Managing Collaborative Synergy in the Crane Industry

By Keith Ng Y. N. (Ng, K.) Ph.D.

Abstract

This study explores the key factors vital to Principal-Distributor
Collaboration (PDC) in the context of the crane industry in Singapore,
Malaysia and Indonesia. It explains the social processes that Principals
use to address differing interests throughout the course of the PDC.

Applying Glaser’s (1978, 1992, 1998, 2001) emergent approach to
grounded theory, 150 interviews were conducted with 50 participants
from these countries. The main professional concern of participants
throughout the course of the PDC was the need to achieve corporate
objectives, within a certain time frame, whilst also having to rely on the
cooperation of key managers from the partnering firm. Key decision
makers continuously resolve their professional concern through the
basic social process of Managing Collaborative Synergy (MCS). The
theory of MCS suggests that the way in which Principal firms manage
the PDC is by giving attention to the three interdependent dimensions
of Competitiveness Initiating, Confidence Building and Conformance
Setting.

Background and Motivation to the Research

This study took place during the Asian Financial crisis at a time
when the crane industry was undergoing change. Principal firms are
manufacturers of cranes or crane components. Distributors are those
who resell, construct and service cranes or crane components of
those principals that they represent. At the time when this study was
conducted, Principals were gaining in their appreciation of the rewards
associated with successful collaboration with Distributor firms in the
pursuit of their corporate objectives. Similarly, Distributors were more
alert to the benefits, in a limited market, of working in conjunction with
their foreign counterparts to share risks and meet increasing customer
demands. This environment of increasing cooperation between
Principal and Distributor firms provided the overall context for this
research study.

It is a well-recognised fact that effective collaboration with Distributors
plays a prominent role in the business-to-business arena (McQuiston,
2001; Mudambi & Aggarwal, 2003), and so collaborating with
Distributors has been gaining popularity with Principal firms for
two main reasons. First, it allows the Principal firms to focus on
larger accounts (Ernst & Young, 1990; Emshweiler, 1991). Second,
Distributors with a home territorial advantage often have a better
knowledge of their local markets and are able to penetrate these
markets with ease and greater success than can Principal firms
(Douglas & Craig, 1989; Cavusgil & Zou, 1994). Given the prospects
of mutual benefits, working with Distributors provides the possibility
of reaching every segment of the business field. Therefore, an astute
Principal firm will choose to work closely with their Distributors in
order to stay competitive and ensure long-term corporate success
(Noordewier, John & Nevin, 1990).

Although there are no definitive data to account for the business
volume that Distributors are directly responsible for, industry estimates
in the United States indicate that there are 400,000 Distributors who
make up as much as 50% of the upper-channel sales in business-to-
business markets (Dishman, 1996). In the crane industry, 80% of
crane firms in Singapore, Malaysia and Indonesia are Distributors who
represent Principal firms that manufacture hoisting equipment. Given
the large number of firms using Distributors, successfully managing
and improving working relationship with Distributors is of paramount
significance to any Principal firm (Merkel, 2001; Ng, 2002).

However, despite the large numbers of Principal firms employing
Distributors, little appears to be understood about how the Principals
have gone about developing and maintaining Principal-Distributor
relationships. While there are a number of models of building
relationships in the business-to-business arena (such as Anderson
& Narus, 1999, Zineldin, 2002), none are specifically designed and
directly focused on managing the collaboration between a Principal
and a Distributor. This lack of research into Principal-Distributor
relationships is also reflected in the crane industry, the specific focus
of this study. This study attempts to fill this gap in understanding
Principal-Distributor relationships by using the crane industry as a
case study. In addition, this study also seeks to explain how Principals
draw out the synergistic nature of the relationship by resolving the
issues arising in the relationship. The relationships between Principals
and Distributors that form the focus of this research are labelled
Principal-Distributor Collaborations (PDCs).

Batt and Purchase (2004) contend that a firm’s ability to develop
and successfully manage its relationship with other firms is a key
competence and source of sustainable competitive advantage.
Managing relationship with Distributors has long been recognized
as a critical component in channel marketing (Ross, 1985; Weber,
2000). However, there is recognition that making collaboration work
is a significant challenge (Boddy, Macbeth & Wagner, 2000; Cropper,
1996; Spekman, Forbes, Isabella & Macavoy, 1998). This leads
Weber (2001, p. 95) to suggest that both Principals and Distributors
may benefit from a closer study of how collaboration between them
“are developed, managed and maintained over time.”

Because of its potential to impact on the long term profitability and
survivability of both Principals and Distributors, the management of
PDCs should be a major concern to both parties. In an increasingly
competitive environment, unsatisfactory progress rates for a PDC
will put considerable resources at risk especially in the form of
financial resources. Conversely, firms that collaborate successfully
realise corporate objectives by improving both top line revenues and
bottom line profits (Weber, 2001). Thus increasing the efficiency and
effectiveness of the management of PDCs has the potential to expand
and maintain significant competitive advantage for both parties.

At a professional level, my interest in the management of PDCs
resulted from my work as the managing director of KI, a manufacturer
of electrification systems for the crane industry. I was involved in the
training of Distributors in the areas of sales and marketing, product
knowledge, installation techniques and after sales maintenance
programs as a part of the induction of new Distributors. In the course
of working for sixteen years in this particular field, it became obvious
to me that the management of PDCs was underdeveloped and under
researched. Collaboration between Principals and Distributors was
not symmetrical, particularly in relation to the role of initiating and
driving the relationship. It was in the perspective of the Principal that
this research was undertaken.

Purpose of the Study

The purpose of this study was to develop a substantive theory of how
key decision makers of Principal firms in the crane industry address
the managerial concerns they were challenged with throughout the
course of the PDC. The following questions guided this study:

1. What are the main concerns that confront key decision makers
contributing to the satisfactory outcome of a PDC?

2. What can these key decision makers do in order to resolve
these concerns to ensure that long-term mutual benefits can be
achieved throughout the course of a PDC?

In this study, key decision makers were individuals who shoulder
the responsibility and were directly involved with the developing
and maintaining of the PDCs. These included business owners and
employees that have the most constant contact with Distributors
and have the greatest influence on the ongoing management of the
Principal-Distributor relationships.

The Method

Given the lack of research in the area of PDCs and the exploratory
nature of the research questions, it was decided to use a qualitative
approach in the present study. More specifically, grounded theory
(Dick, 2002; Glaser, 1978, 1992, 1998, 2001; Glaser & Strauss,
1967) was chosen as the main research methodology. Grounded
theory is a systematic, inductive approach to developing theory to
help understand complex social processes. The main motivation that
encouraged this choice is the ability of grounded theory to handle the
emergence of problems identified by participants in a study (Glaser,
1998).

Another factor that motivated the selection of grounded theory as
the research methodology was that the theory discovered would
be representative of the substantive area of inquiry of this study. A
fundamental strength of grounded theory is letting the data determine
who next to talk to or where to go for further information. This process
is referred to as “theoretical sampling” (Glaser & Strauss, 1967, p.45).
Theoretical sampling in a grounded theory study is determined by
the need to collect as much data as necessary in order to investigate
categories and theoretical connections. Participants were added to
the study as guided by data analysis until the point of saturation was
reached (Glaser, 1978). In this study, 150 interviews were conducted
involving 50 business owners and senior managers of Principal and
Distributor firms in the crane industry across Singapore, Malaysia
and Indonesia. Data were collected over several phases from major
stakeholders of PDCs that had at least 10 years of working experience
in the crane industry. Confidentiality for each participant was ensured
and written consents obtained. The data were coded as an ongoing
process and subsequently written up.

Throughout this study, the constant comparative method was used
for data analysis. The basic intent is the identification of a core
category as a key part of the process. Glaser (1978, p. 93) asserts
that “the generation of theory occurs around a core category” and
represents the main theme of the substantive area of inquiry. So the
core category captures the main concern of participants in a study and
accounts for most variation in a pattern of behaviour. It explains, “what
is going on in the data” (Glaser, 1978, p. 94) and becomes the basis
for the emerging substantive theory. In this study, the core category
was identified through an iterative process of coding, memoing,
theoretical sampling and theoretical sorting. Towards the completion
of data analysis, a comprehensive review of the literature on PDC
was undertaken in order to place the developed substantive theory
within the context of what was already known in existing collaborative
theories on the topic.

The Main Professional Concern

Analysis of the data revealed the following factors formed the main
professional concern of Principals in the crane industry; i.e., how
to collaborate with Distributor firms to achieve corporate objectives
within a specific time frame. These factors emerged after an in-depth
examination of the data collected in the study, as described by the
grounded theory method.

The first factor was the environment within which the key decision
makers try to achieve corporate objectives. For the PDC to work, the
collaborators had to pursue common interests such as increasing
market share, achieving customer satisfaction, filling competency
gaps and reducing overall costs. The reason firms entered into
collaboration was to enable them to leverage each other’s strengths.
Key decision makers were unable to make independent decisions
or work in isolation from each other in a PDC, as they might within
their own firms. Decision-making in a PDC would inevitably involve
both parties acting together. Not only did key decision makers need
to collaborate with each other, they had to do so in the best interests
of all parties. A PDC working environment is collaborative, a ‘it takes
two hands to clap’ scenario. In other words, achieving corporate
objectives in a PDC environment requires collaboration with other
partners through social processes that exclude conventional forms of
managerial power or control.

The second factor that influenced key decision makers was the
pressure of meeting corporate deadlines. The success rate of
achieving set objectives within the specified time would give rise to
better financial gains, an enhancement of corporate reputation and
an overall improvement in business performance. Failure to achieve
set time lines would incur the use of additional resources and an
unnecessary extension of working hours. Therefore a ‘time is of the
essence’ mindset is vital for key decision makers. It allows managers
to recognize and seize opportunities and to recognize when things
are getting off the rails and to take the initiative to fix them. Working
effectively in today’s competitive environment requires managers to
keep pace with the ever-changing market.

Another factor that must not be overlooked was the key decision
makers’ own career prospects. This third factor focused on the key
decision makers’ personal interests. For key decision makers who
were employees, their success in making a PDC work could result
in career benefits ranging from higher bonuses and promotions, to
securing their position within the organisation. For business owners,
the successful management of a PDC would provide the benefits of
long-term corporate success and inherent financial rewards. Failure
to meet set objectives would have adverse implications such as
termination in the case of employees and the possibility of bankruptcy
for business owners.

Therefore, the need to fulfil corporate objectives was a strong
motivating factor in framing the main concern for key decision
makers in a PDC and is often used as a signpost when appraising
managerial competence. Decisions made in the best interest of the
PDC itself rather than just in the interest of the partnering firms or
the key decision makers. This approach led to ‘win-win’ solutions for
long-term market gains. How to maximize the synergistic nature of
the collaboration, through the processes of cooperation, became the
factor that motivated and explained the behaviours of key decision
makers in Principal and Distributor firms.

In this study, synergy is a term that is commonly used and understood
in the Singapore organizational context. Synergy means the ability
of both the Principal and Distributor to create greater competitive
advantage by working together than they could by working apart. This
includes the ability to generate value for each other greater than that
which is generated by each of its rivals.

Managing Collaborative Synergy: A Way of Resolving
the Main Professional Concern

Managing Collaborative Synergy (MCS) was the label selected to
describe the process whereby the Principal constantly addressed
their main concern in the Principal-Distributor relationship. It was a
process in which the Principal firm employed and adapted a range
of collaborative management strategies capable of initiating and
maintaining the synergistic benefits of a PDC in the crane industry.

During the MCS process, constant interactions between key decision
makers from Principal and Distributor firms allowed the establishment
of criteria on which the PDC could be based. These criteria enabled
both firms to achieve a greater understanding of each other’s needs
and expectations. Thus, once these criteria were established, more
cooperation and less opportunistic behaviours could be expected from
key decision makers. In an environment of cooperation, key decision
makers often acted together in an effort to improve the synergistic
nature of a PDC and so achieve satisfactory outcomes for all in the
relationship. Issues that might cause disputes with each other were
often resolved by informal means rather than by one side exploiting
the situation. That was a major feature of MCS.

MCS is a form of management that fits the contextual needs of a
PDC in the crane industry. The theory of MCS enables the Principal
firm to facilitate translation of PDC goals into reality. In addition, MCS
possesses the necessary conceptual power to provide an explanation
of the managerial practices and processes adopted by the Principal
firms in this study.

In the process of MCS, three conceptual phases emerged as the
main professional concerns of study participants and accounted for
the variations in patterns of behaviour of these individuals in the
PDC. In grounded theory parlance, these three phases were sub-core
categories of the process:

1. Competitiveness Initiating
2. Confidence Building
3. Conformance Setting

Competitiveness Initiating

Competitiveness Initiating refers to a sequence of two linked stages
– grappling with the market and positioning within the market – as the
Principal firm assesses and explores the environment within which
their potential Distributors operate. This helps the Principal to position
its internal capabilities to deliver products and services that fulfil
these requirements. In addition, the Principal firms actively identify
suitable potential Distributors to work with. Often Principals identify
Distributors based on what the Distributors can potentially achieve,
given the availability of essential resources supplied by the Principal.
Conceptually, this is the phase whereby the Principal identifies gaps
in market and capitalises on its ability to deliver goods and services.
Deliver them at the time at prices as good as, or better than other
suppliers and in the form sought by buyers. All of this while earning
at least opportunity cost on the resources employed. This phase
provides the Principal with an understanding of the commitment of
resources required to obtain a competitive edge over rival firms.

Grappling with the Market

This encompasses the Principal’s exploration of market needs of
potential Distributors. The Principal searched for marketing information
pertaining to the environment, specific product requirements and
potential Distributors for collaboration. A category of grappling with
the market is the need of achieving competitive edge. This varies
according to the needs of Distributors and may include the need to
have access to expertise and compatibility. Another category is that
of third party influencing. In addition to exploring ways to achieve
a competitive edge, Principals must also understand the existing
relationships in which their potential Distributors were engaged in.

These third parties influencing could influence positively or negatively,
the decision to search for a partner and hence the formation of a PDC
relationship.

Positioning within the Market

This is the process of converting a Distributor’s need to achieve
competitive edge, into an opportunity that was attractive to the
potential Distributor. In other words, positioning within the market is
the consequence of the Principal’s grappling efforts to fulfil market
needs. Activities during this stage are directed towards positioning
the Principal firm so that it is in a favourable stance in later phases.
When effective, this process is likely to result in heightened interest of
potential Distributors towards the Principal firm.

A category of positioning within the market is complying essentials.
In the search to fulfil market requirements, the Principal may take
initiatives to offer goods and services to match market needs. Most
often the missing resources required by the potential Distributor,
determined the area in which the Principal must deliver. This may
take the form of meeting recognised standards, matching quality
expectations and improving designs. The process of identifying a
complying essential in the positioning stage might sometimes lead
a Principal to appreciate a PDC from the perspective of the potential
Distributor.

Another category of positioning within the market is the process of
tolling. This serves as incentives for a potential Distributor in offering
Principal’s products and services in the marketplace. The level of
competition within the market often influences key decision makers to
adopt proactive pricing to maintain competitiveness. Financial gains
in working with the Principal are the implicit condition that justified the
relationship. Therefore, the Principal is required to implement pricing
based on current market trends and needs. It would be unusual not to
express how much value the collaboration could offer each partnering
firm in due course.

Support is the last category of positioning within the market. This is
the label applied to the process that the Principal adopts to assist
Distributors in meeting the objectives of collaboration. In other words,
what other things could the Principal do to enable Distributors to
achieve the desired results from the relationship. Distributor firms
are mainly interested with the type of Principal’s support that they
receive ranging from simple responses on enquiries, availabilities of
stocks, completeness of product range, available marketing budget to
demands for higher discount structures.

Confidence Building

Confidence Building refers to a sequence of two linked stages
– addressing differences and ensuring deliverables. Often the main
challenge for Principals in this phase of a PDC is to increase the
pursuit of mutually compatible interests in the collaboration while
decreasing opportunistic behaviours. Social processes associated
with Confidence Building are employed to attract potential Distributors
so that Principals may access the cooperative nature of the partner
firm for mutual benefits. In addition, this phase is also characterised by
social processes directed at appraising the latent cooperation within
a potential Distributor and between individual key decision makers.
Formal and informal appraisals conducted during this phase often
suggest the rate at which a PDC might progress in the later phases of
the collaboration.

Addressing Differences

Addressing Differences is often a stage marked by intense negotiation,
which leads to the recognition and establishment of common grounds
in the PDC. Activities are directed at increasing the interest of potential
Distributors in forming a PDC. The Principal, having in the first phase
understood and positioned itself in meeting market requirements,
often attracts interest by first converting their need for a partner into
some form of opportunity that is attractive in the market to the potential
Distributor. In a way this is putting the ‘carrot’ before a potential
Distributor in an effort to increase their level of interest in forming a
PDC.

A category of Addressing Differences is that of appraising capability.
Managerial interests at this point are aimed at assessing the levels
of value that the potential partnering firm possesses. Formal and
informal appraisals of capabilities might be undertaken to establish
the level of benefits associated with collaborating with a specific
firm in comparison with the potential risks. Formal appraisals are
referred to as activities that occur at firm-specific level in evaluating
the benefits of working together with a potential partnering firm. This
is characterised by factual, rational and objective requirements of the
firm. Informal appraisals are usually more prominent at the level of key
decision makers. These are substantially less structured and involve
the subjective interpretation of those aspects of risk and benefits that
are believed to be vital to the individual. Intuition rather than fact often
dictates the basis of informal appraisals.

Another category of addressing differences is that of engaging
exclusivity. This is the process where the Principal assigns the right of
marketing its products and services in specific territories to a potential
Distributor. The term ‘exclusivity’ means the rights are given by the
Principal solely to the one Distributor. As exclusivity could be viewed
as the highest selling right awarded to a Distributor, the negotiation
of this factor is often a crucial period for the success or failure of the
PDC. It might be the first catalyst in the PDC to a discussion about
a firm’s willingness to commit to a long-term relationship with the
other potential party. While not working on exclusive terms might be
perceived as non-committal from the Principal, the wrong selection
would impede the main objectives of the collaboration. The Principal
might lose opportunities if the Distributor did not give its exclusive
commitment in its marketing efforts. Conversely, Distributor firms look
for assurances in the relationship with the Principal firm. In marketing
the Principal’s products, Distributors want to be assured that it is worth
their effort to incur marketing expenses and even be able to reap the
benefits of their labour for long-term survivability.

Following the processes of both appraising capability and engaging
exclusivity that of reducing risk follows. Reducing risk is the category
used to describe a time where firms tread carefully prior to the
commitment of significant resources to the PDC. Not all issues can be
fully addressed at this point of time, so both Principal and Distributor
adopt a reducing risk attitude toward the relationship. In other words,
there seems to be general agreement to work with each other in a
PDC given the likelihood that benefits exceed risks and so, to increase
that likelihood, they focus their attention on the reduction of risk. The
process of reducing risk is often characterised by getting a market
response. For example, a Distributor might request a product trial and
obtain customer feedback prior to the commitment of stock orders or
entering any collaborative arrangements. In addition, there is often
an increase in discussions between the potential partner about ways
of improving the level of collaboration. During this stage, the focus
of discussion shifts from internal to external factors impinging on the
potential viability of the PDC. This is often marked with discussions
on commercial terms of sale such as payment terms and flexibility of
payment.

The stage of addressing differences is a transitional period whereby
Distributors’ interests are addressed by the Principal firm. Activities
are usually directed to addressing these issues and success acts as
a catalyst in the formation and formalization of a PDC. This might
take the form of legally binding contracts or a ‘handshake’ agreement
based on the promises given by both parties, as discussed earlier.
The satisfactory completion of this stage leads to one whereby the
Principal firm is in a position to ensure it can deliver on its promises.

Ensuring Deliverables

During the first stage of addressing differences, managerial attention
is centred on addressing the question of ‘how can we work together’.
This stage in PDC usually concludes with a general agreement by
key decision makers within each firm that both partners gain from the
synergies of working together. This becomes the impetus to move
both partners to increase their level of commitment in the PDC. It
is frequently a period in which partnering firms agree that they must
deliver on the promises made in earlier stages of the PDC. The process
of passing these resources to the partnering firm indicates the point
when the commitment to delivering its promises are consummated.

The commitment of real and tangible resources into the PDC often
provides the context of managerial action in this stage. As such, the
Principal may attempt to ensure, often simultaneously, delivery on a
combination of issues common to many PDCs.

Increasing confirmation was the category applied to the process that
involves the Principal firm keeping the promises given as part of its
commitment during the earlier stage of addressing differences. It is
often a crucial period for the success or failure of the PDC. It might
be the first point in the PDC when the reliability of the Principal firm
to deliver on its promises is tested. Often, it is a point whereby the
Distributor has already made commitments to go ahead with stocking
the Principal’s products for re-distribution in the agreed territories.
Failure to deliver on its promises might either dissolve permanently,
or stall, the PDC while the other firm re-examines their alternatives in
view of the actions of the defaulting partner.

Improving status is a category used to describe the consequences
of a firm’s increasing confirmation efforts. Once key managers have
progressed through the increasing confirmation process and trust
and mutual respect are built up, the relationship will move towards a
synergistic position that captures the strength of the two firms working
together. An important property in the process of improving status is
the continued growth in personal relationships between key managers
of the organisations represented. This is characterised by a sense of
familiarity developing through working with recognisable counterparts
in the PDC. Managers experienced in PDCs often appreciate the
essential need to gain the involvement of their counterpart as early as
possible in order to ensure the success of the PDC. Usually, by this
time, experienced managers have established some form of direct
contact with key decision makers of the Distributor firm.

Often, in working with Distributors, it is common for Principals to find
that not all of the agreed points of collaboration are fully covered in the
earlier stages of the relationship. Nor does the Principal anticipate all
of the approaches that might be needed in resolving every managerial
issue. In addition, PDCs in the crane industry often involve many
stakeholders within each partnering firm and the initial agreement
made might not fully address all issues. Some managers prefer to
label the unmet issues as ‘gaps’ and the processes used to resolve
these issues as ‘approaches’.

Closing the gaps often means key managers will constantly look for
alternative means to resolving issues arising between the parties.
Knowing that not all points were covered in the earlier stages of the
discussion, key managers are prepared to make alternative decisions
for the resolution of issues arising. Conversely, inexperienced
managers in PDCs are often astonished to find these gaps were not
addressed earlier and might go through a phase of dissatisfaction and
even anger at what they perceive as failures in the earlier discussions.
This phase of dissatisfaction might jeopardise relationships with key
managers of the partnering firm and even with other managers in their
own firm. As a result, firms experienced in the process of PDC often
strive to limit any form of interruption in the relationship by having the
same key managers participate in all phases of the development of
the PDC.

Another property of improvising status is that of filling in. Although key
decision makers could adopt formal or informal approaches to the
resolution of managerial issues in this stage of a PDC, they are likely
to employ one or the other extreme in filling in the ‘gaps’. This reflects
the level of personal relationships, mutual trust and confidence that
these partnering firm have in each other. When relationships are
characterised by suspicion, key decision makers prefer to manage
issues arising by using formal approaches such as ‘going by the
book’. However, the relationship between Principal and Distributor is
often characterised by increasing levels of trust and mutual respect
and key decision makers will accordingly adopt a ‘logical approach’ to
‘fill in’ the gaps.

Informal means of resolving issues often involves key decision makers
searching for ‘win-win’ solutions. This choice is dependent on the time
required for the issue to be resolved. Taking a ‘logical’ approach to the
resolution of issues prevents the process from stalling to an extent
that jeopardizes the viability of the PDC. In short, what drives key
managers to adopt informal processes to fill in ‘gaps’ is the intention to
avoid impeding the advancement of the PDC at all costs.

Conformance Setting

Conformance Setting is the last phase of the basic social process of
MCS. It can be conceptualised as the extent to which the Principal
devises and implements strategies and actions that guide the PDC to
follow the rules of the collaboration. In attempting to ensure that the
PDC continues to progress at a satisfactory rate, the Principal adopts
a range of strategies to guide decision-making with the objective of
improving the overall synergistic nature of the collaboration. This is
seen as the phase whereby the Principal has delivered on its earlier
promises, and where it expects the Distributor firm to fulfil its part of the
bargain. These strategies provide and act as a guide for the Principal
firm in resolving a variety of managerial issues so that the objectives
of the collaboration can be met. Three broad types of strategies for
Conformance Setting emerged from the study: Distributor-based,
Operational-based and Principal-based strategies.

Distributor-based Strategies

Distributor-based strategies focus directly on the Distributor by
constantly monitoring the status of the Distributor. This involves
continuous interactions between collaborating firms to make sure that
the Distributor is competent in its role. These strategies attempt to
enhance the Distributor’s knowledge by improving its abilities, skills
and attitudes in relation to the Principal’s products and services.
These include training, acquisition and participation. Developing the
capability of Distributors, and helping them to grow, is an effective
strategy that the Principals adopt to achieve high performance by
Distributor firms.

Operational-based Strategies

Operational-based strategies are Principal strategies that focus on
aspects that strive to improve the performance PDC. The overall
category of operational-based strategies consists of two separate
sub-strategies – communicating and preparedness. Communicating
are Principal strategies intended to increase the effectiveness of the
communication occurring between Principal and Distributor firms.
Preparedness are Principal strategies directed at planning for issues
that might arise or actions that might be required as a result of working
with the Distributors. They determine how the desired outcomes could
be efficiently and effectively achieved.

In the crane industry, Principals monitor the operational issues
that might arise as a result of working with Distributors. This would
enable the Principal to determine if there are issues that contribute
to Distributor’s behaviour, positively or negatively. These influences
on Distributors, if deemed to be conducive, will prompt a Principal to
preserve these characteristics. Conversely, when influences effecting
Distributors are perceived as being detrimental, the Principal might
attempt to cease or minimize such effects. Both these outcomes
are likely to affect the Distributor’s behaviour positively. Failing to
do so would frustrate Distributors leading to disillusionment in the
relationship.

Principal-based Strategies

Principal-based strategies were those that are aimed at optimising the
PDC by improving those Principal’s behaviours that affect or influence
the behaviours of their Distributors. In the crane industry, the Principal’s
ability to improve their behaviour depends on two major factors. The
first is their understanding of the level of influence that their behaviours
had on their Distributors. The second is their receptiveness to make
changes in their own behaviours. When their influence has positive
or negative outcomes in Distributor’s behaviours, attempts must be
made to either strengthen or modify their own behaviour accordingly.
This results in both outcomes positively reinforcing the Distributor’s
role in the PDC.

The overall category of Principal-based strategies consists of two
separate sub-strategies – comprehending and self-improvement
strategies. Comprehending is the label given to those strategies
focused at increasing the Principal’s understanding of how their
own behaviours influence Distributor’s behaviour. Self-improvement
is the label given to those strategies aimed at the Principal’s selfimprovement
in order to be attractive to their Distributors and thus in
turn influence their behaviours.

Discussion

In Glaser’s grounded theory method, the emergent theory leads itself
to the extant literature that should be examined in the final stage of the
research process (Guthie, 2000). According to Glaser (1998, 2001),
this approach enables a more appropriate and relevant comparison of
the emergent theory with the literature. The benchmark for inclusion in
the comparison with the extant literature is perceived relevance.
The theory of MCS explains how the Principal firm manages the
Principal-Distributor relationship to achieve corporate objectives
within a specific time frame. The literature search revealed that there
was no theory totally similar to the theory of MCS. However, several
theories that reflect the theoretical focus of PDC can be found in the
Inter-Firm Relationship (IFR) literature with what Peng and Kellogy
(2003) describe as “voluntary cooperative agreements between at
least two organisations which involve exchange and sharing.” (pp.
292-293).

I will present the model proposed by Zineldin (2002) for “managing
one-on-one relationships” (p. 549). No particular reason led to the
choice of this model apart from its relevance to this study. This
model is based on the analogy of a romantic relationship; Zineldin
(2002) proposes business relationships as commencing from a
period of “discovery”, followed by “development” and moving towards
“commitment” and “loyalty” (p. 552). Change is imminent as the IFR
‘evolves’ through a generic sequence of life-cycle phases. Each phase
logically implies a high level of cooperative effort as well as differences
in information, expectations, experiences, needs, wishes, values,
strategy requirements and consequences. As such, each phase has
the potential to create or impede the growth of the relationship.

A closer examination of the theory of MCS and Zineldin’s relationship
life-cycle model reveals several striking similarities. The first of these
is that firms move closer over time as the relationship evolves thus
depicting increasing levels of mutual commitment. This is evident
in the confidence building phase where the Principal firm ensures
deliverables on promises made in earlier stages of the relationship.
Another similarity is the recognition of the inherent problems of
working together in a relationship and as such the possibility of failure
in each phase of the IFR development. Aspects of the theory of MCS
provide some conceptual support for this. To achieve the purpose of
PDC means that Principals and Distributors have to perform their
roles in the relationship effectively, failure to do so would possibility
impede and even terminate the relationship. The third similarity is the
acknowledgement of the need to use strategies in the relationship to
acquire or retain partners. This is supported in the conformance setting
phase whereby strategies such as Distributor-based, Operational-
based and Principal-based are used by the Principal firm to guide
decision making to ensure the PDC continues to progress at an
acceptable rate. However, while there is congruency and conceptual
support to the Zineldin (2002) model, a major point of significance of
the theory of MCS is the contribution it makes by providing insights
into the social processes of deploying strategies that may encourage
greater commitment and trust. In the theory of MCS, strategies were
used to guide the Principal firm in resolving a variety of managerial
issues so that the objectives of working together can be achieved.

Achievements of the Study

The first question early in the study was to examine key factors
that confront key decision makers in order to obtain satisfactory
outcome of a PDC. The findings of this study provide an insight into
our understanding of the major concerns that key decision makers
face when managing PDCs. These results indicate that Principal
firms are expected to give due attention to three main categories of
Competitiveness Initiating, Confidence Building and Conformance
Setting to obtain a favourable result in their endeavours with their
potential Distributors. From the academic perspective, given the
limited studies in identifying managerial concerns and how these key
decision makers went about addressing their concerns, such a study
benefits by filling the gap in the extant literature (Nevin, 1995; Weitz
& Jap, 1995).

The second question was what key decision makers can do to resolve
various concerns that arise throughout the course of the PDC to
achieve long-term mutual benefits. Often in addressing differing
interests in the course of the PDCs, key decision makers not only
pursue their own corporate objectives, they draw out the synergistic
nature to sustain long-term mutual benefits. The crux of the theory
of MCS is the way in which the Principal firms manage the PDC by
employing and adapting a range of managerial strategies capable of
initiating and maintaining the synergistic nature of the relationship.
Key decision makers working at the interface between Principal and
Distributor firms often establish criteria on which the PDC could be
based. How these individuals approach and manage these criteria
is the key to achieving satisfactory outcomes in the relationship.
Managers experienced with PDCs often resolve confronting issues
by considering the interest of both parties rather than by exploiting
the situation. This approach enables the Principal firm to facilitate the
translation of PDC goals into reality, providing consistency in managing
the Principal-Distributor relationship and fulfilling expectations of both
parties to the relationship. The theory of MCS provides details about
the social dynamics between key decision makers in the resolution of
each of the managerial issues identified above.

From the perspective of practitioners, it is expected that the study will
contribute to their understanding of Principal-Distributor relationships.
In addition, it will provide conceptual explanations for the patterns of
behaviour of key decision makers in the crane industry. Understanding
these patterns of behaviour will allow practitioners to be suitably
prepared when collaborating with potential partners. This study will
enable practitioners to recognise the limitations in the roles that both
partners play. Relevant actions could then be taken to address these
shortcomings early on in the relationship, as this study will provide a
platform to evaluate the overall health and status of the collaboration.
An exploratory study like this will begin to provide practitioners with
the means to improve the overall quality, effectiveness and efficiency
of their management of PDCs in general. These improvements will
lead to PDCs contributing to increased corporate performance and
adding to shareholders’ value.

Conclusion

Faced with the ever-increasing number of Principal firms using
Distributors as their sales arm, developing viable working relationships
with Distributors is of considerable importance and is now viewed as
a high profile area in the crane and other related industries. The
results of this grounded theory study indicate that the way in which
the Principal manages this relationship is by giving attention to three
sub-core categories of competitiveness initiating, confidence building
and conformance setting. These findings serve as a foundation for
developing and understanding all the different facets on which the
relationship is based. By collating the data of this study, Principal firms
can build more effective and enduring relationships with those that
resell their products.

Author:

Keith Ng Y. N. (Ng, K.) Ph.D.
Graduate College of Management,
Southern Cross University
Australia
Phone: +65 6271 5937
Fax: +65 6728 0739
Email: keith@kdn.com.sg.

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