Libya is classified as a developing country (AMS, 2012), and although it has long had relationships with the West, it has been subject to UN sanctions for many years, essentially because of its foreign policy (BBC, 2004), which caused a rather volatile relationship with the United States and many other countries in the world. Whilst Libya was not at war with any of these countries, neither was it at peace, and there was suspicion and discomfort on both sides. All of that, however, occurred under the previous regime, which has now fallen, and with that in mind it is important to be aware of what Libya has to offer and how successful international business relationships can be established and maintained between it and the rest of the world in the future. Clearly, there are important and significant factors involved, and examining them is one way to address the issue.
¶ … Social Variables in the Development and Maintenance of Business Relationships with Libyan Companies
The Need for the Research
Expected Contribution to Knowledge
Review of the Chapters
Review of Chapter 2 (Literature Review)
Review of Chapter 3 (Research Methodology)
Review of Chapter 4 (Research Findings)
101.5.4 Review of Chapter 5 (Research Discussion)
101.5.5 Review of Chapter 6 (Recommendation & Conclusion)
101.5.6 Review of Reference List
122.1 Why the Business Relationship is Important
132.2 Social Variables in the Development of Business Relationships
142.2.1 Cultural Affinity
Trust
202.2.3 Commitment
222.2.4 Experience
252.2.5 Satisfaction
262.2.6 Communication
Stages in the Development of a Business Relationship
322.3.1 Pre-contact
332.3.2. Initial Interaction
352.3.3 Development
352.3.4 Maturity
Research Methodology
373.1 Introduction
373.2 Definition of research methodology
383.3 Research Design
393.4 Research Philosophy
423.4.1 Justification for Choosing Phenomenology as the Research Philosophy
433.5 Research Approach
443.5.1 Choice of Research Approach and Justification
443.6 Research Strategy
453.6.1 Case Study, and Justification for Choosing this as the Research Strategy
463.7 Data Collection Methods (Interviews)
503.7.1 Justification for Choosing the Semi-structured Interview as the Data Collection Methods
513.8 Translation of the Interview Protocol
513.9 Data Analysis
533.10 Research Diary
543.11 Ethical Approval
543.12 Research Administration and Pilot Study
573.13 Evaluating the Research Outcomes
583.14 Summary
Chapter 4: Research Findings
594.1 Introduction
594.2 Summary of the Demographic Data
614.3 Summary and Discussion of the Stages in Relationship Building
644.4 Summary Analysis of Stage One and Variables
674.5 Summary Analysis of Stage Two and Variables
694.6 Summary Analysis of Stage Three and Variables
724.7 Summary Analysis of Stage Four and Variables
744.8 Summary Analysis of Stages Five and Six and Variables
754.9 Summary of Stages and Variables
Chapter 5: Research Discussion
805.1 Situation of Libyan Companies in the International Market
815.2 Importance of Psychic Distance and Closeness
835.3 Roles and Interconnectivity of Social Variables in Relationship Development
835.3.1 Role of Commitment in Relationship Development
845.3.2 Role of Trust and Loyalty in Relationship Development
865.3.3 Role of Communication in Relationship Development
875.3.4 Role of Cultural Affinity in Relationship Development
885.3.5 Correlation of Commitment and Communication
895.3.6 Correlation of Commitment and Trust
895.3.7 Correlation of Commitment and Social Bonding
905.3.8 Correlation of Social Bonding and Mutual Goals
915.3.9 Correlation of Cultural Affinity (Empathy) and Social Bonding
925.3.10 Correlation of Communication and Cultural Similarity
925.3.11 Correlation of Communication and Experience
935.3.12 Correlation of Communication and Trust
945.3.13 Correlation of Satisfaction and Commitment
945.3.14 Correlation of Satisfaction and Trust
955.3.15 Correlation of Trust and Cultural Affinity
965.4 Impact of Social Variables in Pre-Contact Stage
975.5 Impact of Social Variables in Initial Interaction Stage
985.6 Impact of Social Variables in Development Stage
1005.7 Impact of Social Variables in Maturity Stage
Chapter 6: Recommendation & Conclusion
1026.1 Cultural Adaptation and Empathy
1036.2 Effective Communication
1046.2.1 Open and Clear Communication
1046.2.2 Mutual Language
1056.2.3 Non-verbal Communication
1066.3 Trust and Loyalty
1076.4 Commitment
1096.5 Experience and Satisfaction
1106.6 Mutual Goals
1116.7 Social Bonding
1136.8 Functional Proximity
References List
Chapter 1: Introduction
Libya is classified as a developing country (AMS, 2012), and although it has long had relationships with the West, it has been subject to UN sanctions for many years, essentially because of its foreign policy (BBC, 2004), which caused a rather volatile relationship with the United States and many other countries in the world. Whilst Libya was not at war with any of these countries, neither was it at peace, and there was suspicion and discomfort on both sides. All of that, however, occurred under the previous regime, which has now fallen, and with that in mind it is important to be aware of what Libya has to offer and how successful international business relationships can be established and maintained between it and the rest of the world in the future. Clearly, there are important and significant factors involved, and examining them is one way to address the issue. Once they have been explored, however, more still needs to be done. Simply saying what the issues are and then ignoring what can be done to move toward the establishment of business relationships, does not solve the problems, but we should critically investigate the current state of international business relationship development literature and then try to explore the characteristics that determines sustainable international business relationships within any business context (Schmitz, 1997; Viotti and Kauppi, 2006).
This study addresses the issue of which factors underpin successful business relationships and the stages in the development of such relationships. In considering these factors, it examines the extent to which they can be applied in the current Libyan context and examines the process from the Libyan point-of-view. This is done by analysing the impact of such variables and establishing their potential for use as a yardstick to measure business challenges within Libya in its new phase of national development.
1.2 Research Background
Libya is located in North Africa bordering Egypt to the east, Tunisia and Algeria to the west, and Chad, Niger and Sudan to the south. It has a population of 5,323,000 inhabitants, and covers a total area of 1,759,540 square kilometres (CIA, 2006). The Libyan economy is dominated by hydrocarbons and the total GDP for 2009 was U.S.$99.673 billion (Global Finance, 2011).
Much of Libya's industry is controlled by the state and state-run machinery. Most companies are based on a hierarchical structure where generally, decisions are made by individuals at the top of the ladder, rather than on the appropriateness of certain individuals to participate in the decision-making (Wallace and Wilkinson, 2004).
In terms of work culture, Libya resembles the countries of Asia and Africa (especially in north of Africa) more than those in Europe, or the U.S.A., in as much as planning is short-term and not pragmatic. Only when it comes to large-scale projects does strategic thinking dominate.
As previously a stated the economy is dominated by the hydrocarbons sector which accounts for over one-third of national output and generates over 95% of total foreign exchange earnings. The sector provides employment to just 2% of the population, and the contribution of agriculture remains negligible. The exploitation of oil and gas reserves has funded the development of most other sectors (Global Finance, 2011).
1.3 the Need for the Research
There are number of factors that make this study a valuable area to investigate:
The dearth of research on business relationship development in Libya.
Poor Libyan global experience in business relationship development.
Studies showing variables and stages in business relationships are not in short supply, and include those by Juttner and Wehrli (1994), Dion et al. (1995), Dawar et al. (1996), Holm et al. (1996), Selnes (1998), Ali and Birley (1998), Conway and Swift (2000), Wright (2004), Powers and Reagan (2007), and Brooks (2008). However, such studies are generally undertaken in developed countries, and Libya is classified as a developing country.
As already mentioned, Libya has been subject to sanctions from the U.S.A. And UN for many years, and this situation has arrested its development. Moreover, recently there has been civil war in many cities in Libya (BBC, 2011), and the establishment and maintenance of business relationships has not been at the forefront of people's minds. However, in the aftermath of the civil war, the atmosphere is calmer, and the interim government has started to establish a new plan for Libya, to include elections has taken place in July 2012 (Libya Alhurrea, 2011).
Nonetheless, despite the new forward-looking interim government's plans, most Libyan companies lack experience about trading internationally. This is an issue since following the government drive for internationalisation there are many international firms trying to invest in Libya, especially in oil, communications, tourism, and the food industry (Libya Alhurrea, 2011). Consequently, Libyan companies find themselves with a need to improve their knowledge and experience, to allow them to participate in international business more successfully. At the same time, foreign companies wishing to invest in Libya need to be aware of the prevailing business environment, the national culture, and the expectations of foreign investors such that they can develop their strategies that are not in opposition to these fundamentals.
Given what has been said so far about Libya's absence from international trade for many years, it is expected that the results of this study will show that there is much work to be done between Libya and other countries when it comes to international business relations. It is also expected that the results will indicate that culture is the largest problem when it comes to overcoming the issues that are causing strained international business relations with Libya. Once such results are obtained, a strategy to dissolve the difficulties can be properly formulated and implemented.
1.4 Research Outline
1.4.1 Aim of the Study
The aim of the study is to conduct an exploration of the social variables involved in the development and maintenance of business relationships with Libyan Companies. This implies an investigation of the stages within the development of business relationships and the mechanisms required to ensure these relationships are sustained.
1.4.2 Objectives
In order to achieve the above aim, three specific objectives are identified as follows:
1. To critically investigate the current state of international business relationship development literature.
2. To explore the characteristics that determines sustainable international business relationships within the Libyan business context-from the Libyan point-of-view.
3. To present a model based on the findings from the two objectives above. This model will serve two main functions: (I). It will help fill in gaps in the current literature relating to the development and maintenance of business relationships with Libya. (II). It will be of practical value to foreign businesses wishing to develop relationships with Libyan companies.
1.4.3 Research Questions
Four research questions are formulated as a means of pursuing the above objectives, these being:
What are the key variables that influence Libyan companies when they internationalise, and why are these variables so important for Libyan organisations?
What are the major steps/stages that Libyans go through when establishing business relationships?
How can foreign organisations establish/maintain sustainable international business relationships with Libya?
1.4.4 Expected Contribution to Knowledge
Libyan companies lack concrete experience of global business relations, in addition to an accompanying absence of research on business relationships development in the Libyan context; both being the result of the economic sanctions and political isolation imposed upon Libya for many years (Alwatan, 2012). Now, with a new political regime and outlook, the time is right to attempt to discover new understandings of the practices employed by Libyan companies, and hence to improve the existing stock of knowledge in this respect. Wallace and Wilkinson (2004) observed that a gap in the knowledge and understanding of the implementation of business relationship development practices exists in various regions of the world, e.g. Africa, Middle East, and South America. This study will contribute towards narrowing that gap. Furthermore, there is a lack of empirical studies relating to business relationships in developing economies (Thiagaragan et al., 2001; Alexander et al., 2002). In seeking to collect data from 17 companies in Libya, this study will try to make a substantial contribution to the literature since it will have strong potential for generalisation, and therefore for strengthening any claims made by it. With such strengths, the results should also be valuable for organisations in Libya that are seeking to internationalise, and hence, there will be a practical contribution as well.
From the review of the literature and the particular influences that are discussed in connection with variables and stages of business relationships, the study will make an original contribution to knowledge through its provision of insight relating to factors that affect business relationships in Libya. In doing so, it will add to the wide body of knowledge about the impact of culture on national business practices. The possible identification of unique cultural factors that influence the variables and stages in the development of business relationships with Libyan companies will also be of interest to other countries sharing similar backgrounds to Libya, and will therefore make a contribution specially to the Arabic countries in Africa literature in general.
1.5 Review of the Chapters
1.5.1 Review of Chapter 2 (Literature Review)
The segment of literature review provides comprehensive analysis regarding the aspects that are pivotal to the development and maintenance of business relationships. This segment initiates with the reasons and causes that determines why business relationship plays an integral part in long-term associations on local and international basis.
Moreover, the social variables in developing and maintaining business relationships that are vital have been discussed in a comprehensive manner, amongst which cultural affinity, trust, commitment, experience, loyalty, satisfaction and social bonds are few of the common and widespread identified variables that have proved to be consequential to the successful business relationships.
Nevertheless, later on, the literature review also highlights the in-depth analysis on the stages in the development of business relationships (that incorporate pre-contact, initial interaction, development and maturity), which are equally important to comprehend with the social variables, as it helps sustain relationships on a long-term basis.
1.5.2 Review of Chapter 3 (Research Methodology)
The section of research methodology provides the research design and methodology that has been used in order to make valuable contribution to existing knowledge on the theme of sustaining the business relationships between Libyan organisations. Since it is a qualitative research, the phenomenological paradigm has been used as the research philosophy.
Moreover, research approach has used the inductive technique, with case study as the appropriate mean of research strategy. However, the interviews (in the semi-structured face-to-face format) have been identified as the data collection technique with the managers, supervisors and other experts from 17 companies in the tourism sector as the participants of the study.
The language has also been considered during the study, with pre-matching strategy for the data analysis. The selection of all these criteria is because it is a social study that needs emphasis on personal perspective and interpretation, as it is essential to come up to fruitful solutions.
1.5.3 Review of Chapter 4 (Research Findings)
The results are based on the semi-structured interview questions with the participants of the study. All the respondents shared similar opinions with respect to the stages that are essential in building a business relationship, which initiates from the searching for a partner.
Politics is noticeably the most important aspect for all the respondents in developing relationships (stage one) and according to them they are able to trust the new partners that have a sense of cultural awareness with commitment, goodwill, job quality and communication. However, effective communication or interaction (sharing, transmitting information and working in collaboration) has been observed as the substantial aspect towards the development (stage two) of the partnership or relationship.
The interviewees have continuously emphasised that trust, cultural awareness, commitment, and quality of job are the most significant aspects that works positively in the third stage and forth stage (that is developing, improving and maintaining the relationships), as it encourage sustainability of the relationships.
1.5.4 Review of Chapter 5 (Research Discussion)
The fragment of research discussion is a deep exchange of words and ideas on the subject matter of exploration of social variables that play an integral role in developing and maintaining business relationships, which is closely linked with the research findings and literature review.
One cannot overlook the fact that building, maintaining and sustaining the business relationships not locally but internationally has become the key driver to the success of the business entity. However, the social variables (that include cultural affinity, trust, commitment, communication experience and satisfaction) are the most common and widespread aspects that facilitates the individuals in developing the relationships. These social variables and their impacts would be discussed in detail that can provide the Libyan companies with the opportunities to maintain healthy relationships over the entire cycle of business.
1.5.5 Review of Chapter 6 (Recommendation & Conclusion)
This is the concluding section of the thesis paper where the researcher has made suggestions for the Libyan companies and enterprises with the solutions on social variables that would facilitate them with the development and maintenance of business relationships on an international platform. The implications of development and maintenance business relationship are purely linked to the deep analysis of the literature review and the survey that was carried out with the Libyan companies. In fact, the researcher has proposed in accordance to the aims and objectives of the study.
Since the business relationship has become the key to the success of the business, thus, the researcher has also highlighted the importance of the social variables such as cultural adaptability, trust, effective communication and so on, that aids the business relationships.
1.5.6 Review of Reference List
The reference list is a synthesis of scholarly articles from journals, online published materials and intellectual books that provide extensive information on the subject of 'Exploration of Social Variables in the Development and Maintenance of Business Relationships with Libyan Companies.'
Chapter 2: Literature Review
2.1 Why the Business Relationship is Important
Relationship is a two-way process, which denotes that it is a give and take process. Relationships are usually based on mutual interest and understanding of both the parties. The business relationships are not established at once, in fact, it is a process that is built gradually over time and has certain prerequisites that need to be followed in order to develop the relationship. This indicates the fact that businesses are not only concerned with gaining monetary benefits, rather, solid business relationships are also an essential element that is considered vital for the success of business.
In all business, relationships are necessary. Indeed, the larger the level of business, the stronger the level of relationship that is required. Consequently, understanding the power of relationships in business is one of the keys to growing business effectively (Kaizen Consulting, 2012). Such relationships are built on confidence on the part of all those involved, and the recognition that professionalism lies at the heart of successful business interactions. However, they do not come naturally, and as observed by Darren (2011), they require some effort to maintain and they must be mutually beneficial, which implies that all those involved must be willing to give, share and support, and not merely take or receive.
It can also be seen that maintaining good business relationships is as important as establishing them. In business, the aim is to connect and create a bond with mentors, colleagues, clients, customers, and management, and to achieve these objectives, the various parties must possess the required skills and invest time and energy. The key is to acknowledge that the relationship will need to be nurtured, and in this respect, there are documented strategies that can be followed. For example parties to the relationship must strive not to inconvenience other parties, nor to be a burden or a distraction to them since the outcome is likely to be damaging. Similarly, parties should be patient when it comes to exchanging information, in acknowledgement that the other party may have other business pressures. At the same time, it is also important to learn how to follow up promptly.
Considering the significance of business relationships, according to some schools of thoughts businesses tend to be more successful and flourish when they are proficient and competent to build as well as maintain enduring business relationships. Besides, these businesses are more effective and efficient in comparison to the businesses that overlook or disregard with this ability.
Placing value on the people involved in business relationships signals that the business itself is held in high regard, since the desired outcome is trust and loyalty. In order to achieve these feelings among the parties, it is also essential to deal with the relationship in a reciprocal manner, that is to say, something beneficial from the connection should be reimbursed by contributing something positive. These fundamental attitudes towards all relationship building and maintenance must always be at the forefront in the minds of businesses.
2.2 Social Variables in the Development of Business Relationships
For any business relationship to be a success, certain of components (or variables) must present, and a number of writers have suggested what these should be. Without the social variables, the business relationship development process is not possible because these social variables facilitate the business partners to develop shared and mutual willingness to establish, develop and sustain the business relationship on a strong and lasting basis. The social variables are the key to the success of the business relationships.
However, the greatest number of variables is identified by Wilson (1995), who lists: commitment, trust, co-operation, mutual goals, interdependence/power imbalance, performance satisfaction, comparison level of alternatives, adaptation, non-retrievable investments, shared technology, summative constructs, structural bonds, and social bonds. However, having proposed these variables, Wilson adds that: "… given situational factors, one might add or delete from the list to capture the relationship situation" (1995: 337). Other major studies include those by Juttner and Wehrli (1994), Dion et al. (1995), Dawar et al. (1996), Holm et al. (1996), Selnes (1998), Ali and Birley (1998), Wright (2004), Powers and Reagan (2007), and Brooks (2008).
Focussing particularly on the factors considered important in developing cross-cultural business relationships, Conway and Swift (2000) suggest the following five factors: (i) cultural empathy, (ii) experience, (iii) satisfaction, (iv) commitment/trust, and (v) communication. From these and other studies, a list of six variables has been distilled by Swift (2008), as key components in the development of relationships across cultures. These are now comprehensively discussed.
2.2.1 Cultural Affinity
Swift (1999) makes the point that the terms 'affinity' and 'liking' have almost the same meaning. In the context of cultural affinity, Hallen and Wiedersheim (1984:18) provide a definition, saying this is: "… a concept intended to express the perceived impact of cultural similarity in different dimensions such as language, business habits, cultural environment, legal environment etc." For Holden and Burgess (1994: 33), cultural affinity is: "… a major factor reducing psychic distance between two parties."
Some authors also compare the notion of cultural affinity with 'empathy', which basically refers to the ability to see a situation from someone else's viewpoint, but does not strictly, mean that one likes the person or object. Empathy is defined by Phillips et al. (1994:104) as: "… the ability to place yourself in the position of the buyer from another culture. In this way a strong attempt is made to understand the thinking approaches, the decision-making process and the interactions between this and the cultural and other forces influencing the buyer." Indeed, it has also been an understanding that empathy is one of the fundamental rules in the business relationship developmental process.
High cultural affinity is a major factor in the reduction of psychic distance between two business parties. Here, the concept of affinity could be used interchangeably with the concept of liking. The idea is essentially that if two cultures are similar, then businesses between these cultures have a greater chance of co-operation and development; similar cultures mean heightened abilities to understand the norms and values inherent in the other party, and the ability to predict and meet requirements in a pre-emptive manner.
There is great inter-relationship between empathy, affinity and closeness, and a high level of mutual influence. However, there is no agreement on the importance of constructing cultural empathy, and some dissenting writers such as Usunier (1993:113), have even derided the concept as being 'naive', referring to "… the immense naivety of those who well-meaningly argue in favour of cultural empathy (being open-minded, sincerely interested in the other, ready to listen, etc.)." That said, Usunier (1993) does appear to be very much in the minority. The influential IMP study, for example, refers to 'liking' as a major factor in business relationships (Turnbull and Cunningham, 1981:47), and Aronson mentions 'interpersonal attraction' (1969:144), a theme that is also addressed by Adler and Graham (1989:523) who claim that: "… in addition to the bargaining strategy itself, interpersonal attraction (e.g. like/dislike, friendly/unfriendly feelings) can strongly influence current negotiation outcomes and the success of future transactions."
According to one of the recent studies, it has come to notice that cultural affinity has a strong and profound relationship with the level of trust, shared experiences and psychic difference. This means that if the organisation has high level of cultural affinity, then it is likely to have greater level of trust and high mutual experience between the organisations that would eventually result in low level of psychic differences. Moreover, the lower level of psychic differences (or high level of closeness) would not only eliminate and alleviate the probability of endangering the establishment and developing the long-term business relationships but would also prove to be beneficial in sustaining good business relationships.
Cultural affinity for many schools of thoughts is considered as the corner stone on which various factors rely and trust is one of the grave determinants. The cultural closeness determines the level of trust amongst the two parties that belong to different cultures. Indeed, the social bonding is another spectrum of cultural closeness or affinity, which demonstrates the fact that the higher the degree of cultural closeness, the deep bonding is likely to appear as an outcome due to greater level of mutual understanding (Scott, Baggio & Cooper, 2008). This is typically because when the two parties have cultural similarity, they are in a much better position to recognise and identify the needs and wants of the consumers.
Numerous sources of information have brought the fact to limelight that understanding the cultural backgrounds of the organisations facilitates successful business relationships to a great extent (Scott, Baggio & Cooper, 2008). This has been the understanding of the experts because according to them, the cultural affinity opens the path to increased and extended business opportunities. Moreover, the experience that is created on the personal basis connection between both the interacting parties due to the similarity within the culture leaves a long lasting impression on one another. As a consequence, trust and commitment is enhanced, which leads to stronger and permanent business relationships.
Quite a few empirical studies have brought the fact to the forefront that cultural affinity and similarity plays a huge and massive role when the business partners seek to develop the level of trust on one another. The results of the studies exhibited that the business partners that had similarity to a vast extent were more likely to develop high level of trust for each other in comparison to the business partners who did not shared the cultural affinity. Cultural affinity is considered to be the most preliminary step and the most critical one towards the establishment of business relationship.
The experts suggests that the existing socio-cultural dissimilarities within the business relationship partners on average generates high levels of differences in the transactional environment, which not only leaves a dramatic impact on the relationship development and maintenance of the business relationships but also creates trade vulnerabilities for the both the interacting partners
2.2.2. Trust
Another important factor where the development of a business relationship is concerned is that of trust. As Ford (1984:18) notes: "… many aspects of relations between customers and suppliers cannot be formalised or based on legal criteria. Instead relationships have to be based on mutual trust."
Trust, according to Dwyer et al. (1987:23) is a "pivotal factor of expectations development," and as such, deserves "priority attention." This belief is also supported by Dion et al. (1995:7), whose research amongst U.S. salesmen and buyers led them to conclude that: "… because trust appears to be central to the development of successful trade relationships, it is critical that sales and purchasing managers focus their attention on this phenomenon."
Most of the present research on the topic is clear that there is a role played by trust in the determination of the dynamics that define interpersonal business interactions, and the formation of business relationships (Anderson and Kumar, 2006). In fact, some writers have gone to the extent of naming trust as the most important variable in the development of a business relationship (Dion et al., 1995; Wilson, 1995; Conway and Swift, 2000). However, Anderson and Kumar (2006) disagree, suggesting that whilst trust is indeed an important variable, it can by no means be termed as the most important factor, as the emotions that emerge in a buyer-seller relationship do so at multiple levels (Anderson and Kumar, 2006).
Huang and Ali (2006:363) defined trust as "the willingness of one party to be vulnerable to the actions of another party based on the assumption that the other will perform a particular action." It is essential in both attaining and developing each stage of the relationship. It is the expectation of trust that drives the relationship in its initial stages, and once that trust has been achieved, it forms the bedrock or building block on which all subsequent interactions take place. Undoubtedly, trust is a key consideration at the national, organisation, and/or personal level.
Huang and Ali (2006) refer to specific business functions (sales and purchasing), rather than adopting a holistic view of relationship development, and suggest that all aspects of the business focus on this vital aspect. Much earlier, Ford (1989:6) suggested that trust is generated through the "experience of interaction," thus implying that it is a consequence of interpersonal relationships. External factors that include word-of-mouth, media reports and various other factors contribute to the establishment of the trust in combination with interaction. This is usually due to the reason that the external factors help the seller to form the perception of trust on a broad spectrum.
Inglehart (1991) would appear to agree when he suggests that trust can be culturally-influenced, and that it is the outcome of history and socio-cultural stereotyping. He suggests that it is linked to cultural perception, inferring that in many instances, people are predisposed to trust or not to trust foreigners, even before meeting them for the first time. In this connection, he notes that "nationalities that are perceived as similar tend to receive similar trust ratings" (1991:155), and he introduced the concept of 'psychogeography' - locating various nationalities at appropriate distances relative to the degree of trust between them and the reference nationality.
Figure 1: The Psycho geography of Selected Nations: as Seen by the British
Chinese
SYMBOL 183 f "Symbol" s 10 h
SYMBOL 183 f "Symbol" s 10 h
Germans
SYMBOL 183 f "Symbol" s 10 h Russians
Spaniards
SYMBOL 183 f "Symbol" s 10 h
SYMBOL 183 f "Symbol" s 10 h
Japanese
Portuguese
SYMBOL 183 f "Symbol" s 10 h
Lux.SYMBOL 183 f "Symbol" s 10 h
Belgians SYMBOL 183 f "Symbol" s 10 h
SYMBOL 183 f "Symbol" s 10 h Swiss
SYMBOL 183 f "Symbol" s 10 h Danes
SYMBOL 183 f "Symbol" s 10 h Dutch
SYMBOL 183 f "Symbol" s 10 h Italians
SYMBOL 183 f "Symbol" s 10 h French
SYMBOL 183 f "Symbol" s 10 h Greeks
SYMBOL 183 f "Symbol" s 10 h
Americans
BRITISH
Irish
SYMBOL 183 f "Symbol" s 10 h
SYMBOL 183 f "Symbol" s 10 h
Source: adapted from Inglehart (1991: 163).
According to some schools of thoughts, satisfaction and experience are considered as the precondition of trust. High level of trust stimulates a more constructive attitude, which eventually escalates the level of customer satisfaction. Conversely, the low trust levels are likely to be reinforced by negative customer experiences or satisfaction (Saunders, Skinner, Dietz, Gillespie & Lewicki, 2010).
Existence of uncertainty (that varies from time to time) in a business relationship is a component that cannot be ignored. In this regard, trust is considerably a principal element in developing the business relationships because it is a technique with which one party (individual or organisation) can deal with uncertain future transactions and dealings with other parties (Bagdoniene & Zilione, 2009). This denotes that the behaviour and attitude of one party decides how the other party is likely to develop the expectations, which means that the extent to which the other party would trust the first party.
Trust is the factor that develops when one party produces valuable outcome to the other party that is according to their competence and goals. In addition, the trust is developed from the previous behaviours, actions and activities that lead to the expectations of the future behaviours. As an outcome of it, business relationships are encouraged and enhanced (Bagdoniene & Zilione, 2009).
Transparency is another term that is closely associated with trust. This signifies that the transparency in the information exchange is directly linked to the level of trust and uncertainty. Therefore, according to the studies, the key to the successful business relationships is building the trust and having a transparent environment between both the parties (Bagdoniene & Zilione, 2009).
Wide range of researches have indicated that business partners are inclined to trust one another when they distinguish and recognize that the other party is constantly struggling to alleviate uncertainty that can lead to escalated efficiency. Indeed, this recognition leads to improvement and enhancement in the effectiveness of the business relationships. Studies have also repeatedly claimed and asserted that trust is considerably a predecessor of commitment, as well as an indispensable characteristic that leads to successful business relationships on long-term basis.
Trust is generally the positive meaning of perceptions of the parties involved in the business relationship development cycle. In other words, if the interacting one side of the parties perceive and believe that the other side is providing and sharing useful information (which provides them with the confidence that this information would reduce uncertainty), then the parties are likely to develop higher level of trust.
From one of the studies, the experts and sociologists define trust through two principal types: characteristic-based trust and process-based trust. According to the definition, characteristic-based trust is typically attributable to social similarity between the interacting partners during the relationship development process. This means that the cultural affinity, empathy and similarity play an integral role in the exchange process, because social and cultural norms that are similar to each other moreover leads to satisfactory exchange, which is easier to achieve. While on the other hand, process-based trust is more reasonable and realistic form of trust, where existing performance and relationships act as the foundation stone. Indeed, the process-based trust is further improved and fortified by various other factors as well.
Deep analyses of studies have also accentuated the piece of information that business partners while putting an effort to the development of business relationships tend to employ two components of trust: cognitive and behavioural. The cognitive component of trust is classically obtained and originated from the level of confidence that is developed amongst the partners due to the consequence of dependability, reliability and trustworthiness. However, the behavioural component is subject to emanate from the level of confidence that comes from the intentions, motivations, honesty and generosity of the business partners.
From the overall analyses of the social variable of trust, it can come to declaration that trust acts as the contributing factor to the risk-reducing mechanism and increase stability within the business relationships.
2.2.3 Commitment
The level of commitment plays a key role in the success of business relationships (Powers, 2007). Commitment has to be understood in the context of the levels of investment within a given relationship. One expects the partner to be committed to the goal of well-being and development of a business, in the absence of which there can be no relations at all. In this respect, commitment has many different degrees and levels, as does trust. In general, the greater the level of trust between partners, the greater level of commitment, but this is not always the case (Swift, 2008). For organisational reasons, one can be completely committed to the working relationship, yet at the same time, be wary of the people with whom one is dealing, so it can be understood that it is not necessary to fully trust someone to be committed to working with them.
The level of commitment that is felt on both the sides of the relationships determines the strength of the bonding. In fact, commitment is considered as one of the most frequent and universal variable that helps determine the relationships between the buyers and sellers. Furthermore, successful business relationships often perceive commitment as the vital and essential tool, as it facilitate intended decisions to remain in a relationship to a great degree.
Indeed, quite a few experts perceive commitment as an intention or motive on which the activity, action or decision is based. Additionally, commitment is also viewed as the aspiration to sustain the business relationships through ongoing activities such as investments that are likely to build and sustain relationships. The element of satisfaction is closely associated with commitment. This means that higher levels of satisfaction in accordance with large investments begets to stronger commitment.
Empirical studies have also brought the fact to the forefront that social bonding also plays an influential role on the level of commitment. In addition, the extent to which two parties have personal connections and acquaintance leaves a dominant and leading affect on developing the commitment when the business relationship is concerned. This clearly signifies that the buyers and sellers who have strong associations on personal basis from before are more likely to have strong commitment in business relationships in comparison to the partners who does not have personal or social bonding (Woodside, 2010).
Evidences from researches have also elucidated that commitment is highly influenced by the size of investment within the business relationship, because it is usually persuaded by the closeness that is caused by the social network or connection. Anderson and Weitz (2000, p. 1393) have proposed based on evidences that the manufacturers are more probable to be committed to their relationship with the distributors in case when the level of investment by the manufacturer is greater in the relationship.
The social variables have a great connectivity with one another such that trust is another prerequisite or a necessity that leads to increased commitment that maintains the business relationships. Besides, studies have exposed the fact that business professionals employ the factor of commitment and loyalty in deepening, expanding and maturing the relationship, as it assures success.
Quite a few of the empirical studies have put forward the fact that commitment in due course causes the customers to experience more closeness in relationships with the providers, which ultimately bring about higher level of confidence in the relationships. This signifies the fact that the closer relationship is usually determined from the characteristics of interdependence of both the interacting parties on one another that is developed over the period of instance. Commitment, indeed, higher level of commitment is eventually the consequence of closeness in the business relationship. Moreover, the studies have also highlighted that commitment to business relationships shrinks the uncertainty; at the same time it also boost the effectiveness and satisfaction, and even enhances the performance and profitability.
Development and maintenance of business relationships are equally important because the stronger the association between the interacting parties, the commitment and lasting business relationships are the general outcomes. In fact, researches and investigations have frequently proclaimed that the level of commitment by the interacting parties represent their intentions to continue and sustain the business relationship and its activities. Level of commitment also becomes high to an accelerated pace when both the business partners have a high degree of satisfaction from each other.
The limited and constrained level of commitment leads to fragility in the business relationships, which are more prone to end it on a rapid pace. Therefore, commitment has become a necessity in order to keep the sustainability of the relationships. Nevertheless, studies also bring the fact to the surface that both the interacting partners ought to develop the feeling that certain level of honesty, dependability, constancy, responsibility and trustworthiness before the commitment is established amongst the business partners. Therefore, the commitment is also defined as the long-standing attitude and approach of counting on (have faith on) one another in the business relationship, where negative events and confrontations are tolerated at both ends. On an overall basis, the commitment must provide long-term expectations of positive development.
2.2.4 Experience
The experience in a business relationship is characteristically derived from the overall observations, perceptions, opinions, and feelings that arise from the mutual interactions between two parties. The experience is not confined to single transaction or one time interaction, but is rather driven by a series of interaction or a number of transactions between the parties that occur during and even after the business deals. Additionally, the experience is an amalgamation of both rational and emotional components that is shaped by the overall interactions across the channels between the parties.
The decision to continue in a relationship may be seen as resulting from the past experience. However, from the recent studies, it has also been noticed that the ongoing experiences in a positive manner creates the opportunity to change the relationship in a much optimistic manner. The level of congruity between relationship expectation and performance so far is a crucial determinant of continuity of relationship. Negative experience can be a hindrance to the maintenance of a relationship.
Experience can be a powerful determinant of attitude formation, as previous experience tends to colour attitudes towards people. As Ford (1984:112) notes: "… individual experience can result in preconceptions regarding suppliers and customers & #8230; These prejudices will affect attitudes and behaviour towards those suppliers and buyers."
Turnbull and Welham (1985:34) suggest that any experience gained when working abroad is a crucial consideration; they studied 407 executives from companies located in five European countries, and concluded that: "… the experience of living and/or working abroad is an important dimension of experience in so far as direct exposure to foreign customers and host country cultures should be valuable inputs to the development of the competence of marketing staff. In particular, the experiences of different cultures and business practices should give improved customer orientation and reduce psychic distance."
If there is no personal experience, there is no movement from positive to negative. Moreover, if there is no personal experience, there is no reference point, and most people will adopt a neutral attitude. The logic would suggest that there is no experience if one has had no contact with someone before (so no prior experience of that individual), and consequently, one is unable to form an opinion of him/her.
However, this is not always the case, as attitudes towards nations can be formed on the basis of 'second hand' experience -- that is, based on the experience of other people, or something that has been read, seen on television or heard on the radio. Such opinions may well be expressed in terms of trust. Considering the aspect of second-hand experiences, current and recent investigations have brought the fact to limelight that word-of-mouth and social media networking sites play a gargantuan role on developing positive or negative opinions and experiences of the consumers. This is predominantly due to the reason that social media websites provide a huge platform to the consumers to openly express and share their experiences about a particular product or service of a brand. This open expression creates a negative or positive attitudes and mindsets that make the potential consumers to undergo the particular provider.
The last experience is remembered best (the recency effect) and one positive experience may change the previous negative perceptions. Overall, happiness and satisfaction in a relationship is achieved when both the parties have optimistic experiences. Therefore, the experience is an integral aspect that can lead to the development of the relationship on an enduring basis.
Experience is usually acquired in terms of sharing knowledge and information, two-way interaction and develops the feeling of affinity or likeness. The positive experience is also associated with openness, attention and participation that ultimately diminish the distance between the parties. The reduced distanced therefore augments the level of trust and hence develops and cultivates a trustful relationship between the parties.
Studies have also indicated at many occasions that the level of understanding between the parties is immensely affected by the shared experiences they have as they go through the cycle of relationships. In a customer provider relationship, the better and positive experience that the customer undergoes enhances their loyalty towards the provider. This constructive experience is positively shared with others, thus creating huge opportunities for the organisations to generate higher revenues and a huge customer database.
Continuous communication is one of the fundamental natures of the business relationship, however, the sharing and transmitting of widespread information develops optimistic work experiences. From the path of experience, the exposure to the challenges on a mutual basis intensifies and reinforces the bond between the business relationship partners.
Extensive studies have suggested the fact that increased social penetration is the eventual outcomes of the positive experiences in the business relationships. This means that both the interacting parties feel mutually connected to one another when they share and reveal in-depth information (in other words the business partners are having pervasive exchange of extensive information) during the business activities. Therefore, the more the in-depth communication process occurs, the more positive outcome is likely to happen with strong social bonding.
2.2.5 Satisfaction
Satisfaction is an outcome of experience; it relates to the manner in which business dealings have had positive results, or in terms of personal requests, the manner in which these have been dealt with. In order to maintain and sustain long-standing business relationships, mutual satisfaction is essential that is only gained through positive experiences. This elucidates that satisfaction and experience are immensely interconnected to one another. This is for the reason that satisfaction is the process that is determined through the assessment of experience where expectations are evaluated. Furthermore, trust and commitment are also developed and enhanced through high level of satisfaction that is vital for healthy business relationships and even helps retaining the consumers and increase profitability.
Culture, on the other hand, also plays an essential role in developing the level of satisfaction. This is normally because satisfaction varies from culture to culture, given the fact that the variables that might be construed as being appropriate in one culture, might be equally inappropriate in another.
Recent investigations have brought the fact to the forefront that satisfaction within the business relationship is crucial and vital, as it leads to successful business to business (B2B) relationships. In simple words, the business relationships are highly induced by satisfaction as well as commitment (Newlands & Hooper, 2009). The higher level of satisfaction results in more durable relationships and vice versa. Moreover, it is also indicated that satisfaction in association with trust and commitment compose a strong business relationship quality, and hence, the higher quality would lead to increased sales and loyalties between the parties. In the client provider relationship, repeated consumptions are also likely to result.
Satisfaction, from the findings of the researches has been identified as a significant component of business relationships, as it usually manipulate other components such as trust and commitment.
The extensive studies suggests that the corporate community in the past few decades have experienced much more advancements and innovations in its way of doing business due to escalated globalization, which has transformed the into more complex environment. Considering the aspects of the environment, which are constantly changing the need for stronger and deeper business relationships have become a necessity. In fact, the capabilities with which the businesses can monitor the strength of their business relationships with increased sophistication levels have also been the new requirement. All this is possible if the business partners are experiencing high levels of satisfaction within their relationships with one another.
Experts have explicated the piece of information through various studies and investigations that the measurement of satisfaction levels leads the business relationship to have increased level of loyalty towards one another. Moreover, both the interacting parties have voluntary willingness to continue and prolong the business relationships because both are satisfied with each other. Satisfaction level within the business relationship also leads to pleasure and happiness with which the relationship tends to deepen and reinforce. High values in terms of elevated market and profit shares are also the common and universal outcomes of satisfaction in business relationships.
In short, the comprehensive analyses of the studies have concluded that satisfaction measurement is the prime and foremost technique with which the businesses desire to assess and evaluate the health of their business relationships with their interacting parties. The measurement of the satisfaction is vital because it would lead the businesses to decide whether to continue the relationships with their interacting partners or whether the existing relationship is at its ending levels.
2.2.6 Communication
Communication in the context of business has to be understood as not just the act of speaking, writing or gesticulating, but the business of transmitting information, so the other party involved in the process is able to effectively receive the message. This demands a good rapport with the clients, partners and employees; it is vital to communicate with the market in order to know market needs and translate them into business opportunities. In this sense, 'communication' is a two-way conversation between an organisation and its market or partners; it is a dealing that depends for its effectiveness on the establishment of a good relationship between them. As a result, the establishment and communication of a relationship with the target market should be key objectives of all companies.
These ideas are supported by more recent scholars. Janice (2003), for example, points out that communication is one of the most important contributing factors to the success of any business, and Swift (2008) observes that the encoding and decoding process must work within the same cultural context or framework, otherwise the differences in cultural environments can create 'noise' in the communications channel.
According to one of the current empirical studies, it has been observed that the process of communication and interaction in a business relationship persuade social interactions. Therefore, socialisation between the parties is increased as both the parties transmit and transfer the tacit knowledge through shared experience. The social relationship enhances the business relationship in one way or the other. This also signifies that communication helps in establishing the commonness or shared perceptions that connects both the sender and the receiver, thus enhancing the business relationship (Donaldson & O'Toole, 2007).
The analyses of numerous studies have authenticated the fact that communication is a fundamental and crucial component in the establishment and maintenance of business relationships (Donaldson & O'Toole, 2007). Even though its importance has been highlighted in various studies, yet, it is considerably a variable that is often overlooked as an element within the development of the relationship. This is overwhelming to state, because the medium of communication is the root cause that leads the interacting parties to experience the other elements.
From the perspective of business relationship, both the sending and receiving of communication is equally important because failure of any one would lead to hindrance in the business relationship. Furthermore, effective relationship, partnership, alliance and coordination are all profoundly dependent upon how the communication takes place between the parties.
From quite a few studies, it has come under limelight that the nature of communication process is largely shaped and outlined by the leadership styles and overall company culture. This also signifies that effective communication also prompt the probability that both the interacting parties within the business relationship start trusting the culture, norms and values of each others. However, it is also prudent to note that the studies indicate that when both the parties trust the cultures of one another, the communication process is also enhanced and improved.
Since all businesses have their unique set of style of working and expressing through communication, thus everybody is unique in its doing businesses. However, the most elementary connection and bonding that is created between the interacting parties is through developing an understanding about the differences of one another. Being cognizant from the differences is only possible through the communication process. Nevertheless, the effectual communication also enables the business partners have greater degree of compromises and negotiations. Collaboration and curtailed conflict is eventually the consequence.
Numerous sources of information have over and over again declared the fact that business is all about building and maintaining relationships and how the information is transferred, processed or shared. The extent to which the flow of information is processes leads to the extent of trust that is developed, which is essential to the relationship development and maintenance. However, the only common factor that correlates and joins all these chains is the effective communication. In other words, effective, efficient and useful means of communication between business partners on local as well as international basis has become critical for success globally. In this regard, studies have indicated that the cultural differences, specifically in worldwide and transnational business relationships lead to impediment to effective communication, hence, the overall performance is hindered, which directly affects the business relationship in short-term as well as long-term.
2.3 Stages in the Development of a Business Relationship
It has been stated by writers such as Ford (1980, 1984), Dwyer et al. (1987), Wilson (1995) Williams (1998), Ford et al. (2003), Dawson (2005), Kirk (2007), and Brooks (2008), that in order to develop a business relationship, it is necessary first and foremost, for the business to be ready to give so that the trust-quotient could be proved, and credibility built with a given market scenario. This is also a prerequisite in the formation of a long-lasting business relationship. Certainly in the scenario where a consumer must be convinced to make a switch from a product they have been using for many years, to a new one, the new supplier has to be persistent and persuasive. Actually, it is argued that decisions to adopt a new supplier are often made on emotion, and then justified rationally (Wilson, 1995). And in fact, a new supplier may only receive part of a new customer's business at first, essentially being placed 'on trial' until the experience has proved itself to be a good one. Basically, the supplier has to earn more business over time. That said, it is not uncommon for customers to do business with several suppliers to stimulate competition, especially on price, but also as a hedge against the deterioration of quality (Brooks, 2008).
Ford (1980, 1984) has proposed a five-step model which can be applied to a dynamic analysis of a business relationship, which involves the following phases:
1. Pre-relationship phase
2. Exploratory phase
3. Developing phase
4. Stable phase
5. Final stage
Dwyer et al. (1987) have also suggested five stages in the development of a relationship, these being:
1. Exploration
2. Awareness
3. Expansion
4. Commitment
5. Dissolution
Likewise, Wilson (1995) perceives business relationship development as occurring through five stages, but his focus is slightly different:
1. Search and selection
2. Defining purpose
3. Setting boundaries
4. Value creation
5. Hybrid stability
Also, Williams (1998) pointed out five stages:
1. Awareness
2. Exploration
3. Expansion
4. Commitment
5. Dissolution
Swift (1999) suggested four stages in the development of a relationship:
1. Pre-Contact
2. Initial Interaction
3. Development
4. Mature Relationship
However, Andersen (2001) has suggested only three stages:
1. Pre-Relationship Stage
2. Early Stage
3. Development Stage
Ford et al. (2003) have also suggested four stages:
1. Pre-Relationship
2. Exploratory
3. Developing
4. Stable
Moreover, Dawson (2005) pointed out four stages:
1. Engaging
2. Aligning
3. Deepening
4. Partnering
Furthermore, Kirk (2007) has pointed out four stages:
1. Awareness
2. Knowledge
3. Liking
4. Trusting
And Brooks (2008) has put forward four stages that businesses pass through in the implementation of a relationship building exercise, these being:
1. Emerging - getting to know each other with a few test transactions (both financial and non-financial)
2. Growth - increases in size and/or volume of transactions
3. Maturity - steady state: stable size and/or volume of transactions
4. Declining - decreases in size and/or volume of transactions
Table 1 provides a synthesis of all these scholars' ideas in business relationship development.
Table 1: Stages in the Development of a Business Relationship
Stages
Authors
1
2
3
4
5
Ford
(1980,1984)
Pre-relationship
Phase
Exploratory phase
Developing phase
Stable phase
Final stage
Dwyer et al. (1987)
Awareness
Exploration
Expansion
Commitment
Dissolution
Wilson
(1995)
Search and selection
Defining purpose
Setting boundaries
Value creation
Hybrid stability
Williams (1998)
Awareness
Exploration
Expansion
Commitment
Dissolution
Swift (1999)
Pre-contact
Initial Interaction
Development
Mature Relationship
Andersen (2001)
Pre-Relationship
Early Stage
Development Stage
Ford et al. (2003)
Pre-Relationship
Exploratory
Developing
Stable
Dawson (2005)
Engaging
Aligning
Deepening
Partnering
Arthur
Kirk (2007)
Awareness
Knowledge
Liking
Trusting
Brooks (2008)
Emerging
Growth
Maturity
Declining
In an effort to make the process simple and avoid the possible dissolution of a relationship, Scanzoni (1997) suggested just three stages of involvement; exploration, expansion, and commitment. According to Hakansson (1982:15), there are two developmental stages for relationships, the first being the 'Episode' stage and the second, 'Adaptations and institutionalisation'. In the first stage, companies exchange products, services, and/or information etc., while the second stage involves relationships development, and mutual expectations. In order for these expectations to form part of the traditional way of operating they are 'institutionalised' at the end of it all.
According to Scanzoni's (1997) analysis, the steps of building a business relationship include: (1) getting to know each other for the sake of a transaction, (2) the growth of the relationship in terms of the transaction actually taking place, (3) the future of the relationship in terms of the development of trust and the growth of a business contact.
Swift (2008) points out that it would serve little to examine all the suggested permutations of business relationship development: possibly the best summary is that provided by Hallen and Wiedersheim (1984), who suggest the following, four broad stages or phases:
2.3.1 Pre-contact
Given that the parties taking part have not been in contact, the perceptions on both sides rely on the second hand appreciations of the whole nation, and thus, the initiation of the process is the cultural affinity which is considered a starting variable (Hallen and Wiedersheim, 1984).
At the initial stage that is the pre-contact stage, both the interacting parties are not involved in any kind of experience with one another; hence the psychic difference is at medium level. This is particularly due to the reason that without any personal experience with one another, the decisions on building the relationship is entirely on the attitudes that are influenced through indirect exposure such as word of mouth, reports and so forth.
The principal aim of the pre-contact stage is to create awareness about the businesses that can be of mutual benefit to both the interacting parties. However, this stage is developed through the collection and assimilation of information. Based on the gathered data, the primary businesses assess and evaluate the other party based on consideration of few imperative factors that include their prior experience, level of uncertainty within their working styles and psychic distance (the cultural affinity, similarity and empathy).
Consistent with Inglehart's (1991) assertion, a predetermined level of trust is possible based on secondary information and this level of trust can significantly influence the subsequent relationship. The 'feedback' aspect of communication is significant since it enhances the reinforcement of positive aspects of the relationship at each and every level. Conway and Swift (2000:1406) specifically point out the development of "…cultural awareness and empathy or affinity within the organisation" with respect to partners as the main role of communication. The overall argument at this stage is that there are minimal chances of any other variables getting involved in relationship development; hence, the remainder become relevant just after making contact.
During the pre-contact stage, the business parties ought to consider dissimilarities and variances in values. This would develop an understanding for both the parties, which is imperative in order to respect each other's values and principles. The business culture would facilitate the parties at both the ends to develop the sense of empathy for one another. In this manner, if both the interacting parties understand the situation of each other, they would be in a much better position to work together by having a smooth and comfortable environment. In addition, both the interacting parties would develop greater level of trust and move on to next level of business relationship development cycle, which is a basic ingredient of thriving business relationships.
2.3.2. Initial Interaction
Prior to carrying out any critical steps the prospective partners must first have a meeting or a series of meetings, which can be said to be initial interaction. This stage is similar to 'exploration' as referred to by Dwyer et al. (1987), and goes on for an undefined period, but generally between 1-12 months, dependent on the frequency of the contacts made.
Since the business relationship is a mutual process of give and take, thus it is imperative to create an effective impression; specifically the first impression is the most vital aspect. This is usually because the initial impression is the key decision maker that counts in the business relationship. Therefore, the process of interacting and communication should be confidently and assertively done.
The initial contact phase makes both the parties sit on a common platform to have deep discussions about various elements with respect to their business activities that can help them in making decisions whether the business relationship would prove to be effectual or not. The elements include initial inputs, priorities of both the parties, communication process, mutual goals and objectives and various other aspects. However, even after having a deep discussion, this stage is usually fragile, delicate and weak, particularly because of the lack of experience and shared understanding. In addition, the differences between the business relationships tend to be high in this level due to high levels of uncertainty. Nonetheless, the relationship is moved on to the next stage by working on common goals of building positive experiences and rising commitment so that the distance and uncertainty that is associated should be reduced and eliminated in the due course.
At this stage in point where the interaction has just taken place, the psychic difference is relatively high than the pre-contact stage because both the parties reflect in a different manner, which is undoubtedly noticeable and visible. However, if the psychic difference is reduced with time and experience, it is more likely to turn the relationship into the developmental phase. This also denotes that trust and level of satisfaction is high that nurtures the relationship and makes both the parties undergo positive experience.
During this stage of initial interaction, cultural affinity is one of the key and chief determinants that cause the psychic distance amongst the parties, nevertheless, if the relationship expands and grows, then cultural affinity would not be the major determinant and trust and experience would take over this element, and would be relatively of greater importance.
Communication, on the other hand, plays a major role in this stage, as it highly accentuates on the growth and enlargement of the cultural affinity. In fact, communication acts as the originator to the relationship development. Apart from all the aspects, this stage of initial interaction is the most risk loaded, which either leads to the development or terminating the relationship. It is this stage that decides the future of the relationship between the parties.
2.3.3 Development
The relationship is developing at this stage, having progressed beyond the initial interaction. At this stage, the emergence of problems is more likely, as the 'honeymoon' period has come to an end and the focus of the partners' moves from relationship development to the core objectives of the business.
Studies also indicate that if the relationship is continued (which means it is not collapsed or failed) the level of psychic distance comparatively becomes low. This means that both the parties lead towards close relationships to each other that are based on the mutual understanding and likeness. At this stage, the communication plays the role of strengthen that fortifies the relationship with positive experiences, which is typically used for developing greater commitment and trust amid both the interacting parties.
From extensive analyses of the data, the fact has come to the surface that this is the most stable phase of the entire relationship development cycle, where both the interacting business partners tend to leverage with the maximum benefits from one another. The level of trust, commitment, satisfaction and experience is at the highest levels. However, it has also come to notice that studies indicated the interdependence of both the business partners have boosted during this stage, which makes the uncertainty and psychic distance to the minimum levels. The flow of information is also making more gradual and steady development in this stage of relationship development. However, the assessment and evaluation of the potential performance and actions of both the parties is the key to decisions that whether the relationship would flourish and move on to the later stage or would discontinue.
2.3.4 Maturity
A business relationship reaching the maturity stage should be an indicator that the partners involved are sufficiently familiar with each other to the extent of being able to anticipate each other's needs and wants. Synonymous with partners in marriage, the partners in a business relationship should be comfortable with each other, work towards a common understanding of what their mutual expectations are, and accept the operational parameters of the relationship.
Psychical distance is subject to reduce by significant level when the relationship reaches at the maturity stage. This is characteristically because mutual awareness, knowledge, cultural affinity and understanding are at the peak. Again, communication is the vital determinant that is required in order to continue and sustain the relationship through maintaining the current intensity of trust and commitment and underpin optimistic experiences that can boost the current satisfaction levels.
During this stage, trust and commitment for both the interacting parties are the most valuable and substantial criteria (that have become the top priority while measuring) that are the key to relationship sustainability and development. However, the experience and satisfaction is measured but not to the extent of trust and commitment, as the maturity stage itself symbolizes that both the parties have reached this stage due to positive experience and high level of satisfaction.
Studies on a broad spectrum have exhibited the piece of information that in order to continue the relationship to a permanent basis, both the business partners (the interacting parties) ought to develop and alter or modify their business strategies and actions that can make them remain competitive, as it is pivotal to continue a healthy relationship.
Chapter 3: Research Methodology
3.1 Introduction
There is agreement that research must be systematic, using appropriate methods to collect and analyse the data, and must address a specific problem or issue, sometimes referred to as the research problem (Hussey and Hussey, 1997). Collis and Hussey (2009:3) state that "research is a process of enquiry and investigation; it is systematic and methodical and research increases knowledge." Hence, it can be appreciated that all research has the potential to make a contribution to existing knowledge. However, research can be undertaken in a variety of ways, and can result in academically rigorous results, from which some generalisations can be made, or can be conducted such that the findings are not verifiable. Consequently, research design is an important matter and should be given careful thought in order to ensure that a study is both reliable and valid.
In this section, details of the research design and methodology used in this study are presented. The aim, objectives, and research questions associated with the study are stated in sections 4.1, 4.2, and 4.3 respectively, and essentially require an investigation of the critical success factors required for sustainable business relationships between Libyan organisations and other companies/organisations engaged in some aspect of trade. Such an investigation requires the collection of data from a variety of sources, and hence, it is necessary to clarify the approaches and methods used in this respect.
The section, therefore, considers issues relating to the research philosophy, research approach, research strategy, and data collection, translation of the interview protocol, data analysis, ethical approval, research administration, and piloting. Additionally, it indicates the chosen overall path for this particular study, and at the same time, offers a strong justification for choices made.
3.2 Definition of research methodology
Many different definitions of the concept of research methodology have been given. Saunders et al. (2009) define research methodology as: "Something that people undertake in order to find out things in a systematic way, thereby increasing their knowledge." Moreover, research methodology has been defined by Likewise, Kruger (2001) as the application of various systematic methods and techniques to create scientifically obtained knowledge. Thus, research methodology is the systematic way a researcher works using the appropriate methods to collect and analyse data and to properly identify issues to be discussed, as well as the objectives of the study under investigation.
3.3 Research Design
This section explains the phases of research process beginning with identifying the research philosophy, research approach, research strategy, data collection, and data analysis methods. Justifications were also made in each particular choice of these phases. Based on Saunders et al. (2009), Figure 2 illustrates the main logical phases of the research model that were followed in order to accomplish the present research in the time available.
Figure 2: The Research Methodology processes.
Adopted from Saunders et al. (2009)
3.4 Research Philosophy
The research philosophy (or paradigm) refers to the scientific practice based on assumptions about the world and the nature of knowledge (Collis and Hussey, 2003). Saunders et al. (2007) state that the research philosophy reflects the way the researcher thinks about the development of knowledge, which in turn affects the way they undertake the research. In fact, there has been a long-standing debate among social researchers and philosophers concerning the perfect research paradigm, with philosophers from opposing positions arguing the relative value of their stances. However, it is generally agreed that the different paradigms do different things, and that the choice of which to adopt is dependent upon the objectives and context of the research.
Two main research philosophies in the social sciences have emerged from the ongoing debate; these are generally referred to as positivist and phenomenological (Collis and Hussey, 2008; Easterby-Smith et al., 1991). These two differing paradigms are often thought of as being diametrically opposed to each other; indeed, there are substantial variations in the approaches. In the former, the emphasis is on the use of quantitative and experimental methods to test hypothetical-deductive generalisations, with the intention of providing causal explanations and fundamental laws (Easterby-Smith, 1991; Remenyi et al., 1998, Amaratunga et al., 2002). There is a need for total independence of the observer from the subject being observed, and for the formulation of hypotheses that can be subsequently verified (Amaratunga et al., 2002).
Phenomenological enquiry on the other hand, adopts qualitative naturalistic approaches to research with a view to understanding human experience in a holistic way, and in its specific context. It is not interested in generating fundamental laws or even external causes, but rather in providing an explanation for a particular phenomenon, and in trying to understand it (Easterby Smith, 1991; Remenyi et al., 1998, Amaratunga et al., 2002).
In their comments on the two paradigms, Collis and Hussey (2008) note that a positivist paradigm includes terms such as Quantitative, Objectivist, Scientific, Experimentalist and Traditionalist paradigm, whereas the phenomenological paradigm uses terms such as Qualitative, Subjectivist, Humanistic and Interpretive. Their summary of these alternative terms appears in Table 2.
Table 2: Philosophical Stances for Research.
Positivistic Paradigm
Phenomenological Paradigm
Quantitative
Qualitative
Objectivist
Subjectivist
Scientific
Humanistic
Experimentalist
Interpretivist
Traditionalist
Source: Collis and Hussey (2009:47)
It can be seen that a major difference is in the type of data collected, the distinction between quantitative and qualitative approaches, being at the top of the list. In quantitative research, the data is generally in the form of numbers, and the focus is on empiricism (Keith & Punch, 2005). Collis and Hussey (2003) note that this type of research attempts to measure variables of count frequencies of phenomena. Typically, survey methods, laboratory experiments, numerical methods such as mathematical modelling, and other formal methods are adopted, and as also noted by Collis and Hussey (2003), the approach is considered as being objective in character with the use of statistics helping to contribute towards such objectivity.
In qualitative research, on the other hand, the data are not in the form of numbers (Keith & Punch, 2005), and as argued by Creswell (2003:198), the researcher "… is the primary instrument in data collection rather than some inanimate mechanism." Consequently, the researcher is highly involved in the actual experiences of the research participants (Creswell, 2003), and this allows for the development of a deeper and fuller appreciation of the phenomenon being studied (Collis and Hussey, 2008). Generally, qualitative researchers favour interviews and direct observation.
Hussey and Hussey (1997) divided the features of qualitative and quantitative research as shown in Table 3.
Table 3: Features of Qualitative and Quantitative Research
Qualitative
Quantitative
Uses small samples
Uses large samples
Concerned with generating theories
Concerned with hypotheses
Data is rich and subjective
Data is highly specific and precise
The location is natural
The location is artificial
Reliability is low
Reliability is high
Validity is high
Validity is low
Generalises from one setting to other
Generalises from sample to population
Source: Hussey and Hussey (1997:47)
There is no definite rule as to which philosophy to select when conducting research, as it depends on the nature and scope of the study, the source of the data, the research questions and hypotheses or proposal, and any constraints that may exist (Yin, 2009), in addition to the overall research aim.
According to the positivist philosophy, knowledge in science can only be gained from direct experience and observation (Robson, 2002). Easterby-Smith et al. (2004:28) view the positivist approach as important because "… the social world exists externally, and & #8230; its properties should be measured through objective methods, rather than being inferred subjectively through sensation, reflection or intuition." They note, however, that Phenomenology is a newer paradigm and stems from the view that 'reality' is not objective and exterior but is socially constructed and given meaning by people (Easterby-Smith et al., 2004).
A number of authors (Easterby-Smith et al., 1991; Collis and Hussey, 2008; Saunders et al., 2000) have highlighted the main elements of this choice involving research philosophy. In particular, Easterby-Smith et al. (2008:30) summarise the distinction between positivist and phenomenological philosophies:
Table 4: Positivism vs. Phenomenology
Positivism
Phenomenology
The observer
Must be independent
Is part of what is being observed
Human interests
Should be irrelevant
Are the main drivers of science
Explanations
Must demonstrate causality
Aim to increase general understanding of the situation
Research progress through
Hypotheses and deduction
Gathering rich data from which ideas are induced
Concepts
Need to be operatioalised so that they can be measured
Should incorporate stakeholder perspective
Units of analysis
Should be reduced to simple terms
May include the complexity of 'whole' situations
Generalisation through
Statistical probability
Theoretical abstraction
Sampling requires
Large numbers selected randomly
Small numbers of cases chosen for specific reason
Source: Easterby-Smith et al., (2008:30)
3.4.1 Justification for Choosing Phenomenology as the Research Philosophy
Lester (1999), and Roberts (2011), highlighted that epistemologically, phenomenological approaches are based in a paradigm of personal knowledge and subjectivity, and emphasise the importance of personal perspective and interpretation. As such, they are powerful for understanding subjective experience, gaining insights into people's motivations and actions, and cutting through the clutter of taken-for-granted assumptions and conventional wisdom.
Given the exploratory nature of this research study, an approach that will allow insights into the motivations of individuals in Libyan businesses is essential. Indeed, the choice of a phenomenological approach to this current study is based on the advice offered by many other authors including Saunders et al. (2007) and Collis and Hussey (2008) who affirm that phenomenology is the appropriate philosophy for studies that deal with the exchange of experience between companies. It is also relevant that the researcher is involved in the context of the research, which refers to the subjective aspects of human and firm activity, taking as examples the change of culture and top management involvement. Especially, this research tries to explore variables and stages of business relationship between companies through people, and as Easterby-Smith et al. (2004) have pointed out, phenomenology focuses on the ways that people make sense of the world, especially through sharing their experiences with others via the medium of language. A phenomenological approach, therefore, lends itself to establishing the reality of relational activities.
Easterby-Smith et al. (2008) have also observed that since the early 1980s, a trend from positivism towards phenomenology has been evident since it is generally believed that the latter facilitates the collection of rich data and does not suffer from the rigidity associated with the former. Given the characteristics of both these two major philosophical stances (as shown in Table 2), it is clear that the aim and objectives of this study that require the collection of rich data, and at the same time demand an approach that will adapt to the reality of the fieldwork, will be met by a phenomenological approach. Clearly, the study is social in nature; it is concerned with establishing people's beliefs, views of the world, attitudes and experience in a particular environment, and with the way in which these ideas are exchanged between people. The research questions are concerned with the what, why and how of the particular situation being explored, and consequently, the phenomenological paradigm will facilitate answers much better than the positivist approach might.
The essential point to grasp in connection with the study is that it is concerned with a very specific context -- the business world, Libya, and the wider international environment, and that all data will come from people who may perceive that specific context differently. Amaratunga et al. (2002) highlight the fact that phenomenology emphasises understanding human experiences in context-specific settings, and Easterby-Smith et al. (2008) stress that reality is not objective and external, but rather, is socially constructed and given meaning by people. Hence, further justifications for the choice of philosophical paradigm are provided.
3.5 Research Approach
There are two main research approaches, the deductive and inductive. In the deductive approach the researcher develops a theory, a hypothesis, and then designs a research strategy to test that hypothesis (Saunders et al., 2007). Deduction is characterised by the testing of theory by empirical observation, and the method is referred to as moving from the general to the particular, in what can be described as a 'top-down' approach (Collis and Hussey, 2008).
This is in stark contrast to the inductive approach, in which the researcher collects data and develops a theory based on the analysis of the data (Saunders et al., 2007). The theory is generated from observing reality, and consequently particular examples are used to infer generalities (Collis and Hussey, 2008). Moving from specific observations to broader generalisations presents a 'bottom up' approach, in which patterns and regularities are noted and used to formulate some tentative hypotheses that can be explored before eventually arriving at some general conclusions or theories (Trochim, 2006). Inductive reasoning, by its very nature, is more open-ended and exploratory, especially at the beginning. Easterby-Smith et al. (2008) argue that the inductive approach encourages researchers to work with qualitative data and to use a variety of methods to collect the data needed.
3.5.1 Choice of Research Approach and Justification
The researcher has chosen the inductive approach to achieve the aim and objectives of the study since whilst there is existing theory concerning the development and sustainability of business relationships, there is no such theory relating to the very specific context of Libya, as both an Arab and a developing country. Consequently, in this study, the findings from the fieldwork will be incorporated into the existing theory, thereby demonstrating the 'bottom up' effect. That said, Saunders et al. (2007) make the point that it is quite possible for a researcher to combine the two approaches in one study in order to gain the advantage of each or both.
3.6 Research Strategy
There are many research strategies in social science research (Velde et al., 2004; Yin, 2008), which include: experiments, surveys, histories, analysis of archival information, and case studies. Yin (2008) identified three conditions which can be used to select the appropriate strategy for research:
a) the type of research question posed;
b) the extent of control an investigator has over actual behavioural events; and c) the degree of focus on contemporary as opposed to historical events.
Table 5 shows these three conditions
Table 5: Conditions for the Selection of Research Strategy
Strategy
Form of Research Question
Requires control of Behavioural Events?
Focus on Contemporary Events?
Experiment
How, Why?
Yes
Yes
Survey
Who, What, Where, How many, How much?
No
Yes
Archival analysis
Who, What, Where, How many, How much?
No
Yes/No
History
How, Why?
No
No
Case study
How, Why
No
Yes
Source: Yin (2003:5)
3.6.1 Case Study, and Justification for Choosing this as the Research Strategy
Yin has good experience and an expert in the field of case study research, and his definition of the method as "…an empirical inquiry that investigates a contemporary phenomenon within its real-life context, especially when the boundaries between phenomenon and context are not clearly evident" (2003:13) has been accepted over many years. Yin (2008) indicates (Table 5) that the case study is an appropriate strategy when 'how' or 'why' questions are being posed, because the methods available within the case study approach allow the researcher to determine not only what happened but also why it happened. He also recommends the case study as a useful option when the study is of current rather than past events, and when the researcher is unable to control them. Referring back again to the nature of the research questions posed in the current study (how, why, and what), and taking into account the fact that the focus is on contemporary events, and that the researcher has no control over behavioural events, the case study strategy presents itself as a suitable vehicle to undertake the research.
Velde (2004) indicates that a case study strategy is an appropriate one to adopt if the aim of the research is to conduct an intensive study of a phenomenon within its total surroundings. It is particularly useful when the focus is on understanding process (Saunders, 2009). The specific need of the current study is to question certain individuals via an interview approach, to delve into the research questions identified in Section 4.3. These people will have the expertise gained by working in particular companies or sectors, to provide an understanding of the process of business relationship building, and hence a case study approach is suitable. Indeed, Saunders et al., (2007) confirm that in order to satisfy a study's research aim and objectives, the research strategy must be one that allows for the actual research questions to be answered. Consequently, the researcher has chosen the case study strategy as this will facilitate the collection of data from a wide perspective. Interviews with managers, supervisors and other people who are expert in the field will provide the deep knowledge to gain the depth of understanding of the information necessary to investigate and explore cultural-related factors affecting business relationship with Libyan organisations.
3.7 Data Collection Methods (Interviews)
Interviewing is a research method that involves interaction between a researcher and an interviewee, with the intention of gaining information from the interviewee (Robson, 2002). Sekaran (2003) makes the point that interviewing is conducted to obtain information on the issue of interest. Hence, it follows that in order to be able to provide information; the interviewee must be knowledgeable in the area of interest to the researcher. On the same issues, Yin (2011) notes that the interview is one of the most powerful ways available of understanding others, providing a good means of accessing people's perceptions, meanings, definitions of situations, and constructions of reality.
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