Assignment: 2 15.02.

2020

Report prepared by; Mr Muhammad Ahmed raja

Contents
Introduction .......................................................... 2
Elements of interaction model ............................. 2
The parties in the interaction process .................. 2
Process of interactions .......................................... 3
Types of interaction .............................................. 3
Interaction environment ....................................... 4
Analyse of a chosen relationship based on the
elements discussed above. ................................... 5
Conclusion. ............................................................ 6
References ............................................................ 6

1
Introduction
As business world is full of organisations which interact with each other in whole or partially
for some social and economic benefit. These interactions require individual, with diverse and
complex skills and characteristics, use of technology, other equipment and resources and
particular atmosphere which facilitate their activities in a given socio -economic and
controlling environment to achieve some desired objectives.

The Interaction Model, proposed by the IMP Group of researchers (Håkansson, 1982; Ford,
1990, 1997, 2001) when like-minded researchers from France, the UK, Italy and Germany
came together.

Elements of interaction model

The interaction process. it consists of the exchanges between the two organisations. This
process may be a short-term goal-oriented relationship or spread over a long period of time
based on the nature and chrematistics linked to the relationship and organisation objectives.

the participants. The interaction process comprises of individuals or specific departments

assigned to individuals in two organisations involved in the interaction process.

The atmosphere affecting and being affected by the interaction. This involve the power
dependency, conflict and cooperation, closeness and social distances which effect the
relationships strengths due to the inter dependency of the two organisations. (David
Ford,2002).

The environment within which interaction takes place consist of the market opportunities,
organisations size and structure, past experiences of the organisation in international level
and social system obstacles.

The parties in the interaction process

A relationship requires at least two parties to create an event or carry an activity. Companies
interact, act and react in various forms such as, purchase, delivery, production and
information exchange (David, F. 2002). No relationship exists without the at least two
parties. The parties are the organisations or the individuals from those organisations. It is the
organisations, or more precisely, the individuals, who interact to each other to form some
specific relationship.one is always buying organisation and other a seller organisation. This
interaction keeps growing and consequently, a seller to one organisation becomes a buyer to
another organisation, which leads the development of a larger network of buying and selling
organisations. who interact with each other, link their activities, tie the resources and bond
the actors in an interaction process for a viable economic benefits.it will depend upon the
characteristics of the organisations as well the individuals within the organisations and may
be affected by or have the effect on internal atmosphere as well as the external macro
environment.

2
Process of interactions
The interaction process can be defined as both short- and long-term perspectives. Over time,
the relationship is developed through the routinisation of events /episodes and which tend
to institutionalize or destabilize it, depending on the evaluations made by the two firms in
the interaction. These episodes may vary in terms of types of exchange. Through social
exchange with the supplier, the customer attempts to reduce decision- making uncertainty.

With the passage of time and with mutual adaptation, a relationship-specific mode develops,
which protect the process of interaction in case a crises develops and forms the specific
procedures or patterns for mutual developments, communication style between individuals
and more or less implicit rules which serve as a framework for any future relationship.

The relationship could be short term or long term. The short-term relationships are mostly
transactional and ends with single or fewer sourcing activities. but quite often the
relationship between the organisation are long term (Ford,2002) and consist of continuity in
episodes/events. these long-term relationships of the two organisations may be affected
more or less by the events itself or the individual events of both organisations.

The events between the organisation take place in the areas of such as, the products and
services exchange, financial resources, the information and social exchanges.

Types of interaction
There are four types of interactions. The understanding of their characteristics is important
in persuading a relationship. the variety of collaboration of contractors as well as with
subcontractors as discussed by, Iper Blenker & Poul Rind Christensen ,2006 ,in detail.

Standard subcontracting. this involved the standard activities relating to production that a
organisation carries out daily basis in contract with other organisation.in this interaction
there is normally no need for adoration to fulfil specific customers needs this is very
important to the contractor. Sub- contractors possess a critical competence of value to the
contractor (Hollenson.2007).it represents the situations where there are relatively simple
customers. Interaction is very low and narrow
It is not always product or money that is exchanged. There is often a large amount of
informational contact. For example, technical details may be discussed by research,
production or engineering staff from both companies in respect of new product or process
initiatives (Cunningham and Homse, 1986).
Information exchange is simple because the contractor specifies criteria for contribution.
The contractor’s in-house capacity is often a major competitor.

Expanded subcontracting.
This interaction develops, where some mutual specialization between the two parties exist
and exit costs are higher for both organisations. So, replacing the interaction to multi
supplier may be viable.

Strategic development subcontracting.

This is very important to the contractor. Sub- contractors possess a critical competence of
value to the contractor. They are involved in the contractor’s long-term planning, and

3
activities are coordinated by dialogue.
Partnership-based subcontracting.
This is a relationship based on a strong mutual strategic value and dependency. The
subcontractor is highly involved in the resource & development activities of the contractor.
There is a certain overlap between the different types of subcontractor, and in a specific
relationship it can be very difficult to place a subcontractor in a certain type.
Relationship atmosphere
the atmosphere relates to power dependency, which restrict and centralise the interaction
among the organisation, cooperation and conflicts arise due to various activities and
interaction, closeness due to trust development. This trust develops when organisation
interact each other to relocate some facilities of productions and delivery etc, jointly for the
economic benefits. One of the reasons of closeness is the transaction cost
(Williamson,1975). The conflicts in organisation lead to the creation of distance.

The relationship atmosphere plays important role in key account management in

organisations. As buyer and seller approach each other, the marketing exchanges are
changing from single transactions to a relationship.
Power dependency relates to increasing controlee on other counterpart and reduction in
the uncertainty relating to input and output.
If two parties in the relationship perceive the power clearly the relationship developed will
be more or less strong over the time.it helps the organisation in utilizing the resources
efficiently.

Interaction environment
it consists of the set of external conditions and forces that have the potential to influence
the organisation. (Janice Edwards, 2014). the relationships between the organisations
evolve in a general macro environment that has great effect on their interaction. This
environment of interaction can be analysed in the following contexts.
Social system, market structure, market inter- nationalization
and market dynamism (growth, innovation rate).
The social system is formed by the cultural behaviours and practices. so organisation may
face certain obstacles in developing relationship in the process of exchanges with its
counterparts .these cultural and traditions differences and at some points the religious
practices form certain attitude which effect the buying certain products from the seller this
also involves the political interest of certain countries and law of land to prevent
organisation to enter in a relationship which does not comply to law of land or political
interest.
The stability in the market and rate of exchange of a country currency also effect the buyer
and seller relationships. understanding these aspects of the market help both organisations
to determine the ultimate effects on their mutual relations.
The dynamism in the market create the opportunities which in some cases, maybe more or
less violated in order to gain more financial benefits. Although it increases the organisations
share in the market due to the actions of other party in relationship as well as it decreases
the buying organisations dependency on single or fewer partners.
When it comes to developing the products or services the position of an individual
relationship is affected by more or less by the other party involvement in the process of

4
channelizing product from primary producer/manufacturer to the final customer.

The organisation which have their presence in the international market or are forced to
enter in the international market to reduce the cost of production or any other economic
benefits require in some cases heavy investment in outsourcing a production or selling their
subsidiary to cover the cost.

Analyse of a chosen relationship based on the elements discussed

above.
in order to analyse a relationship developed through an exchange I choose a supplier -
customer relation involving the manufacturing of a device used in the automobile industry.
the manufacture inters in a relationship with the supplier to manufacture the equipment
which will replace the existent equipment with new features, which will be more user
friendly.The purpose is to attract a wider market and give greater satisfaction for value to
existent customers.
The interaction between the organisation is often long term when there is buying and
selling (David, F.2002) interaction. Hence there is highly dependency between the
organisations exist. This dependency may relate more or less to technology, resources as
well as other activities involved in the process.
It is important for both the organisation to understand the nature and type of interaction
they are in, as well as the other elements of interaction such as how the process is going to
be carried out on long term basis. A clear understanding the factors effecting it as well as
supporting the process such as specific services and skills of actors, financial strength of
organisation, information and technology in use and the social aspect, is important in
developing the product that will fulfil the needs of the customers. The external
environment, which comprises of market structures, opportunism, internationalisation and
social system as discussed above, have great effects on the success of any interaction
between the firms.
As when the process starts through an interaction and party get involved into the process an
interactional atmosphere develops.
The understanding this interactional atmosphere is core in successful continuity of any
process. Interaction atmosphere as discussed above have number of factors. A clear
awareness of these factors is very important for both parties in the interaction process.
The question of capability concerns the functions they will fulfil. the question of jointness
concern their mutuality in social concern. The activities and resources help the organisations
create strong mutual trust for objective returns. The question of particularity relates how
both organisations are unique and directed to each other (David,F. 2002). inconsistency
relate lack of clarity in the interaction which may make the interaction obsolete.
Organisation are therefore required to reduce uncertainty by acting in a way which help the
process to run according to the set expectation so that end results could be achieve
otherwise any shortfall in the process may cost the organisation heavily.

5
Conclusion.
This paper is very brief theorical description of various elements of IMP group, the process
understanding in business relationship and analysis of a hypothetical relationship in the light
of IMP group. A bit more in depth analysis will be require to serve the general reader to
understand the issues and action needed in a particular situation, where the process is more
complex in nature. Due to the time and briefness of the topic I tried to explain a common
understanding of the issue raised in the question using theoretical approach.

References

Global Marketing: A Decision-oriented Approach, Hollensen, Pearson Education 2007.

Financial Times Prentice Hall.

Markets and hierarchies, analysis and antitrust implications: a study in the economics of
internal organisation, Oliver E. Williamson, Free Press, 1975 .

Mastering Strategic Management – 1st Canadian Edition 2014 Janice

Edwardshttps://opentextbc.ca/strategicmanagement/chapter/the-relationship-between-
an-organisation-and-its-environment/. ((Accessed 8.02.2020).

Mastering Strategic Management – 1st Canadian Edition 2014 Janice Edwards.( Chapter 3
Evaluating the External environment),
(https://opentextbc.ca/strategicmanagement/chapter/the-relationship-between-an-
organization-and-its-environment/) (accessed 10.02.2020)

Strategic Marketing Management,Wilson, R.M.S,Gilligan, C.2012 , Taylor & Francis.

Understanding Business Marketing and Purchasing: An Interaction Approach, Ford, D. 2002,

Thomson Learning.
Journals

Blenker, Per & Christensen, Poul. (1995). Interactive strategies in supply chains–a double-
edged portfolio approach to small-and medium-sized subcontractors’ position analyses.
Entrepreneurship and Regional Development - ENTREP REG DEV. 7. 249-264.
10.1080/08985629500000016.

European Journal of Operational Research, Vol: 128, Issue: 3, Page: 509-531( accessed
10.02.2020).

Turnbull, P., Ford, D. and Cunningham, M. (1996), "Interaction, relationships and networks
in business markets: an evolving perspective", Journal of Business & Industrial Marketing,
Vol. 11 No. 3/4, pp. 44-62.