Vertical coordination between the buyer and seller in business can often benefit from
collaboration in their business activities.
This requires naturally great deal of trust between the parties, and the relationship
evolve dynamically. (Kotler et al 2009) Trust is attained when time, energy and effort put
into communication between the partners. Collaborations are depending of the positive
relationship
and effective connections between partners. (Gadja 2004)
Development of the relationship depends on changes in business environmental
uncertainty
and interdependence between parties. It is common that one partner get more out of the
economies of scale that collaboration creates. Also single partner has higher barrier to
enter
the market than the collaboration partner. In the beginning of the collaboration, one partner
often experiences drastic market growth. One collaboration party possibly has more power
over the other, based on the information asymmetry between the parties. Uneven
knowledge
would also profit one firm more if it would invade to its collaborator s market. (Kotler et ‟
al
2009)
Buyer-supplier relationships differ in availability of substitutes or by supply; complexity,
importance
and market dynamism related to it. The relationship and the power positions in it
changes over time. Presence of market constrains or lack of certainty on the market keeps
the cooperating partners in close relationship. (Kotler et al 2009) Business allies have
tendency
to repeat partnerships over time, as it is costly to find new partner in business and requires
checking up their performance. (Todeva & Knoke 2005)
Customer-supplier relationship has tendency to create tension adaption and safeguarding.
Vertical coordination ties customer and seller closer together, leading to specific invest-
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ments, tailored to specific value-chain partner and company. This grows firms profits, ‟
gives
better positioning but locks up the firm to the particular relationship and increase sunk
costs.
(Kotler et al 2009)
There s a risk of opportunism in vertical coordination; if the supplier performance ‟
monitoring
is weak on the buyer s side, the supplier can cheat and lower the quality of the goods or ‟
services.
Poor performance in collaboration can be also due refusal to adapt to changed
circumstances.
Opportunism cause cost as firms have to put labor to observe the quality, the asset
that could have more use in more productive tasks. (Kotler et al 2009)
A start-up firm needs good contacts in order to deliver products and develop them to meet
up
the contemporary requirements the market sets. Collaborations are firms tool to increase‟
the business performance. Collaboration investment purpose is to seek positive return.
Collaboration
of any kind is considered a positive continuum for the participants. Collaboration
parts are able to perform better progressively and invest so that their collaboration
