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INTRODUCTION
In Today?s world, many organizations rely on their relationships with stakeholders- customers, Investors, employees, suppliers and partners to succeed. (Bagdoniene and Zilione 2009). ?Relationships are interdependent processes of continous exchange between at least two business actors in a business network context?( Holmond and Tornroos 1997:305) An Understanding of Business networks and the specific processes affecting change in networks is intimately connected to the nature of relationships.( Holmond and tornroos 1997:304)
Business-to-business relationships are characterized by an exchange between two or more parties. Research has identified several factors that enhance marketing and management in business relationships, mainly with a focus on large manufacturing firms.. Cross-cultural relationships are becoming Increasingly important in building good?relationships.(Swift 2000) This age of relationships is characterized by tailoring product and services in other to meet customer wishes and needs.(Bagdoniene and Zilone 2009).Thus it is Imperative for buyers and sellers to maintain a long term relationship especially where benefits exceeds the risks(Sheth 2004)
The development of business relationships evolve?through?number?of stages, each shaped by determinant variables.
Thus this work seeks to identify the various stages of developing business relationships and their determinant variables and to also examine the? underlying importance?of foreign language competence and how it could reduce psychic distance in buyer-seller relationships. .
STAGES INVOLVED IN DEVELOPING BUSINESS RELATIONSHIPS
Several Authors have proposed various stages involved in developing business relationships. (Hakansson 1982;Hallen and Paul 1984;Ford 1984;Tyler k et al 2006;Dawson2005;Williams 1998 and Scazoni 1979).
Table 1
STAGES OF BUSINESS RELATIONSHIP PROCESS
Dwyer et al(1987)
Williams(1998)
Ford et al(2003)
Hallen and Wiedershem-paul (1984
Dawson(2005)
Full mutual awareness
Awareness
Pre-relationship
Pre-contract
engaging
exploration
exploration
exploratory
Initial interaction
aligning
expansion
expansion
developing
Development
deepening
commitment
Commitment
stable
Maturity
patnering
Dissolution
Expansion
Hakansson(1982) developed Two key stages involved in establishing business relationships. The first stage of development is the episode stage which involves the exchange of products and services and information. Once the concerned parties at this stage are mutually satisfied, the yprogress to the second stage ?Adaptation and Institutionalization? stage which are key features of the interaction approach. Ford(1984) defines Adaptation as the measures taken or adopted to tackle specific needs of a partner which may translate to adapting the product or service surrounding the delivery of the product.
However, Tyler et al(2006) noted that Adaptation is not without risks because it requires relationship-specific investments. Adaptations could be best actualized through two variables which are mutual trust and interdependence. This variables reduces the risk of one party becoming commandeering over the other. Mutual commitment on the other hand allows the other party to expect that adaptations will be compensated by future exchange.(Tyler et al 2006:334)
Relationships are an extension of the social exchange? which are important in developing interaction between the parties involved. This social exchanges between the parties lead to clear expectations in both parties which is finally institutionalized into their way of operating.(Hakansson 1982:17;Swift 2008)
Dwyer et al(1987) gave a different view on developing relationships by suggesting five key stages of in developing business relationships. i)awarness stage, ii)exploration stage, iii) expansion stage, iiii) commitment stage and .iv)dissolution stage.
Scazoni(1979) further narrowed it down to three stages including the exploration stage, expansion stage and commitment stage.
Hallen and Wiedershem-paul (1984) proposed four stages of developing business relationships. They further developed a model which examined business interactions in an international context and also examines how psychic distance between business partners could be reduced.(Conway and Swift 1999)
Pre-contract stage
At this stage the concerned parties involved are yet to meet each other, In that case, each party will have perceptions and visions based on national cultures (Swift J 2008). The culture affinity or empathy can be identified as the starting variable. The cultural differences between the parties concerned could impact on physic distance. In view of the cultural affinity or empathy likely to be perceived at this stage, the psychic distance is said to be medium.(Swift 1998:1401)
Another key variable identified in this stage is trust. The level of trust can have significant impact on consecutive relationships. The level of trust is likely to be based on secondary information available to both parties.(swift 1998)
Communication could also be seen as important variable as it play a key role in developing cultural awareness between both parties.(Swift 2008)
Initial Interaction stage
At this stage, The first meeting is held between prospective partners. According to Conway and Swift(1998);Swift J (2008), This stage relates to Exploratory stage included in (Scazoni 1979; Dwyer et al 1987) stages of developing business relationships. At this stage the physic distance is likely to increase because the differences between the parties involved are at their apparent phase. The relationship at this stage is highly dependent on cultural backgrounds.(Holden and Burgress 1999)The Key Variables that could be identified at this stage is Trust, Experience and Communication
Development stage
This is the progression of the initial interaction stage. This is the stage were problems and issues are more likely to be apparent as the concerned parties would be concentrating on achieving business objectives rather than establishing business relationships.(Conway and Swift 1999) At this point, Physic distance is likely to decrease as the parties concerned have now become psychologically closer to each other and hence a mutual agreement and understanding is shared at this point.(Swift 2008).
Maturity stage
This is the most profitable stage of establishing business relationship as the development stage which concentrates on business objectives is already established
At this stage, mutual understanding and high level of trust should have been reached as the parties concerned should have understood each other very well to anticipate each others needs.( Conway and Swift 1999)
The key criteria or variables of developing relationship at this stage is Commitment and trust.(Swift 2008)
VARIABLES INVOLVED IN STAGES OF BUSINESS RELATIONSHIPS
Wilson (1995) Suggested 13 variables that could be used in developing business relationships. Commitment, trust, co-operation, Mutual goals, Inter dependence, Performance satisfaction, comparison level of alternative, Adaptation, Non retrievable investments, Shared technology, Summative constructs, structural Bonds, and Social bonds.
However, He further suggested that ?Given situational factors, one might add or delete from the list to capture the relationship situation? (Wilson 1995:337).
In a different view, Conway and Swift suggested that from an International business perspective, experience, customer empathy, trust, commitment and communication are the most Important variables in business relationship development. (Conway and swift 1998). In determining the effect of this variables on relationships, Swift and Haung (2004) conducted a comparative assessment of variables based on the orientation of relationship.
Table 2 Comparative Assessment of Variables based on relationship Orientation
Relationships Types
Variables
Task Oriented
Relationship Oriented
Trust
Low
High
Commitment
Low
High
Experience(satisfaction)
Episodic
Cumulative
Communication
Low
High
Dependence
Unilateral
Balanced Bilateral
Cooperation
Low
High
Mutual goals
Few
Many
Adaptation
Low
High
Source (Swift and Huang 2004:26)
From the Table above, they noted that the key variable tend to be of higher importance in relation oriented business rather than task oriented. This however shows that such relationships are highly dependent on establishing high levels of trust, commitment, cooperation and communication.(Swift and Huang 2004)
Trust
Trust has been recognised as an important variable for the success of developing business relationships. ?Trust while being a determinant of psychic closeness is also a consequence? (Conway and Swift :1403)
Recent literature suggest that trust creates stability and guarantees continuity in the relationships between industry actors and serves as a glue that links the relationship together (Svensson 2004; Dwyer et al 1987)
Lane and Bachmann (1996), Revealed some insights into the importance of trust in business relationship provided by the social systems theory. Trust is seen as reducing the complexity inherent in a given system by enabling individual actors involved in the relationship set up mutual expectations about their future behavior. One who trust another, acts as if that other?s actions are to a degree predictable.(Burchel and Wilkinson 1996)
According to Gundling, (2003). Companies need to handle customer concerns professionally to make the art of persuasion easier. ?In China, the success of relationship marketing is based on guanxi networks?.(Wong 2007:261) business is done with people whom they trust and those connected to guanxi networks.(Wong 2007:)
Commitment
Commitment has been discovered to be an essential component in understanding success of marketing relationships.(Heffernan 2003) Commitment has been shown to be a critical ingredient in the success of long term business to business relationships (Morgan and Hunt 1994).
In the same light, Morgan and Hunt (1994:23) describes ?commitment among exchange partners as key to achieving valuable outcomes.? According to Heffernan( 2003) Findings suggest that two types of commitment emerge at the early interaction stage of relationship development:affective and calculative commitment.
Affective commitment is seen as the more critical commitment to develop at this stage and is developed by trust, face to face communication and the partners ?doing the little things?. Calculative commitment is developed by the signing of the contract and expenses incurred by meeting face to face. (Heffernan 2003)
In the pre contract and early interaction stage there is commitment between the parties involved. A level of commitment needs to be developed for the relationship to progress to the growth stage.
?All this means that commitment by the two parties is vital if the relationship is to develop from the stage of [early interaction]? (Ford et. al 1998:35).
Customer Orientation/Empathy
Customer orientation is considered to be a key factor in business relationship (Palmer and Bejou (1994:500), and has links with the concept of social bonding. ?The word ``empathy'' really refers to an understanding, or the ability to see a situation from someone else's point of view, although many use the term synonymously with affinity and liking? (Conway and Swift 2000 :1395)
At the initial stages of development, there is a likely scenario of the seller to empathise with the buyer. This buyer-seller relationships further develops mutual empathy is achieved.(Conway and Swift 2000) ). Liking by one party play important roles in developing reletionships. The greater the degree of empathy or ?liking''between the parties involved, the lesser the likelihood of barriers to developing relationships. ?Liking'' a particular individual (or group of people) gives a more positive outlook towards that person?.(Conway and swift 2000:1395) Empathy has been recognized as a element of the guanxi notion in China
(Wong 2007)
Experience
Experience is influential at the individual level and can be a powerful determinant of psychic distance as it influences attitude formation.(Conway and Swift 2000)
A negative experience may hinder the business relationship, and may result to customer defection.
This suggests the important influence experience can have on customer satisfaction and, the more
satisfied the customer, the more durable the relationship (Buchanan and Gillies,1990) believe that customer satisfaction can be experienced at both an episodic and at a more general relationship level. While there is indeed a great degree of interaction between the variables, it has been suggested that individually they are relatively more or less important at different stages of relationship development. (Swift and Conway 2000)
Communication
Communication fosters confidence in the continuity of the relationship and reduces conflict (Anderson and Weitz 1989; Anderson and Narus 1990). Effective collaboration and co-ordination depend on effective communication. Communication, language in particular, becomes more important when trying to establish business relationships.(Conway and swift 2000)Therefore communication should be the key objectives of all businesses. Communication also plays an important role in developing cultural liking and empathy at the initial interaction stage. At the development stage, communication reinforces the positive experiences achieved from the initial interaction stage and develops the commitment and trust between both parties.( Conway and Swift 2000)
At the Maturity relationships stage, communication will continue to enhance satisfaction and maintain trust and commitment between the two parties. Thus establishing a strong business relationship.(Conway and Swift 2000)
TASK TWO
HOW FOREIGN LANGUAGE COMPETENCE INCREASES THE LEVEL OF PSYCHIC CLOSENESS
Concept of psychic Distance
The concept of psychic distance plays significant and central roles in international business research. Johanson and Vahlner (1997) opined an initial concept of psychic distance as factors preventing the flow of information.
O?Grady and Lane (1996) further refined the definition of physic distance as a ?firms degree of uncertainty about a foreign market resulting from cultural differences and other business difficulties that present barriers to learning about the market and operating there?( O?Grady and Lane,1996: 30). The geometry of psychic distance is composed of a set of variables that make the home-host country environments differ. This includes religion, wealth distribution, educational level, economic development, geographical distance, cultural differences as well as language (Johanson and Wiedersheim-Paul, 1975).
Role of Foreign language competence in establishing psychic closeness
The role of language in international business has been the subject of increasing study (Swift, 1998). In an attempt to define a language and a foreign language in particular, several authors have given various definitions about foreign language.
Ajiboye (2002: 2) suggests that foreign language is ?any language different form the mother tongue?. Dow (2008: 2) defined foreign language as the ?fluency in a language other than one of the dominant languages of the person?s home country?.
According to Swift (1991) language barriers are commonly found in the communication process and when language becomes a barrier to communication, it affects the verbal communication between partners as well as ones ability to interpret the market culture (Swift, 1991).
Crick (1999) in his article on the internationalization of the firms investigated the use of foreign language skills in small and medium sized firms in UK. The results of this research showed that firms are aware of importance of foreign language but this is not reflected in their daily work (Andersen and Rasmussen: 2002).
Crick?s Report reached two conclusions:
i) Over 33% of UK companies encounter language barriers especially in contact with foreign markets.
ii) UK companies are at risk of loosing valuable trading opportunities with foreign countries because they lack foreign language skills. (Anderson and Rasmussen, 2002)
As communication is an important variable in developing business relationships, it must follow that language is an underpinning factor which brings two business partners closer, thereby increasing the psychic closeness between them. Studies carried out by the International Marketing Purchase Group (IMP) suggests that most British firms do not give sufficient attention to language as an influence in competitive performance (Turnbull, 1981).
Drawing upon the findings of the IMP Group work and Betro Committee, Turnbull (1981:6) proposed six marketing advantages of foreign language skills. It is noted that this advantages could bring two partners closer. He states that foreign language competence can:
i) Improve the flow of commitment to and fro the market
ii) Allow building relationship of trust and commitment
iii) Create a psychological advantage in selling
iv) Improve the ability to understand the business practices of the market
v) Show an interest in culture and customer?s country and more often makes business negotiation easier.
vi) Improve ability to negotiate and adapt product offerings to meet specific needs of their customers.
(1981:6)
Fluency and competency in a foreign language is contributing factor in reducing psychic distance. For instance, ?while the linguistic distance between Canada and Japan may vary, for a Canadian who is fluent in Japanese language, the distance perceived between the two countries is likely to be lower. In a similar fashion, for a Chinese citizen who speaks fluent English, the perceived distance of the USA, UK, Canada and New Zealand will tend to be lower than for a Chinese citizen who does not have competence in linguistics (Dow and karunaratna 2006). Glees (1986) suggested that understanding the market language ensures greater accuracy of communication. The key concept behind this is market closeness which may be likened to psychological closeness to ones market (Swift, 1991). Moreover, the degree of knowledge on foreign markets will increase the psychic closeness between business partners in the home- host countries (Santos et al., 2011). This ?closeness? can be achieved by sharing culture and language. When the foreign language of one business partner is not understood substantially, it would be difficult to establish market closeness. This explains why language differences are important in international marketing and how they contribute to social and psychic distance (Swift, 1991).
In international business negotiations, language is an important factor as it is underpinned by trust given that developing good relationships is determined by mutual trust between buyer and seller (Swift, 1991). McCall and Warrington (1989) agree with Swift?s view by linking trust to activities of partners concerned and if a smooth business negotiation is to be achieved, a degree of mutual trust and cooperation must be established. Competence in foreign language gives a psycho-social barrier to interaction. This eventually increases psychic closeness between the buyers and sellers as mutual trust and cooperation is established (Turnbull and Welham, 1985). Moreover, foreign language competency is also very important in understanding the business their practices and procedures that significantly differ across the globe.
Conclusion
The ability to establish psychic closeness is very closely linked with the ability to speak the language of the business partner. Lack of foreign language competence could pose a barrier for organisations exploring the possibility of establishing business relationships in foreign countries. As presented, language can be the major determinant in establishing trust, commitment and cultural affinity within business relationships.
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