This article assesses supplier-customer relationships. In actual business practice, firms are adopting programs that seek to develop closer relationships in order to achieve lower product costs, reduced time-to-market, improved quality, advanced technology, or improved service/delivery. Market governed situations are those that generally rely on competitive market forces when determining the specifics of either single or multiple transaction situations. In many cases, the competitive market behavior may be based on price or service dynamics that cause buyers to only purchase one time (as in the single transaction situation) or multiple times from the same supplier if the supplier maintains a competitive price or service position relative to the competition. Relationally governed systems are those in which the parties form a mutually agreed upon governance structure where market forces do not play a central role in determining relationship parameters. In other words, the governance arises from the unique agreement that the parties have concerning how business will be conducted within the relationship. Beyond relationally governed systems are various forms of equity arrangements. These relationships are governed by the policies of one of the parties because that party has ownership control in the relationship. Joint ventures, retail owned cooperatives, and corporate or internal customer situations all fall within the realm of ownership governed situations.
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