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IMM-06983; No of Pages 11 Industrial Marketing Management xxx (2014) xxx–xxx Contents lists available at ScienceDirect Industrial Marketing Management Environmental factors influencing the management of key accounts in an Arab Middle Eastern context Fawaz Baddar ALHussan a,⁎, Faten Baddar AL-Husan b,...

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Environmental factors influencing the management of key accounts in an Arab Middle Eastern context Chavi C-Y Fletcher-Chen, Fawaz Baddar

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IMM-06983; No of Pages 11 Industrial Marketing Management xxx (2014) xxx–xxx

Contents lists available at ScienceDirect

Industrial Marketing Management

Environmental factors influencing the management of key accounts in an Arab Middle Eastern context Fawaz Baddar ALHussan a,⁎, Faten Baddar AL-Husan b,1, Chavi C.-Y. Fletcher-Chen a,2 a b

Université Catholique de Lille, IESEG School of Management (LEM UMR CNRS 8179), 3 Rue de la Digue, Lille 59000, France University of Bedfordshire, Putteridge Bury, Hitchen Road, Luton LU2 8LE, United Kingdom

a r t i c l e

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Article history: Received 7 March 2013 Received in revised form 1 December 2013 Accepted 11 December 2013 Available online xxxx Keywords: Key account management Relationship management Emerging economies Contingency theory Network approach

a b s t r a c t Within the sales and marketing literature, it is recognised that a range of external factors can influence how companies in the business-to-business field manage business relationships within national and across international borders. However, there have been very few studies that explore the influence of the external environment on key account relationships, especially within the context of emerging economies. This study draws on the network approach and contingency theory to identify and highlight the influence of external environmental factors on the management of inter-organisational relationships with key customers in emerging economies in the Arab Middle East region. It is based on an extensive qualitative enquiry that utilises 50 in-depth semi-structured interviews conducted in Jordan with endogenous and Western firms. It concludes that key account practices within an Arab context are shaped by a number of contingencies that are embedded in broader institutional contexts and the business environment, which may challenge the adoption of company-wide universal key account management policies across borders. © 2014 Elsevier Inc. All rights reserved.

1. Introduction Since the mid-1980s, customer relationship management has been significantly affected by a number of significant changes in the business environment. Intensified levels of competition in most markets and subsequent selling costs for suppliers; growing customer concentration arising from increased mergers and acquisitions; increased centralised purchasing; customer demands for more services and better communication; the increased desire to develop partnerships; wide geographic dispersion of buyers for the same company; increased sophistication of buyers; maturity of business markets in most developed countries; improvements in information and communication technologies; and the adoption of active strategies by large buyers to reduce the supplier base to cut costs have forced companies to adopt and develop key account management strategies to increase their competitive advantage (Davies & Ryals, 2009; Ivens & Pardo, 2007; McDonald, Millman, & Rogers, 1997; Ozegovic & Sarac, 2012; Sharma, 2006; Tzempelikos & Gounaris, 2013; Weilbaker & Weeks, 1997). Consequently, Key Account Management (KAM) has become a strategic and popular process of selling, in business-to-business marketing that has gained increased importance for suppliers worldwide (Gosselin & Bauwen, 2006; Guenzi, Johnson, & Castaldo, 2009; Guenzi,

⁎ Corresponding author. Tel.: +33 320 54 58 92; fax: +33 320 57 48 55. E-mail addresses: [email protected] (F.B. ALHussan), [email protected] (F.B. AL-Husan), [email protected] (C.C.-Y. Fletcher-Chen). 1 Tel.: +44 158 24 83 941. 2 Tel.: +33 320 54 58 92; fax: +33 320 57 48 55.

Pardo, & Georges, 2007; Homburg, Workman, & Jensen, 2002; Pardo, Henneberg, Mouzas, & Naudé, 2006; Salojarvi, Sainio, & Tarkiainen, 2010; Sharma, 2006; Wengler, Ehret, & Saab, 2006; Wong, 1998; Wotruba & Castleberry, 1993; Zupancic, 2008). More specifically, KAM can be understood as a relationship-oriented marketing management approach which focuses on dealing with major customers in the business-to-business market (Ojasalo, 2001). KAM can also be thought of as a strategy to retain and develop closer relationships with the firm's most valued and important customers (Davies & Ryals, 2009; Georges & Eggert, 2003; Gosselin & Heene, 2000; Natti & Palo, 2011). Key accounts or key customers are the most important customers for supplier organisations, and are usually given special consideration. McDonald et al. (1995, p. 9) define a key account as ‘…a customer deemed to be of strategic importance by the selling company’. The literature indicates that the nature of KAM and the formation of key account programmes are not only influenced by a number of internal/organisational factors, but also by external/environmental factors (Homburg et al., 2002). The external environment may be referred to as the forces that are beyond the selling firms' capacity to control, and which influence the formation of the key account programme and strategies (Jones, Dixon, Chonko, & Cannon, 2005). These include competitors and the market environment such as characteristics of customers, demand concentration, purchasing centralisation and purchasing complexity, the nature of the product and product complexity, technological, ethical and regulatory forces (Brehmer & Rehme, 2009; Wengler et al., 2006; Workman, Homburg, & Jensen, 2003). However, relatively little attention has been paid to the influence of these environmental/ exogenous factors on KAM dimensions and relationships (Fletcher &

0019-8501/$ – see front matter © 2014 Elsevier Inc. All rights reserved. http://dx.doi.org/10.1016/j.indmarman.2014.02.008

Please cite this article as: ALHussan, F.B., et al., Environmental factors influencing the management of key accounts in an Arab Middle Eastern context, Industrial Marketing Management (2014), http://dx.doi.org/10.1016/j.indmarman.2014.02.008

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F.B. ALHussan et al. / Industrial Marketing Management xxx (2014) xxx–xxx

Fang, 2006; Homburg et al., 2002). Furthermore, there is relatively little research on KAM in emerging and developing economies (LDCs) and, in particular in the Middle East region and the Arab World, as opposed to the developed economies (Al-Husan & Brennan, 2009). These gaps in the literature are problematic, for it is clear that multinational corporations (MNCs) are increasingly expanding their operations in emerging and developing countries (UN, 1993, 1997). Secondly, the region is strategically important, given its central geographic location, market size and large oil reserves (Budhwar & Mellahi, 2007). The aim of this paper is to fill these gaps by exploring the environmental contingencies that influence the design and implementation of KAM in an Arab context. This paper is divided into five main sections. In the first section, a brief review is provided on the debate concerning key account management. The second goes on to consider how KAM relationships are contingent upon the embeddedness of firms within the broader environment and institutional context. The third section outlines the research methods utilised. The fourth section reports the key findings obtained from the interviews. Finally, a concluding section draws together the key points emerging from the study and considers their implications for the existing debate relating to the management of key accounts. 2. Theoretical background 2.1. Key account management Key account management (KAM) has its roots in relationship marketing (RM), and is perceived as the newest paradigm in customer relationship management approaches (Davies & Ryals, 2009; Durif, Benedicte, & Graf, 2013; Gounaris & Tzempelikos, 2013a; Hughes, Foss, Stone, & Cheverton, 2004; McDonald et al., 1997; Ozegovic & Sarac, 2012; Wahyuni & Titus, 2013; Wengler, 2006, 2007). KAM is also conceptualised as the practical implementation of RM (Godson, 2009; Gosselin & Bauwen, 2006; Gounaris & Tzempelikos, 2013b; Gummesson, 2012; Harwood, Garry, & Broderick, 2008; Sheth & Shah, 2003; Tzempelikos & Gounaris, 2013). More specifically, KAM is based on the relationship marketing theory in terms of how to manage key customers and how to develop and maintain strategic relationships with the customers and channel partners, while integrating with other internal functions of the organisation like service, logistics and information management (Gupta & Melevar, 2002). Thus, KAM and relationship marketing emphasises long-term ongoing relationships (Kim, Han, & Lee, 2001; Little & Marandi, 2003), that aim to build long-term, committed, trusting and co-operative relationships, which are defined by openness, genuineness, customer suggestions, fair dealing, and a willingness to sacrifice short-term profit for longterm profits and advantages (Benette, 1996). KAM, as currently portrayed in the relationship marketing literature, is a significant approach to creating value, by implementing specific processes targeting most important customers (Wengler et al., 2006). Since the provision of special treatment and specific processes to the most important customers are beyond the capabilities of any one individual and require a coordinated effort across product divisions, sales regions and functional groups at different levels, organisations have resorted to the adoption of KAM approaches (Workman et al., 2003). Hence, KAM is often represented as managing both internal and external networks (Holt & McDonald, 2000; Pardo, 1994). Accordingly, it is argued that among the three relationship marketing schools of thought which can provide a useful framework for analysing KAM, namely: The Nordic School of Relationship Marketing, The Anglo-Australian School of Relationship Marketing, and The Industrial Marketing and Purchasing (IMP) Group (Baines, Fill, & Page, 2008; Egan, 2008; Palmer, Lindgreen, & Vanhamme, 2005), the IMP networks approach to relationship marketing can be seen as most relevant and useful in understanding the KAM approach. A number of studies on

KAM have mainly analysed KAM using the Industrial Network Approach (e.g. Homburg et al., 2002; Hutt & Walker, 2006; Ming-Huei & WenChiung, 2011; Pardo, Salle, & Spencer, 1995; Spencer, 1999; Workman et al., 2003). This study is based on the Arab World, which is founded on a clannetwork society that nurtures networked business relationships. Consequently, applying the networks approach in this analysis seemed to be most appropriate for understanding and analysing KAM in the Arab context. The IMP2 industrial network approach exceeds the analysis of dyads (as in the interaction approach) to networks (Axelsson & Easton, 1992), since ‘dyadic relationships are embedded in a larger set of exchange relations called a network’ (Hutt & Walker, 2006, p. 468). A network is a set of actors or social entities that are connected by a set of ties or relationships (Borgatti & Foster, 2003; Hutt & Walker, 2006). Ford, Gadde, Håkansson, and Snehota (2003) define networks as “companies and their relationships between them” (p. 5). More specifically, according to the industrial network approach, the evolution and development of business relationships take place in terms of changes in three dimensions: actor bonds, activity links and resource ties (Araujo & Easton, 1996; Axelsson & Easton, 1992; Ford, 1997; Håkansson & Johanson, 1992; Håkansson & Snehota, 1995; Veludo, 2009). These represent the substance of the business relationship, and may be seen to capture the ‘formal’/‘organisational’ aspects of KAM (Shaw, 2003). These dimensions are explained in more detail below: • Activities: Activities describe what is done in the network. Håkansson and Johanson (1992, p. 30) state that ‘an activity occurs when one or several actors combine, develop, exchange, or create resources by utilising other resources’. The activities include goods and services/ manufacturing, administrative, technical and commercial issues that can be connected and exchanged among companies and organisations sharing a business relationship. • Resource ties: Performing activities requires resources. Resource ties connect elements of companies together. Actors are the ones who bring resources and all resources are controlled by actors, either by single actors or by many actors who combine their resources to create a shared resource (Håkansson & Johanson, 1992). The resources include technological, human, marketing and other resources which interacting organisations share and decisions about which can become dependent upon another's resources. • Actors: Actors are defined as those who perform activities and/or control resources. Organisations and individuals contribute to business relationships, including key account managers, senior managers and sales teams. These three interrelated factors are combined in a conceptual framework to operationalize KAM (Fig. 1). Scholars argue that changes in these relationships are reflected in the relationship's attributes — the informal/relational dimensions such as trust, commitment, satisfaction and bonds (Biggemann & Buttle, 2009; Huang & Wilkinson, 2006). This is supported by other research findings which indicate that in addition to substance, ‘interaction’ between the organisations is paramount to the establishment and development of relationships. These interactions not only include all activities essential to establish business relationships such as making visits and phone calls and attending meetings, but also include ‘social interactions and the types of activities typical of a friendship relationship’ (Shaw, 2003, p. 153). Consequently, it is argued that when considering what drives the success of KAM, researchers need to focus on both the formal organisational aspects of KAM and on the informal/relational aspects of KAM (Ivens & Pardo, 2007; Tzempelikos & Gounaris, 2011). Furthermore, the IMP network approach emphasises the connectivity of companies in that individual companies are part of a larger setting, indicating that the environment of firms needs to be acknowledged when analysing a company's activities and strategic decisions (Håkansson, 1982; Håkansson & Snehota, 1989). Consequently, to

Please cite this article as: ALHussan, F.B., et al., Environmental factors influencing the management of key accounts in an Arab Middle Eastern context, Industrial Marketing Management (2014), http://dx.doi.org/10.1016/j.indmarman.2014.02.008

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(Adapted from Homburg et al., 2002; Workman, Homburg, & Jensen, 2003; Håkansson & Johanson, 1992) Fig. 1. KAM framework. (Adapted from Homburg et al., 2002; Workman et al., 2003; Håkansson & Johanson, 1992).

understand how KAM is designed and implemented, it is argued that the context and the environmental/contingency factors in which companies are embedded, need to be analysed and understood (Homburg et al., 2002; Wengler et al., 2006). 2.2. The environmental context of KAM Contingency theory (CT) suggests that firm strategies, structures and behavioural processes will be dependent upon environmental conditions (Lawrence & Lorsch, 1967). The central premise of CT is that effectiveness, broadly defined as ‘organisational adaptation and survival’, can be achieved in more than one way and depends on the appropriate fit or matching of contingency factors/situational influences with internal organisational designs that can allow appropriate responses to the environment (Zeithaml, Varadarajan, & Zeithaml, 1988, p. 39). Thus, scholars from different disciplines argue that managerial decisions and practices need to be aligned with environmental demands to obtain the desired work behaviours and improve performance (e.g. Schuler & Jackson, 1987; Waiganjo, Mukulu, & Kahiri, 2012). Within the sales field, for example, the impact and managerial significance of examining situational influences, and the interaction between the sales behaviours and sales environment may be demonstrated in Thompson's (1973) statement that “every contact a salesman has…involves different human problems or situations. In brief, there is no one sales situation and no one way to sell” (Weitz, 1981, p. 89). In effect, organisations do not operate in a vacuum as they are embedded in national and supra-national environments that can act as a source of competitive advantage as well as a constraint on firms' strategic choices and managerial actions (Aguilera & Dencker, 2004). Research evidence indicates that firms' organisational practices vary across countries as they are affected by the socio-cultural and institutional environments in which they have evolved and developed (Al-Husan & Brennan, 2009; Kogut, 1991; Kostova, 1999; Yang, Su, & Fam, 2012). Changes in the environment bring with them new challenges for the selling organisation. However, there is lack of empirical evidence on the effects of the external environment on the KAM dimensions (Homburg et al., 2002). One of the environmental factors that have become increasingly relevant in the international context is “culture”. National culture is often reflected in a country's organisational and managerial decisions and practices (Schneider, 1989). Thus, it is argued that cultural

differences such as time and space, interaction models and attitudes have a major impact on a number of key account management issues, including how relationships start and develop, buyer–seller interactions, business networks, business negotiations, the buying-decision process in the buyer's organisation, selling styles, personal and institutional credibility, and sales force management (Usunier & Lee, 2005). National culture is part of the wider institutional environment in which firms are embedded (Aguilera & Dencker, 2004). According to historical institutionalism, national institutions and governance principles of each market economy or business system are country-specific and include: the state, the financial system, education and training systems, the legal systems, authority relations, union strengths and labour-management relations (Whitley, 1996, 2000). Scott (1995, 2008) proposes that institutional environments possess three pillars: regulatory, normative and cultural-cognitive. The regulatory component of an institutional environment, relates to the laws, rules and regulations in an institutional environment and delineates what organisations can or cannot do. The normative pillar focuses on the value systems, beliefs and norms that prevail in a country and define what people should or should not do. The cultural-cognitive pillar emphasises managers' internal interpretive business practices which are shaped by their external cultural environment; and their business knowledge, which is shaped by their social interactions developed over time. This pillar specifies what people will typically do (Yang et al., 2012). According to DiMaggio and Powell (1983), to gain legitimacy firms seek to achieve acceptable business practices to comply with three main types of institutional isomorphism3: mimetic isomorphism, which results from standard responses to uncertainty represented by organisations effort to imitate and model themselves on other organisations; normative isomorphism, which stems primarily from professionalization; and coercive isomorphism that stems from formal and informal institutional pressures. Formal pressures include such factors as political and regulatory influences (DiMaggio & Powell, 1983). Within the sales ...