Business relationship framework in Indonesia: relationship marketing vs transaction cost

Abstract

Purpose – This paper aims to explore business relationship framework between two companies. In this research, relationship marketing and transaction cost were used as frameworks to analyze business relationship of two different kinds of companies in Indonesia, oil company and hypermarket. Gronroos (1994) defines relationship marketing is establishing, maintaining and enhancing relationships with customers and other partners, at a profit, so that the objectives of the parties involved are met. This is achieved by a mutual exchange and fulfillment of promises. This definition is a key to analyze the relationship of retailer and their supplier. In contrast, Williamson (1980) argued that relationship in business organization is based on their economic interest, and this approach is known as transaction cost approach. In this kind of relationship, business organizations consider cost and benefit of business relationship. Design/methodology/approach – The design of this study is triangulation. Two approaches were used to answer the research questions. A survey involving 204 respondents was conducted. These are companies in Indonesia oil and gas and retail industries. The types of power of those companies were analyzed using descriptive statistic and paired t test. Also, case study was conducted to gain depth information of two companies, with a large number of business partners among the respondents. The design of case study is holistic case study. Findings – The result shows that, in the oil company, the relationship between a company and their supplier is tied on a strict contract. In fact, the relationship of supplier and company in a fuel company based on transaction cost theory. In the retail company, the relationship of supplier and retailer based on trust, commitment and satisfaction. Those three construct are the foundation of relationship marketing. Companies in those two industries tend to use non-coercive power to influence their business partners. Originality/value – This study analyzes type of business relationship in industries in emerging markets. It also discusses type of influence strategy used by companies to control their business partners to gain mutual benefit.