: This figure shows that 30% of retailers planning to

implement, 30% are aware and not planning to implement and 40% unaware of PRM.

Figure 5: Planning for Implementation of PRM



Survey Results Research Question 4(a)–:This figure shows that 40% of retailers Work

actively against each other’s needs, 30% are Neither party takes responsibility for what

happens in a relationship and 30% Destructive conflict occurs.

Figure 6: Counterproductive or Antagonistic relationships

Survey Results Research Question 4(b)–: This figure shows that 30% of retailers Engage in

a competitive struggle to divide a fixed amount of value, 50% are Attempt to maximize value

for each side and 20% Minimal sharing of information.

Figure 7: Competitive Relationships or Distributive or Adversarial relationships

Survey Results Research Question 4(c)–: This figure shows that 40% of retailers Engage

Longer-term relationships result from mutual goals, 30% are Partner involvement during

product development increases and 30% Open sharing of information occurs including

sharing of cost data. Critical Success factor of PRM tells about various preferable variables

which are responsible for selection of strategic partner.

Figure 8: Cooperative or Integrative Relationships

Survey Results Research Question 5–:After observing these results we can conclude that

factor two, three and four are considerable by the retailers this means that relying on few

critical partners are not favorable by most of retailers. Whereas they like to manage strategic

relationship, develop alliances and partnerships, pursue cross-organizational integration and



value-creating activities. Partnerships can afford to new technologies or markets; the ability

to provide a wider range of products/services; economies of scale in joint research and/or

production; access to knowledge beyond the firms’ boundaries; sharing of risks; and access to

complementary skills [20].

Factor Analysis of data shows these results:

Table 3: Component Matrix

Component

1

Q 5.1 Rely on fewer critical partners on

longer-term agreements

-.491

Q 5.2 Manage strategic relationships .947

Q 5.3 Develop alliances and partnerships .851

Q 5.4 Pursue cross-organizational integration

and value creating activities

.676

Extraction Method: Principal Component Analysis.

a. 1 components extracted.

Survey Results Research Question 6–:

Table 4: Rotated Component Matrix

After observing these results and taking values above 0.8 which shows that long term

business agreements adequate time for planning and sharing of cost saving ideas are the most

favorable. Because managing long term cost benefit driven relationships are more effective.

These results indicate that retailers want long term financial stable agreements. Partnerships

are defined as purposive strategic relationships between independent firms who shares



compatible goals, strive for mutual benefit, and knowledge of high level of mutual

interdependence. They join efforts to achieve goals that each firm, acting alone, could not

attain easily. The formation of these alliances and partnerships is motivated primarily to gain

competitive advantage in the marketplace [1].

Table 5: Component Transformation Matrix

Survey Results Research Question 7–: After watching these observations we could

conclude that traditional values (commitment, trust and cooperation) are the most favorable

factors in what partners want/needs. This may be because of slow change in partner selection

criteria and slow growth in Indian organized retail sector. Due to which traditional practice

are followed by most of retailers.

Figure 9: Ranking of relationship variables

VI. STRATEGIES AND FRAMEWORK FOR CHANNEL-PARTNER

RELATIONSHIP MANAGEMENT

Challenges and bad practices:

Manufacturers and distributors continue rely on each other’s actions and resources.

Simultaneously, each side struggles to maintain autonomy and control over its own

operations in this area of dynamic uncertainty. This mutual dependency creates conflicts

about direction, strategy and commitments. Business relationships between manufacturers

and distributors are not altruistic, nor should they be. Both parties need to perceive a benefit



from the relationship. But how can manufacturers and distributors work together, especially

in situations when one party feels vulnerable to the other’s actions? In trying to maintain this

balance between the various channel partners an organization encounters a large number of

challenges. Some of the challenges have been identified as:

1. Sales opportunities missed due to ineffective transfer of leads to channel partners.

2. Visibility into channel partner behavior.

3. Sales from channel partners lost due to lack of knowledge about new products and

their availability.

4. Partner effectiveness, product expertise and loyalty.

5. Out of date sales tools and stale product information.

6. Increased channel revenue through increased partner effectiveness.

7. Reducing channel management costs through better efficiencies.

8. Management of sales opportunities that involve multiple parties.

9. Gaining channel visibility and measuring channel performance in addition, different

areas of responsibility within an organization present very specific role based needs.

10. Alignment of business goals with that of the channel.

Apart from the challenges given above there are some bad practices also, which also needs

attention.

1. Annual major program changes.

2. Annual changes in channel management/leadership.

3. Failure to promote channel partners in marketing efforts.

4. Pushing the products through unsuitable business channels.

Proposed best practices:

The partnering organization should move according to a well defined strategy for making its

partnership a success. The various best practices that should be followed for effectively

fighting out the challenges are as below.

1. Design the strategies to suit well with the company’s corporate strategy.



2. The company should limit to a small number of competent partners when it comes to

choosing the strategic partners.

3. There should be an addition of more metrics to measure the success of the company.

4. Both the parties should try to find out the ways of helping each other to execute their

strategies.

5. The partnership should be built in such a way that it becomes easy and seamless to do

business, both for the customers and for the partners.

6. There should be full commitment from the top management to make the partnership

successful.

7. New business models should be developed to form a new way of doing business.

8. Channels needs and wants should be reviewed periodically.

9. Partners should be treated as “family”.

10. The main attention should be on satisfaction of needs, preferences and demands of

prospective and potential customers.

Figure 10: Proposed Conceptual Model for Strategic Partnership



Figure 11: Effect of relationship attribute on partnering firm

VII. CONCLUSION AND DISCUSSION

We could conclude that traditional values (commitment, trust and cooperation) are the most

favorable factors in what partners want/needs. This may be because of slow change in partner

selection criteria and slow growth in Indian organized retail sector. Due to which traditional

practice are followed by most of retailers. Long term business agreements and adequate time

for planning and sharing of cost saving ideas are the most important criteria while selecting a

partner. Because managing long term cost benefit driven relationships are more effective.

Relationship has been revived by the emergence of e-business and the increasing power of

customers. Although PRM is created as a new breed of business solutions, it is originated

from relationship marketing. Therefore, through reviewing exiting studies on relationship

marketing and key factors for improving relationships, general functionalities provided by

PRM solution vendors are linked to the key factors to verify if PRM is really useful to

enhance relationships. However the current business changes dynamically based on

complicated situations and the fast evolution of IT.

Especially the current hot issue is collaboration that encompasses social relationships,

business relationships, and systematic relationships. It makes PRM seek a way that enables to

run collaborative processes to provide systematic foundations for collaboration. PRM fosters

serving prompt and proper processes whenever business situations request different

operations on PRM and pursue collaboration in both of processes and IT systems. Whenever

roles or events trigger some changes in the processes, it calls a proper rule and recombines

proper processes, activities or attributes based on the rule. This study proposes a framework



to identify key alliance success factors that would contribute to an understanding of why

alliance make sense, what the partners need to bring to the table and e\what management

practices and attributes might help the long-term growth, development and success of

strategic alliances.

VIII. LIMITATIONS AND FUTURE RESEARCH

Firstly, the sample size was relatively small future studies can take a larger sample size to

verify the findings of the current study. Another limitation of this study is the single industry

(retail) focus, future studies can be done by taking samples from other industries. The

limitation of this paper is the lack of availability of successful implementations of channel-

partner relationship management in India. In this study we used a qualitative approach

.Further quantitative research should be done in order to justify various suggestions.

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ANNEXURE

QUESTIONNAIRE

Aim: To assess the factors behind the selection of partners in your organization.

Conducted by: ABV-Indian Institute of Information Technology & Management, Gwalior

Note:-

Please do not return incomplete form

Use capitals as far as possible while completion this questionnaire

Information provided will be kept completely confidential

PRM Awareness and preparedness

1. Your organization is a:

PRM user organization

PRM non user

Planning to implement PRM

2. If organization is a PRM user organization, please indicate whether the organization has:

Already implemented PRM

Currently implementing PRM

3. If organization is a PRM non-user organization, please indicate whether the organization

is:

Planning to implement

Aware and not planning to implement

Unaware

4. Which kind of partner relationships is used in your organization?

Counterproductive or Antagonistic relationships

Work actively against each other’s needs

Neither party takes responsibility for what happens in a relationship

Destructive conflict occurs

Competitive Relationships or Distributive or Adversarial relationships

Engage in a competitive struggle to divide a fixed amount of value

Attempt to maximize value for each side

Minimal sharing of information

Cooperative or Integrative Relationships

Longer-term relationships result from mutual goals

Partner involvement during product development increases

Open sharing of information occurs including sharing of cost data



5. Express your organization according to Strategic sourcing Characteristics for PRM on

given scale.

S.No. Factors Strongly Liberal Poor

1 Rely on fewer critical partners on longer-term

agreements

2 Manage Strategic Relationships

3 Develop alliances and Partnerships

4 Pursue cross-organizational integration and value-

creating activities

6. In Partner Relationship Management, What Partners want/need(Rate on scale of 1-5,

1being the least important and 5 being the most important)

S.No. Factors Rating

1. Longer-term business arrangements

2. Fair financial share

3. Adequate time for planning

4. Accurate forecasts

5. Ethical Treatment

6. Sharing of cost-saving ideas

7. Open sharing of information including technology

roadmaps

8. Objective performance feedback

9. Payment sharing in a reasonable time

10. Opportunity to become a preferred partner

7. Rank the Relationship variables on the scale of 1-12.

S.No. Variables Rank

1. Commitment

2. Trust

3. Cooperation

4. Mutual Goals

5. Interdependence / Power Imbalance

6. Performance Satisfaction

7. Comparison level of alternative

8. Non-retrievable Investments

9. Shared Technology

10. Structural Bonds

11. Social Bonds

12. Communication

role of channel-partner in effective relationship

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