Does centralising global account management activities in response to international retailers pay off?
| Verfasser | Swoboda, Bernhard |
| Posten | RESEARCH ARTICLE - Report |
Abstract:
* This study provides insights into how manufacturers adopt their Global Account Management (GAM) activities in response to the increasing expansion of retailers. Specifically, we focus on the manufacturers' central coordination of two types of GAM activities: strategic and tactical activities.
* We analyse the manufacturers' associations with international retailers and with GAM effectiveness and efficiency by using data from 172 manufacturers. Moreover, we consider the suppliers' dependence on their key retail accounts to be an important moderator within the consumer goods sector.
* In particular, manufacturers respond to the centralisation of the retailers' purchasing activities by centralising strategic GAM activities, such as customer strategy, information processing, or price systems. Additionally, manufacturers respond even stronger by centralising tactical activities, such as category management, marketing, or logistics. Although the centralisation of strategic activities drives GAM effectiveness and efficiency, the centralisation of tactical activities does not. This finding might be explained by the specific context of manufacturer-retailer relations. Finally, we find that, although the decision to centralise GAM activities pays off, the benefits are contingent on the particular type of GAM activity and the level of customer dependency.
Keywords: Retail internationalisation * GAM activities * Centralisation * Effectiveness * Efficiency
Introduction
Today, leading retail firms conduct up to 70% of their sales abroad (see Swoboda et al. 2009). The foreign expansion of retailers affects the relationship between retailers and suppliers, particularly with regard to how suppliers coordinate their key account management (KAM). Scholars define KAM as a strategic approach focused on customer prioritisation to obtain higher customer profitability and higher returns on sales (Homburg et al. 2008). In this study, we focus on global account management (GAM). GAM differs from KAM in that GAM considers specific challenges to coordinating customer relations across countries (Gosselin and Bauwen 2006). Prior scholars define GAM as "an organisational form and process in multinational companies by which the worldwide activities serving a given multinational customer are coordinated centrally by one person or team within the supplying company" (Montgomery and Yip 1999, p. 10). The organisational form of the concept appears to be straightforward. It provides customers with one point of contact. However, for suppliers, the process of implementing centrally coordinated activities is frequently problematic (Birkinshaw et al. 2001, p. 232). Why is central coordination a critical issue? On the one hand, centralising customer-related activities (i.e., coordination at the headquarters level and not at the country level: see Hennart 1991) might be a superior way of dealing with globalising customers. On the other hand, GAM programs are often established alongside existing local sales organisations, and, more importantly, the retailers who manage complex store networks demand support at different levels (e.g., at the headquarters level and at the county/store level) (Verbeke et al. 2006). Hence, to analyse how consumer goods manufacturers organise their GAM activities in response to retailer expansion, we focus on the central coordination of two types of GAM activities: strategic and tactical activities. We further propose that strategic and tactical activities have different impacts on GAM effectiveness and efficiency.
Although scholars often study KAM (e.g., a recent review is provided by Richards and Jones 2009), the literature rarely focuses on GAM. The relevance of GAM is undisputed within the literature, but only six studies empirically investigate GAM coordination issues. Three of these studies address the issue of centralisation (Birkinshaw et al. 2001; Toulan et al. 2007; Shi et al. 2010) but do not analyse it in further detail. For example, Shi et al. (2010) find that the extent of centrally coordinated marketing activities drives GAM performance, and Birkinshaw et al. (2001) show that centralisation is related to GAM performance. Thus, two research gaps exist in the literature.
There is a lack of empirical findings on the centralisation of different GAM activities and its association with GAM effectiveness and efficiency. Recent studies usually analyse performance in terms of effectiveness or efficiency. On the one hand, GAM may be more effective if manufacturers strengthen their market positions by centralising their strategic GAM activities. On the other hand, GAM may be more efficient if the manufacturers decentralise some of their GAM activities to enhance the local flexibility towards the retailers' store networks. Both scenarios are relevant to studies on GAM and should be analysed in more detail with regard to their effects on the effectiveness and efficiency of GAM.
Prior studies predominantly survey firms without differentiating the firms according to sector. In contrast, we argue that the consumer goods sector is distinct and that its specific characteristics have not been properly addressed to date. Specifically, this sector is distinctive because of its two-tier distribution structure (Geylani et al. 2007), where retailers play an important filtering role by deciding which products from which suppliers will be offered to the consumers. More importantly, each supplier depends on retailers to a different extent and may respond internally by strategically coordinating its customer-related activities. Although retailers and suppliers frequently collaborate in category management and logistics within the domestic context (Corsten and Kumar 2005), they often experience conflict while discussing prices. For these reasons, we analyse the decision to centralise strategic vs. tactical GAM activities and the suppliers' dependence on retailers.
In sum, this study aims to analyse the following research questions. To what extent do manufacturers centralise their GAM activities in response to the international retailers' activities? How does the centralisation of strategic and tactical GAM activities influence GAM performance in terms of effectiveness and efficiency? Finally, how does the suppliers' dependence on their key accounts affect these relationships?
While investigating these questions, this study contributes to the International Business literature, especially with respect to international retailer-supplier relationships. From a theoretical perspective, we respond to Birkinshaw et al.'s (2001) call to investigate centralisation as an important aspect of GAM organisation. We also follow Shi et al. (2010) and Shi et al. (2004) by analysing the effects of facilitating conditions and the antecedents of GAM. Finally, we answer Shi et al.'s (2010) call for sector-specific studies on GAM. This study provides a detailed perspective on how manufacturers coordinate two types of GAM activities. The findings of this study might help reduce the concerns of consumer goods managers. As many managers believe that GAM induces global retailers to exert increased pressure for greater transparency on pricing, these consumer goods managers believe that there are several obstacles to the centralisation of customer-related activities (Harvey et al. 2003).
Literature on GAM Coordination
Prior research on GAM coordination is sparse (see Table l) and distinct from the research on domestic KAM (e.g., Shi et al. 2010). The existing studies on domestic KAM view structural coordination mechanisms differently from the studies on GAM and define, for example, centralisation as the integration of certain decision makers or specialists into the decision-making process (e.g., Homburg et al. 2002). Although we control for structural coordination mechanisms (e.g., formalisation and specialisation) in this study, we review the literature on GAM coordination by focusing on three aspects: the centralisation of GAM activities, the efficiency/effectiveness of GAM, and the customer-related determinants of GAM.
Montgomery and Yip (2000) conceptually discuss and Birkinshaw et al. (2001) empirically demonstrate that when the supplier centralises stronger than the customer it has positive effects on the efficiency of the GAM relationship. Toulan et al. (2007) show that the central coordination of supplier activities has a significant impact on the performance of GAM activities. While analysing GAM strategies, Shi et al. (2010) show that the central coordination of marketing activities, which the researchers refer to as 'intercountry coordination', significantly impacts performance, as does the standardisation of marketing activities. However, only Wilson and Weilbaker (2004; within a domestic context, Zupancic 2008) differentiate the scope of KAM activities into two levels: strategic activities represent the general, fundamental and long-term approach to the collaboration with the customer (e.g., customer-related strategies and information processing), whereas tactical activities are operational arrangements that are conducted on a day-to-day basis (e.g., category management, marketing, or logistics).
Scholars conceptualise GAM performance in different ways. Birkinshaw et al. (2001) focus on efficiency and sales growth as well as partnership with the customer (e.g. realising joint projects). Toulan et al. (2007) consider efficiency and the lessons learned from managing global accounts. Shi et al. (2010) examine the achievement of GAM objectives. We find that global supplier-customer relationships might be linked to different objectives (further goals are shown by Wilson and Weilbaker 2004). However, as Homburg et al. (2002) indicate, GAM should be effective because suppliers may want to grow with the key account in sales and market share. Additionally, GAM should be efficient because suppliers aim to minimise the costs and efforts...
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