The power of trust in manufacturer-retailer relationships

• Main Author: KUMAR, Nirmalya
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 1996
• Subjects: Trust; Business planning; Retail industry; Manufactures; Partnership; Industrial organization; Business research; Chain stores; Strategic planning; Marketing; Organizational Behavior and Theory
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/5179; https://ink.library.smu.edu.sg/context/lkcsb_research/article/6178/viewcontent/PowerTrustManufacturer_HBR_1996_afv.pdf
• Institution: Singapore Management University

Manufacturers and retailers traditionally have seen each other as adversaries, but the benefits generated by trusting relationships between such old foes as Procter & Gamble Company and Wal-Mart Stores show that fear and intimidation may not be the most effective way for manufacturers and retailers to deal with each other after all. Studies of manufacturer-retailer relationships in a variety of industries reveal that exploiting power has three major drawbacks. it can come back to haunt a company if the balance of power changes; victims will ultimately seek ways to resist such exploitation; and working as partners allows retailers and manufacturers to provide customers with greater value than they can when they try to exploit each other.To build a trusting relationship with their weaker partners, powerful companies can build systems that strive both to compensate their partners fairly for their contributions and to resolve differences in a manner that their partners perceive as fair. These systems ensure that there is two-way communication, that all channel partners are dealt with equitably, and that partners can appeal channel policies and decisions. In addition, they provide partners with a coherent rationale for policies and ensure that partners are treated with respect.Moving a relationship from the power game to the trust game is difficult, requiring a change in culture, management systems, and attitudes. But the success of organizations such as Marks & Spencer, Kraft, and E.J. Ekornes all testify to the benefits of making the effort. In rapidly changing environments, success will go to those who learn to make the leap of faith.