Part 5: Inter-organisational value creation Flashcards
What is (management) control?
Strategies and tools to influence employees, groups, and units to work towards organisational goals
Who works with inter-organisational control?
Marketing & Sales R&D & Production Logistics Quality management Legal, finance, and other support functions Controllers (Almost everyone)
Why do we need inter-organisational control?
- To manage opportunism/fairness
- Safeguard against being exploited
- Profit sharing and pricing issues
- To enable efficient exchange
- Co-ordination of operational exchange
- Information sharing
- Knowledge transfer sharing
- To align inter- & intra-organisational goals and strategies
What are inter-organisational relationships
Interconnections between organisations that allow for economic specialisation
Inter-organisational dimensions of relationships
Structural dimensions (hard factors) Affective dimensions (soft factors) Temporal dimensions (relationships are not static)
What are the structural dimensions of inter-organisational relationships
- Activity system (who does what)
- Resource distribution (who has what)
= Product - Interaction patterns
- Contracts
- Investments
- Adaptations
What are the affective dimensions of inter-organisational relationships
- Trust
- Commitment
- Norms
- Satisfaction and Conflict
- Goals and negotiations
What are the temporal dimensions of inter-organisational relationships
Longevity
Cumulativity (the importance of history)
Institutionalisation
Inter-organisational types of relationships can be
Collaborative
Transactional
Can you, as a company, choose whether you have inter-organisational relationships?
No, it’s necessary for efficient allocation of resources and activities. It is not a question of whether you have relationships, but what kind of relationships
What determines what kind of relationships you have?
- Nature of product
- commodity vs adapted - Importance of the product
- consequence of loss - Supply market conditions
- readily available or scarce - Resources to spend on relationship maintenance and development
- The counterpart’s interest in us
- Our joint history
Van der Meer-Kooistra & Vosselman (2000)’s model of phases and transactional relationships (12 fielder)
Transactional relation
Contact phase
Contract phase
Execution phase
Inter-firm relationship pattern
Market-based pattern
Bureaucratic pattern
Trust-based pattern
Agndal & Nilsson’s extended exchange process
- Supplier selection
- Concept development
- Joint product and/or process design
- Deliveries (production)
- Price revisions & Product and process redesign
Relationships can be built upon
- Emergent relationship development
- Strategic relationship transformation
- Commanding interventions
- Engineering interventions
- Teaching interventions
- Socializing interventions
Open Book Accounting
Sharing costs and other accounting information in a supply chain (mostly common suppliers providing customers)
Buyer perspective (why?)
Supplier perspective (why not?)
Incentives (buyer to supplier)
Why do the buyer want to engage in Open book accounting?
- Cost control
- Efficient processes (the suppliers)
- Purchases (are the suppliers-suppliers’ prices fair)
- Continuous improvements - Price control
- Avoid overcharging
- Competitive supply chain - Avoid misunderstandings
- Concerns both parties - Relieve tension and gain knowledge to
- Learn about supply chain
- Use against supplier
Why would suppliers not want to engage in open book accounting?
- Distrust
- Pricing model
- Uncertain benefits
- Policy
- Buyer’s competence (not enough)
- Time horizon (taking a risk today, but benefits will come in the future)
- Investments required)
- Relies on new logics
What incentives can buyers give suppliers to engage in open book accounting?
- Basic requirement (If you don’t you won’t be our supplier, Volvo says this)
- Efficiency gains
- Within relationship (more likely to be selected next
time)
- Outside relationship (more competitive when
competing for other contracts) - Understanding
- Relieves tension
- Profit margin (if known you could’ve guaranteed the
profit margin) - Special incentives (promise to)
- Favoured supplier
- Longer contract
- Greater volumes
Relationship purchasing strategy
Asset specificity
Significant relationship-specific investments
High degree of commitment
Focus on joint benefits
Uncertainty Few alternative suppliers High switching costs Product critical to buyer Interdependence Self-regulating behaviour through trust Cumulativity
Transactional purchasing strategy
- Asset specificity
Limited relationship-specific investments
Low degree of commitment
Focus on own benefits
2. Uncertainty Many alternative suppliers Low switching costs Product of limited importance to buyer Interdependence Opportunism checked by buyer No Cumulativity
Agndal & Nilsson techniques for inter-organisational value creation in the Supplier evaluation stage
Joint target costing
Open book accounting
Agndal & Nilsson techniques for inter-organisational value creation in the Concept discussion stage
Cost platform
Often simultaneous with supplier evaluation
Agndal & Nilsson techniques for inter-organisational value creation in the Joint production & process design stage
- Quality-function-price trade off
- Concurrent engineering, minimal cost investigation
- Cross-functional teams
- Knowledge exchange
Agndal & Nilsson techniques for inter-organisational value creation in the Deliveries/production stage
Kaizen (value analysis), small ongoing improvements
Agndal & Nilsson techniques for inter-organisational value creation in the Price revision stage
- Expected annual price reductions (learning, other efficiencies)
- Factors that might change prices (volumes, raw material prices)
- Product and process redesign
- Simple value analysis and target costing
(Often costly to change products and processes)
Formal joint costs management techniques
- Quality-function-price trade-off
- Concurrent engineering
- Inter-organisational cost investigations
- Kaizen (value analysis)
Informal use of open books
Uses of open books not tied to a formal cost management technique
How does the purchasing strategy influence usage and result of open book practises
Transactional purchasing strategy
- Cost data is used to reduce purchase price
Relational purchasing strategy
- Cost data supports joint cost reduction
Agndal & Nilsson (2010) open book accounting practises expressed in terms of
- Nature of data and accounting data disclosure practises
- Types of data
- Main cost objects
- Extent of disclosure
- Forms of disclosure
- Direction of data disclosure - Uses of disclosed accounting data
- Main purposes
- Specific decisions and activities supported - Conditions of open book accounting
- Attitudes to cost data disclosure
- Incentives to disclose data
