Reference no: EM131804191

Problem: Describe the different channel relationship types and their unique costs and benefits. Channel relationships can be plotted on a continuum ranging from Arm's Length to integrated, with cooperative relationships somewhere in between. Arm's Length relationships generally consist of unique transactions that are intended to occur once or very infrequently, and are pursued when closer relationships are undesirable or impractical. Though Arm's Length relationships are low risk, they also provide few benefits in terms of favorable conditions for the agreement, and disputes are often resolved in court. Integrated relationships, on the opposite end of the spectrum, are very close relationships that are backed by formal agreements and can result in great efficiency and effectiveness. However, given that integrated relationships tend either to involve high levels of expense (in the case of vertical integration) or require enormous amounts of trust in the partner company (as in the case of supply chains), many companies prefer cooperative relationships in some settings. Cooperative relationships are a hybrid form of relationship that is governed by formal contract, are temporary, and are enforced by the agreement itself.

Question: Working with another student in the class, decide when it would be most advantageous for large companies like Procter & Gamble, IBM, and/or Ford Motor Company to develop integrated relationships with smaller suppliers. Would the same rules for integrated relationship development also apply to customers? Why or why not?