Intermediation in Business Networks: A Case Study in the Textile and Clothing Industry
Licentiate thesis, 2011
Intermediation is a central concept in the marketing channel literature where it is used for analyzing how specific firms, intermediaries, connect producers and users. It is argued that intermediation is primarily about increasing transaction efficiency when intermediaries undertake functions for closing the gap between producer stocks and consumer assortments, thus bridging discrepancies in time and place between supply and demand. Current changes of business reality in terms of postponement, specialization, customization and outsourcing call for an extended perspective on intermediation, since existing interpretations do not seem to fit very well with today’s business reality. As a supplement to the previous focus on intermediation between actors, this thesis explores intermediation also in the activity and resource layers of business networks, with the aim of creating a framework for analyzing intermediation in contemporary business networks. Models and concepts from the industrial network approach (e.g. Håkansson, 1987; Håkansson et al., 2009) are used in order to regain a holistic view of intermediation justified by the need to “bring together heterogeneous supply on the one hand with heterogeneous demand on the other” (Alderson, 1965, p. 200).
A qualitative case study in the textile and clothing industry is used to empirically address intermediation. It involves a Swedish shirt manufacturer, SM, and its demand side and supply side, which have very different features. The demand side is characterized by a huge variety of product ranges, volumes of different types of shirts, changes of models demanded and a call for rapid modifications both quantitatively and in terms of variants. On the supply side, large-scale facilities appear with an inherent logic of large economic batch quantities to obtain cost efficiency. The intermediating challenge for SM is thus to balance the flexibility requirements on its demand side with the call for stability on its supply side.
A broadened scope of intermediation contributes to improved understanding of current conditions in business reality. The activity analysis shows that the way a specific activity intermediates between two other activities will impact on their economies of scale, interdependences, economic efficiency and diversity. The resource analysis reveals that resource utilization owing to resource intermediation is an intricate balancing of obtaining cost efficiency and individualization. The analysis of the actor layer shows that intermediation among actors is ever more important since resource combining and activity interdependence increasingly cross the borders of firms. In today’s business reality all firms are involved in intermediation. Hence, ‘intermediary’ has lost its relevance as a theoretical construct since it can no longer be used as a meaningful discriminator between various types of actors.
Keywords: intermediation, intermediaries, industrial network, channel, textile, clothing