DISCRETE VERSUS RELATIONAL BUSINESS STRATEGIES

Assalamualaikum and very pleasant day for all viewers.

On this post, we will discuss about discrete versus relational business strategies.

But, what is discrete arm's length transaction?

A transaction in which the buyers and sellers of a product act independently and have no relationship to each other. The concept of an arm's length transaction is to ensure that both parties in the deal are acting in their own self interest and are not subject to any pressure or duress from the other party.

Next, what is relational business strategies?

Relational business strategies is a long-term relation between the companies that move beyond special influences transaction by involving effort of both firm to coordinate functional activities.

We will discuss about the difference of both of this contractual element based on:
1. Duration
2. Transferability (switching parties)
3. Attitude
4. Communication
5. Information

DURATION

As you know, if you choose discrete orientation, the duration transaction is only one time. After the transaction, you have no relation. Different with relational orientation, the duration is long time. The transaction is not limited to  one task only, but continuously as stated in the contract.

TRANSFERABILITY (SWITCHING PARTIES)

For discrete orientation, they completely easy to switch to another party as they are independent and not directly tied with contract. You can change supplier easily but for relational orientation, it is extremely difficult to change the party as they have contract stated.

ATTITUDE

As you have single transaction with discrete orientation, you must have suspicious and independent as they have no trust between each other. But, if you have relationship between each other, the attitude must be open, trusting, cooperative, and easy to communicate.

COMMUNICATION

There is very little communication between discrete orientation as they make transaction with different parties and always changing while relational orientation is more complex and a lot of things they want to share.

INFORMATION

The information between discrete orientation is limited and proprietary as they have no relation. Contrast to relational orientation, information are need to be shared as it involved directly to the business. Information such as technology used and labor management are those for examples.

Conclusion is, there are lot of benefits in doing partnership rather than do it alone (discrete orientation). They can gain high quality, reduce cost, quantity discount, market stability for both parties. This also will enhance sales as both parties need each other to make profitable business.