Relationship value in the Russian wholesale carpet market

Abstract

The importance of studying the Russian market stems from several characteristics such as experiencing transition from a command to a market economy that is seen in its business networks, being the biggest emerging stock market and high potential for business. The ‘command period’, where the government control all aspects of life, has caused the lack of academic research which makes this study an important addition to the body of knowledge on the Russian market specially the business to business market. It becomes an important reference for business practice and a guide for future research. Desk research revealed problems in the wholesale market such as the inability of managers to build long-term successful relationships and lack of value-added collaborative relationships. The wholesale market has also been experiencing several problems such as lack of domestic supply and dominance of importers and the carpet market is one those markets that shares these problems. The fact that the wholesale market is dominated by importers raised the interest in researching relationships where wholesalers/distributers are suppliers. This was supported by the fact that research is lacking from the wholesalers point of view, it is always either manufacturers or retailers view. To help businesses in the Russian wholesale carpet market establish a relationship value perspective, it is important to understand how customer think of their supplier relationships in terms of what constitutes valuable in their supplier relationships. the trade off factor which is at the heart of relationship value is the centre of this research as it is targeting at understanding how customer trade off different relationship value attributes to evaluate their relationships with suppliers. Using a pragmatic approach, the research attempts to identify the most valuable attributes for the customer organization in their relationship with suppliers. A pragmatic approach to research is using a mix of both a positivistic and a relativistic approach in the same research, conjoint analysis as a tool for measurement was chosen for the field study. The nature of conjoint measurement involving two stages; the elicitation phase where exploratory semi structured interviews was used to elicitation relationship value attributes to be used in the next stage, conjoint cards suited the research approach adopted. Conjoint measurement also has many advantages that matched research objectives such as attributes of relationship value used in the elicitation phase were adopted from the literature of relationship value. Data were collected using conjoint questionnaire which gives an accurate estimation of the attribute and the attribute level importance to each respondent. A total 59 were usable questionnaires were collected out of which 48 included the second answered the second and the third part of the questionnaire (conjoint cards). The unit used in the analysis of the Russian carpet distribution network is the triad distributor-distributor-retailers. The conjoint questionnaire was distributed to retailers to evaluate what they value in their suppliers (distributor) relationship and to distributors to evaluate what they value in their supplier (distributor) relationship. From the exploratory semi structured interviews at the elicitation phase it was found that the most important attribute that Russian companies saw valuable in their relationship with suppliers are price discounts, communication, adaptability, relationship length, delays of operations, and terms of payment. Relationship value attributes. The research reveals important characteristics of the Russian wholesale carpet such as the fact that Russian carpet wholesalers have a high preference for long-term relationships while retailers have a high preference for short-term relationships. Also wholesalers have a very high preference for “no delays at all’ while retailers have a tolerance rate for acceptable delays. The most important contribution of this research is what we called “the relationship value concept” which is the sum of utilities of all relationship value attributes. The relationship utility concept could be used to assess how valuable existing relationships are as well as the value of new ones or new offerings to customers. The research provides reference tables with utility values that can be used in calculating the value of a customer relationship. The reference tables include values of attributes and their levels depending on whether the organization is a retailer or wholesaler and also depending on the type of carpets sold by the organization. Another contribution is to the literature of segmentation in business to business markets operational method for segmenting the market was found. The relationship value concept is introduced as an operational method for segmenting the market. It is also thought that this research contributes to the lacking literature from wholesalers’ point of view in distribution networks research