Summary Module 3: Partnerships
One of the most famous Partnerships was one between Procter&Gamble and Walmart. It was the
start of many partnerships to come as the success that it created was shown.
Partnership
A long term relationship between two or more companies that is characterized by sharing info and
skills, a willingness to accommodate the other side’s needs (more than in a ordinary business
transaction) and where trust is the norm and contracts are kept to a minimum.
- Is advantageous for both parties (leading to greater profits)
Process Partnerships
- Data Exchange partnership
Tesco and Kellogg’s combined their data to avoid out of stock moments
- Order fulfillment
Amazon started a fulfillment center inside of the P&G warehouse to create a better flow of
fulfillment for the customer and the both companies
- Collaborative assortment planning
Campbells and Safeway started a partnership where Campsbells analyses the data of Safeway to
advise them on what to get in stock
Product Partnerships
- Exclusive launch
Pepsi and Amazon worked together to launch a new Pepsi drink which was only available at Amazon
- Exclusive product/brand
Whirlpool and Lowe’s partnered where Lowe’s created an adjustable rack for in Whirlpool
dishwashers which was of course only available at Lowe’s
- Private label production
MARS produces the Private label products for Walmart. In return Walmarts places all MARS products
at sight level and regularly gives discounts on these products to increase sales
,Power in Partnerships
Power
A’s power over B
- The ability of A to control or to influence B’s behavior
- The ability of A to make B do something it otherwise would not have done
To have power = Not per definition to use power
Dependence
B is dependent on A (or: A has power over B)
- When B makes a lot of profits/sales from the relationship with A
- AND B has few alternatives to make those profits/sales elsewhere
Power = 1/Dependence
A’s power over B = B’s dependence on A
Application: Is Cott dependent on Walmart?
Dependence and power are two-sided!
- Manufacturer can be dependent on Retailer(hence: Retailer has power over Manufacturer)
- Retailer can also (at the same time) be dependent on Manufacturer (hence: Manufacturer
also has power over Retailer)
, Dependence structure of a relationship
As a manufacturer you do not want to be in the left above quadrant. You are than a HOSTAGE.
To avoid this situation there are two options
1. Reduce your dependence (expand number of alternatives)
o Add new channels
o Add direct channel
Danger: Apathy
- When both retailer and manufacturer dependence are low this can create apathy and can
provoke retaliation
2. Increase retailer dependence (make it harder for retailer to replace you by creating value)
o Reduce price transparency
Exclusives (Shampoo from Head & Shoulders and JD.com)
Different SKU’s
o Collaborative product development (Hershey’s rearranging candy shelfs)
o Merchandizing optimization
Partnerships between unequal’s
Partnerships between unequal’s are only possible when there is trust between the parties
How to breed trust
- Powerful party
o Communicate
Annual/quarterly meetings to explain reason behind decision
Visit trade shows together
o Be fair
Allow your partner to earn a fair return
One of the most famous Partnerships was one between Procter&Gamble and Walmart. It was the
start of many partnerships to come as the success that it created was shown.
Partnership
A long term relationship between two or more companies that is characterized by sharing info and
skills, a willingness to accommodate the other side’s needs (more than in a ordinary business
transaction) and where trust is the norm and contracts are kept to a minimum.
- Is advantageous for both parties (leading to greater profits)
Process Partnerships
- Data Exchange partnership
Tesco and Kellogg’s combined their data to avoid out of stock moments
- Order fulfillment
Amazon started a fulfillment center inside of the P&G warehouse to create a better flow of
fulfillment for the customer and the both companies
- Collaborative assortment planning
Campbells and Safeway started a partnership where Campsbells analyses the data of Safeway to
advise them on what to get in stock
Product Partnerships
- Exclusive launch
Pepsi and Amazon worked together to launch a new Pepsi drink which was only available at Amazon
- Exclusive product/brand
Whirlpool and Lowe’s partnered where Lowe’s created an adjustable rack for in Whirlpool
dishwashers which was of course only available at Lowe’s
- Private label production
MARS produces the Private label products for Walmart. In return Walmarts places all MARS products
at sight level and regularly gives discounts on these products to increase sales
,Power in Partnerships
Power
A’s power over B
- The ability of A to control or to influence B’s behavior
- The ability of A to make B do something it otherwise would not have done
To have power = Not per definition to use power
Dependence
B is dependent on A (or: A has power over B)
- When B makes a lot of profits/sales from the relationship with A
- AND B has few alternatives to make those profits/sales elsewhere
Power = 1/Dependence
A’s power over B = B’s dependence on A
Application: Is Cott dependent on Walmart?
Dependence and power are two-sided!
- Manufacturer can be dependent on Retailer(hence: Retailer has power over Manufacturer)
- Retailer can also (at the same time) be dependent on Manufacturer (hence: Manufacturer
also has power over Retailer)
, Dependence structure of a relationship
As a manufacturer you do not want to be in the left above quadrant. You are than a HOSTAGE.
To avoid this situation there are two options
1. Reduce your dependence (expand number of alternatives)
o Add new channels
o Add direct channel
Danger: Apathy
- When both retailer and manufacturer dependence are low this can create apathy and can
provoke retaliation
2. Increase retailer dependence (make it harder for retailer to replace you by creating value)
o Reduce price transparency
Exclusives (Shampoo from Head & Shoulders and JD.com)
Different SKU’s
o Collaborative product development (Hershey’s rearranging candy shelfs)
o Merchandizing optimization
Partnerships between unequal’s
Partnerships between unequal’s are only possible when there is trust between the parties
How to breed trust
- Powerful party
o Communicate
Annual/quarterly meetings to explain reason behind decision
Visit trade shows together
o Be fair
Allow your partner to earn a fair return
