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35Research article UDC 339
doi: 10.47576/2782-4586_2022_2_6
CONFLICTS IN B2B MARKETS AND ALTERNATIVE METHODS OF THEIR JUDGING
Lankin Oleg A.
Saint Petersburg State University of Economics, Saint Petersburg, Russia
Abstract. The research is conducted on the basis of the methodology of the neo-institutional economic theory. The authors use the game approach (part of the Game theory during compilation of the existing (traditionally applied) and alternative (offered) methods of conflict resolution in B2B markets. Thus, conflicts in B2B markets appear due to unexpected expenditures and losses of one or both parties of business cooperation. Probability of emergence of conflicts is higher in the international B2B markets in case of independence of competitiveness and commercial effectiveness of business of seller and budget on the reputation capital, presence of intermediaries, and susceptibility of business in these markets to the influence of independent forces. The existing approaches to dispute resolution are brought down to ignoring them (acceptance of losses and refusal from the set requirements regarding their compensation) or applying to court, which leads to additional - court - expenditures and crisis of both parties. The authors offer marketing of relations as a preventive practice that precedes the alternative methods of conflict resolution in B2B markets. This method allows for compensation of losses of both parties and for prevention of their additional expenditures and crisis, as well as for provision of additional profit from strengthening of relations that are valuable for them as a basis of their competitiveness. This method envisages mutual concession for preserving the current contractual relations, which are more profitable than the market ones. It is universal - that is, it fits any conflicts - and is recommended for practical application for intensification of development of entrepreneurship and acceleration of the rate of economic growth.
Keywords: conflict in B2B markets; business cooperation; alternative approaches to conflict resolution; marketing of relations.
For citation: Lankin O. A. Conflicts in B2B markets and alternative methods of their judging. Journal of Monetary Economics and Management, 2022, no. 2, pp. 6-12. doi: 10.47576/2782-4586_2022_2_6.
КОНФЛИКТЫ В БИЗНЕСЕ С ДЕЛОВЫМИ РЫНКАМИ И АЛЬТЕРНАТИВНЫЕ МЕТОДЫ ИХ ОЦЕНКИ
Ланкин Олег Анатольевич
Санкт-Петербургский государственный экономический университет,
Санкт-Петербург, Россия
Аннотация. В статье анализируются сущность, причины, последствия и факторы возникновения конфликтов между бизнесом и бизнес-рынками, а также существующие и альтернативные (более оптимальные) подходы к их регулированию для стимулирования экономического роста. Исследование
проводится на основе методологии неоинституциональнои экономической теории. Автор использует игровой подход (часть теории игр) при компиляции существующих (традиционно применяемых) и альтернативных (предлагаемых) способов разрешения конфликтов в бизнесе на бизнес-рынки. Отмечается, что конфликты между бизнес-рынками возникают из-за непредвиденных расходов и убытков одной или обеих сторон делового сотрудничества. Вероятность возникновения таких конфликтов на международных рынках выше в случае независимости конкурентоспособности и коммерческой эффективности бизнеса продавца и бюджета от репутационного капитала, наличия посредников, а также подверженности бизнеса влиянию независимых сил. Существующие подходы к разрешению споров сводятся к их игнорированию (признанию убытков и отказу от установленных требований по их возмещению) или обращению в суд, что приводит к дополнительным расходам и кризису обеих сторон. Автор предлагает маркетинг отношений как превентивную практику, предшествующую альтернативным методам разрешения конфликтов, что позволяет компенсировать убытки обеих сторон, а также обеспечить дополнительную прибыль от укрепления ценных для них отношений как основы конкурентоспособности. Этот метод предусматривает взаимные уступки для сохранения существующих договорных отношений, более выгодных, чем рыночные. Он универсален, подходит для любых конфликтов и рекомендован к практическому применению для интенсификации развития предпринимательства и ускорения темпов экономического роста.
Ключевые слова: конфликт на рынках B2B; деловое сотрудничество; альтернативные подходы к разрешению конфликтов; маркетинг отношений.
In the modem global economy, most of sectorial markets are peculiar for long chain of added value, which is caused by two reasons. The 1st reason is limitation of production and distribution of adjacent but separate business processes. Specialization in either production or distribution is usually caused either by deficit of financial resources for formation of vertically integrated business or by state anti-monopoly regulation, which prohibits simultaneous presence of the company in several links of the added value chain within one sectorial market.
The 2nd reason is high commercial attractiveness of the business model of mediation (in production and distribution). Wide opportunities for international labor division appear in the conditions of globalization. This allows increasing competitiveness as to quality and price due to concentration of production in countries with the highest accessibility of necessary resources with further distribution by intermediaries around the world. In addition to this, differences in the living standards often stimulate organization of production and purchase of final products in developing countries for their further re-selling in developed countries for a higher price.
Due to the above reasons, B2B markets occupy a large share in the structure of national economy and develop intensely. Contradiction of interests of entrepreneurial structures (including individual entrepreneurs), which are economic subjects in the studied markets, leads to emergence of conflicts. As entrepreneurship is the main driving force of economic growth, conflicts in B2B markets negatively influence the development of economic systems and may lead to their crises and slow down their overcoming.
That's why an important scientific and practical problem of the modem economic theory is studying the causal relations of emergence of conflicts in B2B markets and optimization of the process of their resolution. The purpose of the chapter is to study the essence, determine the reasons, consequences, and factors of emergence of conflicts in B2B markets, and determine the existing approaches and develop alternative (more optimal) approaches to their regulation in the interests of stimulation of economic growth.
As a result of the literature overview on the topic of business cooperation of entrepreneurial structures, we determined that in the modem economic science a company is presented in
the form of a "black box," which input consists of supplies (B2B) and output consists of sales (B2C, B2B, or B2G). That is, it is envisaged that almost every company is a participant of B2B markets, which emphasizes the importance of studying the peculiarities of functioning and development of these markets.
Theoretical and empirical studies of business cooperation of entrepreneurial structures in B2B markets are performed in the works Glinska-Newes et al. (2018), Guo et al. (2018), Inshakova et al. (2017, 2018), Krivtsov (2015), Kumar et al. (2018), Liu et al. (2018), Malik et al. (2018), Morozova et al. (2018), Mubeen et al. (2018), Popkova et al. (2017), and Veselovsky et al. (2018). At the same time, it is determined that conflicts in B2B markets are poorly studied, as in the existing publications the main attention is paid to organizational (selection out of alternative business partners) and marketing (supporting the competitiveness) issues.
However, the above works reflect the specifics of B2B markets, based on which the difference between conflicts in these markets and conflicts in B2C markets (Chapter 1) is determined. Thus, the intermediary position of B2B markets in the
structure of production and distribution processes causes the interest of companies that participate in business cooperation in these markets in the quickest conflict resolution. Unlike the final consumers in B2C markets, which, as a rule, strive for the most profitable conflict resolution regardless of the time required
for that, companies in B2B markets strive for the quickest resolution of conflicts that paralyze their activities (that is, cause their crisis) with any allowable result.
In view of the determined specifics of conflicts in B2B markets, the research is conducted on the basis of the methodology of the neo-institutional economic theory. In particular, the game approach (belonging to the Game theory) is used during compilation of the existing (traditionally used) and alternative (offered by the authors) approaches to conflict regulation in B2B markets.
As a result of studying the causal relations of conflicts in B2B markets, we determined that these conflicts are caused by failures in the system of supply and sales due to actions of one of the parties of business cooperation, a third party, or independent force (Table 1).
TABLE 1 - Reasons and Factors of Emergence of Conflicts in B2B Markets
Reason of Emergence of the Problem
Object of Conflict (Problem that Causes the Conflict)
Specifics of B2B Markets that Cause the Reasons of Emergence of Problems
Actions of seller
Difference between quality of goods and the contract terms
Violation of delivery terms by sellers
Violation of guarantee obligations
Negative externalities during shipment and usage of products
Independence of competitiveness and commercial effectiveness of business of seller from reputation capital
Actions of buyer
Refusal from purchasing and paying for products due to difference between its factual quality and expectations of consumers
Untimely or incomplete payment for products
Unlawful requirement of exchange, guarantee service, or return of products
Independence of competitiveness and commercial effectiveness of business buyer from reputation capital Buyer's ignorance of the laws
Actions of third Damage or loss of cargo during transportation Presence of intermediaries (transporters)
party Customs problems International cooperation
Taxation problems Different tax regimes of the parties
Influence of independent forces Change of currency exchange rate International cooperation
Problems of influence of independent natural & climatic, human, and anthropogenic factors Susceptibility to the influence of independent factors
Source: Compiled by the authors.
As is seen from Table 1, one of the reasons of conflict emergence in B2B market is seller's actions. In this case, the object of a conflict (the problem that causes the conflict) is difference between the quality of goods and contract terms, independence of competitiveness and commercial effectiveness of seller's business on reputation capital, violation of delivery terms by sellers, violation of maintenance service, and negative externalities during shipment and usage of products. Specifics of B2B markets that lead to the reason of emergence of problems include independence of competitiveness and commercial effectiveness of seller's business on reputation capital.
Another reason of emergence of a conflict in B2B market is buyer's actions. In this case, the object of a conflict is refusal from purchasing and paying for products due to difference between the factual quality of goods and expectations of consumers, untimely or incomplete payment for products due to independence of competitiveness and commercial effectiveness of buyer's business from reputation capital, as well as unlawful requirement of exchange, maintenance service, or return of products due to buyer's ignorance of the laws.
Another reason of emergence of a conflict in B2B market is third party's actions. In this case, the object of a conflict is damage or loss of cargo during transportation in case of usage of intermediaries (transporters), customs problems (e.g., unexpected custom expenditures, delay of products at customs) during international cooperation, and taxation problems in case of different tax regimes of the parties (e.g., when one of the parties is not a VAT payer and another party bears large tax expenditures because of this).
The reasons of emergence of a conflict in B2B market include also the influence of independent forces. In this case, the object of the conflict is change of currency exchange rate during international cooperation and the problems of influence of independent natural and climatic (e.g., natural disasters), human (strikes and thefts), and anthropogenic (actions of cyber criminals) factors.
A generalized reason of emergence of conflicts in B2B markets is losses of one of the parties of business cooperation or both parties. As of now, two variants of conflict resolution are practiced in these markets:
- neglecting the conflict: in case of realization that expenditures for the conflict (at least, transaction costs) exceed the potential advantages from its resolution, which will probably be unprofitable, one or both parties of business cooperation prefer to neglect the conflict, preventing new losses and remaining with the losses that are already borne;
- legal action: in case of expectation of significant advantages from conflict resolution and high probability of obtaining them and the forecasted lesser court costs, one or both parties of business cooperation start legal action, increasing their losses (as a result, they will be compensated only to one party).
The following preventive practices that precede the alternative methods of conflict resolution in B2B markets are offered:
- larger detailization of business agreements: this method is described in detail in Chapter 1 and allows preventing the conflicts, though it could be used also for solving them.
- marketing of relations: this method envisages concession of a party or mutual concession for preserving the relations that pose higher value than the potential advantages from the most profitable conflict resolution.
The existing (traditional applied methods of ignoring the conflict and legal action) and alternative (the offered method of marketing of relations) methods of conflict resolution (and preceding preventive practices) in B2B markets are compiled with the help of the game approach in Table 2.
In Table 2, the crossing of the strategies of business cooperation parties features profit (buyer's profit is marked in solid, and seller's profit is markets in italics), which could be the following:
- "-1": additional losses.
- "0": absence of losses and profit; and
- "1": profit.
As is seen from Table 2, ignoring the conflict leads to zero profit for a business cooperation party that implements this strategy, and legal action leads to additional losses. Marketing of relations allows solving the argument unilaterally with zero profit in case of another party ignoring the conflict. During legal action, marketing of relations is ineffective - and both parties of cooperation undergo the crisis and bear losses due to the crisis and due to court expenditures. Optimum is achieved during bilateral marketing
TABLE 2 - Comparison of the Existing (Traditionally Used) and Alternative (Offered by the Authors) Methods of Conflict
Resolution in B2B Markets with the Help of the Game Approach
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Figure 1 shows that business cooperation in B2B markets is long-term (constant) in most
cases. The parties of business cooperation often use it as a basis for their competitiveness -seller can count for regular sales and gain advantages from "scale effect," and buyer can make purchases for better price with guaranteed
FIGURE 1 - The Conceptual Model of Mutually Profitable Conflict Resolution in B2B Markets with the Help of Marketing
of Relations (Source: compiled by the authors)
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quality and delivery terms. That's why both parties are interested in development of relations that have higher value for them in the long-term, as compared to short-term advantages from profitable conflict resolution, and they are ready for mutual concessions.
Long-term and mutually profitable business relations ensure accumulation of experience and formation of own culture of conflict resolution, experience of mutual concessions, value of relations, and mutual interest in their preservation. Marketing of relations ensures
quick regulation of conflict before emergence of a crisis, preservation of relations, and support for competitiveness, as well as making of optimal decision for both parties (maximization of profit).
Thus, conflicts in B2B markets emerge due to unpredicted expenditures and losses of one or both parties of business cooperation. Probability of emergence of conflicts is higher in the international B2B markets, in case of independence of competitiveness and commercial effectiveness of seller and buyer's business on reputation capital, with intermediaries and susceptibility of business in these markets to the influence of independent forces. The existing approaches to conflict resolution are brought down to ignoring them (acceptance of losses and refusal from the set requirements for their compensation) or legal
action, which is connected to additional - court -expenditures or crisis of both parties' business.
Marketing of relations is offered as a preventive practice that precedes the alternative methods of conflict resolution in B2B markets. This method allows compensating the losses of both parties, preventing additional expenditures and crisis, and providing additional profit from strengthening of relations, which poses high value for them as a basis of their competitiveness. This method envisages mutual concession for preservation of current contractual relations which are more profitable than market ones. It is universal -that is, it fits any conflicts and is recommended for practical application for intensification of development of entrepreneurship and acceleration of the rate of economic growth.
References
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Information about the author LANKIN OLEG A. - Saint Petersburg State University of Economics, Saint Petersburg, Russia
Информация об авторе
ЛАНКИН ОЛЕГ АНАТОЛЬЕВИЧ - Санкт-Петербургский государственный экономический университет, Санкт-Петербург, Россия
