<< Chapter < Page Chapter >> Page >
Types of relationships
(1) Market exchanges (2) Partnerships
Factors involved in the relationship Solo exchange Functional relationship Relational partnership Strategic partnership
Time horizon short term long term long term long term
Concern for the party low low medium high
Trust low low high high
Investment in relationship low low low high
Nature of relationship conflict, bargaining cooperation accommodation coordination
Risk in relationship low medium high high
Potential benefits low medium high high

Functional relationship

A functional relationship is a long-term market exchange characterized by loyalty (Weitz, Castleberry, and Tanner, 2005). This type of relationship portrays the buyer purchasing a product out of routine or pattern. In a functional relationship, previous purchases will often influence later purchases. Typically, the buyer will continue to purchase from their selected seller as long as the price and the product stay relatively consistent to the original transaction. Buyers often illustrate this loyalty for several reasons. One reason a buyer remains loyal is simply convenience. It is easier for the buyer to avoid the arduous task of searching and negotiating for a product every time a recurring purchase needs to be made, especially when they are likely to come to the same conclusion and buy again from the previous supplier.

For example: A buyer for a school is in charge of purchasing all items that will be necessary for the cafeteria to function. Assume the school in question is a small elementary school with only about one hundred students. The buyer must purchase snacks, candy, meat, and drinks, just to name a few. This particular buyer uses a wholesaler to purchase all necessary items. This wholesaler has no desire to establish a partnership with the school; it merely wishes to sell as many items as possible. Similarly, the success of this relationship will not make or break the school’s success as an educational institution. This affiliation is established out of convenience. However, if the vendor begins to have poor service or inflated prices, the purchaser will simply choose a comparable wholesaler with little anxiety.

With a functional relationship, both parties are interested in their own profits, therefore, price is usually the most important factor in the decision making process. The relationship established between the buyer and seller is not permanent. Buyers will often change suppliers to try and get the best possible deal; however, when deciding on a supplier other factors are often weighed into the equation such as quality, reliability, trust, and commitment.


A partnership is two parties concerned about the welfare of each other in developing a win-win relationship (Mohr, 1994). There are two types of partnerships: a relational and strategic partnership.

Relational partnership

A relational partnership is a partnership that develops on the premise of a close, personal relationship built on trust (Mohr, 1994). With this type of partnership there is an open line of communication, and the parties work together in order to overcome any potential problems. Both sides of the partnership are trying to make money, but the more important factor is developing a long-term, working relationship that will continue to generate money over time. When relational partnerships are successful, it is often not necessary to have more than minimal negotiations about price. In addition, minor details will not be allowed to derail or end the relationships because the goal is to establish an ongoing mutually beneficial exchange.

Relational partnerships may develop because of personal ties, but more often they occur due to professional necessity. For example, every year large US businesses recruit new employees using booths at career fairs across the country. Such a career fair program is not significant enough for the company to enter into a strategic partnership with an employment service to perform hiring at career fairs, but finding employees with the necessary skills is still very important. Regional managers will likely be responsible for this job and they may form a relational partnership with the organizations that host the job fairs in their area to ensure that when the job fairs are planned the representative company will be included. A relational partnership is more similar to a friendship than to a market exchange. Rather than showing concern only for their own self interests, partners will offer their time and resources to continue the relationship, because of the expected future benefits of continuing interactions. James Cash Penney, the founder of the US department store chain JCPenney, believed that “all great businesses are built on friendship”. If this ideal is applied, a strong foundation can be formed through relational partnerships.

Strategic partnership

A strategic partnership is a long-term business relationship in which the partner organizations make significant investments to improve the profitability of both parties (Mohr, 1994). Strategic partnerships are created to uncover and exploit joint opportunities while minimizing joint weaknesses. Both parties will contribute financially, and consequently take significant risks in order to provide the partnership with a strategic advantage. This type of partnership is founded on the basis that both members are dependent on each other. The partners will have the same goals, as well as agree on the best course of action to achieve those goals. In order to achieve the target objective, partnerships must be based on an open-door policy; the partnership cannot be successful if information is kept confidential or there is a lack of willingness to accept risk equally.

An example of a strategic partnership was evident in 2007 when Time Warner’s AOL strengthened their strategic partnership with Google. Google invested one billion dollars for a five per cent stake in AOL. The agreement created a global online advertising partnership, which has made more of AOL's industry leading content available to Google users. These strategic partnerships tend to be very successful because products and services are created that are not offered by competitors.

Before entering into any particular type of partnership, each company should consider all of the potential benefits and consequences. The next section of this chapter will help weigh the various costs and benefits related to choosing a relationship.

Questions & Answers

Do somebody tell me a best nano engineering book for beginners?
s. Reply
what is fullerene does it is used to make bukky balls
Devang Reply
are you nano engineer ?
what is the Synthesis, properties,and applications of carbon nano chemistry
Abhijith Reply
so some one know about replacing silicon atom with phosphorous in semiconductors device?
s. Reply
Yeah, it is a pain to say the least. You basically have to heat the substarte up to around 1000 degrees celcius then pass phosphene gas over top of it, which is explosive and toxic by the way, under very low pressure.
how to fabricate graphene ink ?
for screen printed electrodes ?
What is lattice structure?
s. Reply
of graphene you mean?
or in general
in general
Graphene has a hexagonal structure
On having this app for quite a bit time, Haven't realised there's a chat room in it.
what is biological synthesis of nanoparticles
Sanket Reply
what's the easiest and fastest way to the synthesize AgNP?
Damian Reply
types of nano material
abeetha Reply
I start with an easy one. carbon nanotubes woven into a long filament like a string
many many of nanotubes
what is the k.e before it land
what is the function of carbon nanotubes?
I'm interested in nanotube
what is nanomaterials​ and their applications of sensors.
Ramkumar Reply
what is nano technology
Sravani Reply
what is system testing?
preparation of nanomaterial
Victor Reply
Yes, Nanotechnology has a very fast field of applications and their is always something new to do with it...
Himanshu Reply
good afternoon madam
what is system testing
what is the application of nanotechnology?
In this morden time nanotechnology used in many field . 1-Electronics-manufacturad IC ,RAM,MRAM,solar panel etc 2-Helth and Medical-Nanomedicine,Drug Dilivery for cancer treatment etc 3- Atomobile -MEMS, Coating on car etc. and may other field for details you can check at Google
anybody can imagine what will be happen after 100 years from now in nano tech world
after 100 year this will be not nanotechnology maybe this technology name will be change . maybe aftet 100 year . we work on electron lable practically about its properties and behaviour by the different instruments
name doesn't matter , whatever it will be change... I'm taking about effect on circumstances of the microscopic world
how hard could it be to apply nanotechnology against viral infections such HIV or Ebola?
silver nanoparticles could handle the job?
not now but maybe in future only AgNP maybe any other nanomaterials
I'm interested in Nanotube
this technology will not going on for the long time , so I'm thinking about femtotechnology 10^-15
can nanotechnology change the direction of the face of the world
Prasenjit Reply
At high concentrations (>0.01 M), the relation between absorptivity coefficient and absorbance is no longer linear. This is due to the electrostatic interactions between the quantum dots in close proximity. If the concentration of the solution is high, another effect that is seen is the scattering of light from the large number of quantum dots. This assumption only works at low concentrations of the analyte. Presence of stray light.
Ali Reply
how did you get the value of 2000N.What calculations are needed to arrive at it
Smarajit Reply
Privacy Information Security Software Version 1.1a
how can i know my business best resources, cheap and good quality
cabdi Reply
vikash rawat
jagvir Reply
entrepreneurial mobility
Manish Reply

Get the best Business fundamentals course in your pocket!

Source:  OpenStax, Business fundamentals. OpenStax CNX. Oct 08, 2010 Download for free at http://cnx.org/content/col11227/1.4
Google Play and the Google Play logo are trademarks of Google Inc.

Notification Switch

Would you like to follow the 'Business fundamentals' conversation and receive update notifications?