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Integrating to the Global Supply Chain: Being a Branded Supplier

Conference Paper · January 2005

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Tuncdan Baltacioglu Oznur Yurt

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 INTEGRATING TO THE GLOBAL SUPPLY CHAIN: BEING A BRANDED
SUPPLIER
Tuncdan Baltacıoğlu1, Öznur Yurt2 and Melike D. Kaplan3

Abstract ⎯ Increasing globalization and tendency of the boundaries to disappear lead to rapidly increasing
competition in the international markets. The most effective way to differ from competition is to create a
strong and valuable brand. In addition, the problem of integration to international distribution chain in which
the company operates is extremely challenging to many exporters. Even when a firm finds a way to access to
the international distribution chain, it usually faces the problem of continuity: Due to lack of a strong brand,
it becomes impossible for the firm to stay as a supplier in the long period.

However, branding for the end-consumer requires a high level of investment, which is generally not
affordable for Turkish exporters. This paper proposes that rather than focusing on the end-consumer, Turkish
exporters should emphasize on directing branding and related marketing efforts to their retailers and
becoming “branded suppliers”. The problems regarding this issue and proposed solutions are also proposed.

Keywords ⎯ Branded supplier, branding, SCM, distribution chain,B2B, exporters

INTRODUCTION

In the recent decades, the concept of supply chain has become extremely important to companies
operating in an increasingly competitive global marketplace. Integration to a global supply chain, therefore,
has proved to be vital for businesses that strive for strong positions in the international markets. However,
even when a firm finds a way to access to the international distribution chains, continuity in the chain arises as
one of the major problems. Lack of long-term collaboration and trust between the parties, accompanying price
wars result in diminished power to deal with the competition, and the supplier is usually dismissed in the
chain in favor of the other providing lower prices. The solution to this problem lies in the concept of branding
and being a “branded supplier” for its organizational buyers.
The organization of this paper is as follows: As an introductory part, we first describe and briefly
examine the supply chain concept. In the next two sections, integration into global supply chains and problems
associated with this task are addressed. The third part develops branding and the “branded supplier” concept
as a solution with a number of practical recommendations. Finally, the key conclusions from this paper are
summarized with a number of recommendations for further research.

THE GROWING IMPORTANCE OF THE SUPPLY CHAIN

One of the most important changes that initiated by globalization is probably the desperate need to
achieve a competitive advantage and maintain it in the long run. Today, having a competitive advantage seems
to be the only way to stay in business. In addition, globalization calls for interdependency between various
firms all around the world. The growing importance of these concepts ultimately led to emergence of supply
chain notion, and effective management of this chain became a hot topic. In the recent decades, efficient
management of logistics operations within the firm has been accepted to be the primary source of competitive
advantage. Thus, the supply chain in which a firm is operating has now a great importance for the company’s
success. In order to achieve effectiveness, not even one company can operate its functions isolated from its
suppliers and other units in the supply chain. This interdependency is the main reason of development of the

1
Tunçdan Baltacığlu, Izmir University of Economics, Faculty of Economics and Administrative Sciences, Balcova, Izmir, Turkiye,
tuncdan.baltacioglu@ieu.edu.tr
2
Öznur Yurt, Izmir University of Economics, Faculty of Economics and Administrative Sciences, Balcova, Izmir, Turkiye,
oznur.yurt@ieu.edu.tr
3
Melike D. Kaplan, Izmir University of Economics, Faculty of Economics and Administrative Sciences, Balcova, Izmir, Turkiye,
melike.demirbag@ieu.edu.tr
supply chain management system (Lummus and Vokurka, 1999). The need to improve logistics operations,
increasing levels of outsourcing, rising costs, competitive pressures, increasing globalization, importance of e-
commerce and the complexity of supply chain are some of the other reasons to the development of the supply
chain management concept (Stevenson, 2002).
There are many different definitions of supply chain in the literature. An extensive review on the
literature by Bechtel and Jayaram (1997) show that the term SCM is often misused and that no agreement
exists about its definition. Nevertheless, the widely accepted definition that was proposed during the Global
Supply Chain Forum which was held in 1998, indicates that supply chain management is the integration of the
key business processes from the end user through original suppliers that provides products, services, and
information that add value for customers and other stake holders (Lambert, Cooper and Pagh, 1998).
The supply chain is the network of organizations. In this network, the upstream and downstream
linkages, many processes, activities and operations produce value in the form of products, services or
information to the consumer through the supply chain. Therefore, the supply chain is sometimes named as
“the value chain”. Although supply chain approach was initially based on vertical integration, today a solid
line is drawn between these concepts. A supply chain consists of many different relationships with suppliers
and customers, rather than being just a production and distribution integration. The relationships between the
companies of a supply chain may be transaction based and function specific, or they can be strategic alliances
(Ghiani, Laporte and Musmanno, 2004). The structure of cooperation and coordination between each unit of a
supply chain is vital (Christopher, 1998). As Lambert, Cooper and Pagh (1998) indicate, the business
processes, the management components, and the structure of the chain are the basic three elements of a supply
chain management. Therefore, effective coordination and cooperation in these elements are also required
when managing a supply chain.
However, it is obvious that achieving cooperation in the supply chain, and thus complete supply chain
integration is not an easy task. There exists considerable antagonism among supply chain members due to
mutual distrust and relationship difficulties before and during competition (Simatupang and Sridharan, 2002).
These conflicts arise from a number of factors such as differences between members’ goals and objectives
(Gaski, 1984) or disagreement over domain of actions and decisions. Therefore, in practice, exercise of power
in supply chains determines the structure of the chain. Usually, the most powerful company (sometimes
referred as the focal company) sets the strategic objectives and supply chain policies (Laseter and Oliver,
2003). In this context, it becomes important to identify how less powerful companies integrate and operate in
the supply chain to achieve several benefits.

INTEGRATION TO THE GLOBAL SUPPLY CHAIN

Supply chain management concept was based on the local/regional logistics functions before the
dramatic effects of globalization. Even in the recent years, supply chain management activities could be
realized within a particular country. Today, there is no doubt that all companies have linkages with
international markets, and accordingly international supply chains due to increasing globalization and
tendency of the boundaries to disappear. This is why all the companies are trying to achieve competitive
advantages in international markets. With respect to Porter’s terminology, until recently, mainly two strategies
were acknowledged as the sources of competitive advantage; product differentiation or cost leadership.
Basically, a cost leadership strategy emphasizes offering the product or service at the cheapest price. This can
be done by creating the most efficient manufacturing price, by economies of scale, or by control of suppliers
and channels. On the other hand, a company may employ a differentiation strategy, which allows it to sell its
products for a premium price. Differentiation strategy emphasizes creating superior products, products with
unique or more desirable features or design. However, in today’s world these two strategies face a number of
challenges. As for cost leadership, it may be suggested that it is extremely hard for small firms to achieve a
competitive advantage via implementation of this strategy. This is due to a number of inner strengths required
to enjoy a cost leadership advantage. On the other hand, differentiated products cannot be truly differentiated,
as the information flow is tremendous and any product can be imitated soon enough. In this context, the
differentiation of processes rather than products becomes more critical. However, tactics for differentiation are
various today. One of these tactics or differentiation processes is undoubtedly the hot topic of supply chain
management. Today, the new base of competitive advantage has become as the effective management of
logistics functions (Christopher, 1998). Moreover, the new managerial challenge is effective management of
integrated supply chains.
 Supply chain management approach is purely based on the cooperation and coordination between the
units that are operating in the chain. Units within a supply chain need coordination in order to achieve
informational cooperation as well as the operational cooperation. The main aim of supply chain management
is creating synergy by the shared goals and strategies of different firms. This notion leads to the all units’
integration to the supply chain. If at least one functional area or a unit is operating independently in a supply
chain, it is not possible to talk about a fully integrated supply chain. Relationships between the units and
integration capabilities within a supply chain can be developed in many ways. Traditionally, the relationships
were based on arms-length agreements until late 1980s. However, in recent years, the transactions rely more
on collaboration, information sharing and trust that are the core requirements of value creation in supply chain
(Hoyt and Huq, 2000). The advantages of cooperating with the other firms are; access to scarce resources such
as new technologies, products, skills and know-how and the possibility of risk sharing, which are considerably
important for integration process.
The integration capability of the companies is directly related to the factors such as; company size,
brand name, possession of assets, technical skills, knowledge and experience to innovate products, processes
and services, innovation and flexibility (Bommer and Jalajas, 2002). Moreover, creating differentiation and
brand are the dramatically important abilities for the companies, which are achieving involvement
opportunities to the supply chain. It is obvious that globalization changes the structures of these factors and
makes the business environment more challenging each day.

PROBLEMS OF INTERNATIONAL SUPPLIERS

The problem of integration to global supply chain in which the company operates is extremely
challenging for many exporters. Different sets of exporting and integration problems at different stages of the
development process. Those problems or barriers can be defined as all those constraints that hinder ability of
the firm to initiate, develop or maintain export marketing activities (Leonidou, 1995). If the international
suppliers that are at least export stage in industrialization process may solve those problems, the long-term
success can be possible. The functional problems of the exporters, problems that vary according to the stage of
development of the exporting firm and stage of exporting process are directly affecting the success of
integration process (Vozikis and Mescon, 1985). The main exporting problems can be classified as;
administrative, political, financial, operational, marketing, governmental or economic based (Vozikis and
Mescon, 1985; Das, 1994). Diamantopoulos (2001), Das (1994) and Amine and Cavusgil (2001) identified the
export characteristics, which are the main determinants of integration, as; firm size, age of the firm, company
internationalization; quality, attitudes and characteristics of the managers, management self-perception as
exporters, presence of export department and export staff, export product base, export market numbers,
geographical coverage, product adaptation and product, R&D efforts, export assistance, level of competition,
type of industry the firm is in, the economic and political environment, origin of the buyer, nature of buyer-
supplier relationships and their impact on export performance, degree of uncertainty, perceived distance,
conflict, cooperation, power dependence, degree of adaptation and company attitude and commitment to
exporting, the process of market selection and marketing mix decisions.
Supplier integration to the international supply chain problem mainly based on the exporter’s
involvement to the process. Diamantopoulos (2001) stated that the export involvement, which is
operationalized as the proportion of turnover accounted for by export sales, referred as export intensity or
export sales contribution (Cavusgil, 1984) is used to describe the extent to which a company is dependent
upon export activity for its business.
The barriers and problems of supplier integration might be studied according to the most prominent
classification of Cavusgil (1984) and Leonidou (1995). These problem categories are internal-domestic
problems that arise from within the firm, but are obvious in its domestic market, internal-foreign problems that
are mainly about firm itself, but they are experienced in the country of the target-market, external-domestic
problems that stem from the external environment but they are experienced in the country of the target-
market, external-foreign problems that are external-foreign originate from the external environment of the
firm, but they are met in the domain of the export target market (Kaleka and Katsikeas, 1995).
Even when a firm finds a way to access to the international distribution chain, there are two
alternatives. One is becoming a regular supplier, whereas the other alternative is sporadic supplier. Researches
show that; regular suppliers have developed more internal capability to appreciate importance of integration
problems as well as to cope with such problems (Kaleka and Katsikeas, 1995). Therefore it might be accepted
that the most overwhelming problem that the suppliers usually face is continuity: Due to lack of a strong
brand, it becomes impossible for the firm to stay as a supplier in the long period. The main reason of the
continuity problem in a supply chain is the integration problems based on the poor competitive abilities.
Continuity problem arise due to a number of factors. Firstly, in order to achieve continuity in a
particular market, stability in quality and quantity is essential. In other words, the exporter firm should ensure
that all the products and/or services are of permanent quality and exported in sufficient amounts. Secondly, the
environmental instability and inequality of different countries in a supply chain, including economic, cultural
and legal factors, emerges as an important obstacle to continuity. Thirdly, problems regarding capacity and
resource availability, accompanying the fluctuations in demand, prevent exporter firms to achieve continuity
in the long term. Incompatibility of information technology infrastructures of the units, differences in
managerial approaches, and difficulty in engaging in cooperative relationships are some other problems that
companies face. Finally, and equally important, problems in accessing the end consumers directly appear as a
major obstacle. Exporting firms usually try to reach the consumers via international distributors, handling the
control of operations mainly to these intermediaries. They usually have little or no control on host country’s
distribution channels. In this context, the relationship between the intermediary and the firm gains great
importance. Therefore, it may be suggested that the continuity problem on the first hand can be solved by
developing strong relations with the distributors. In order to provide such a relationship, the exporter firm
primarily should seek ways to build a strong brand image on the side of the distributor.

BRANDING: THE SOLUTION TO THE CONTINUITY PROBLEM IN THE SUPPLY

CHAIN

A brand is a distinguishing name and/or symbol (such as a logo, trademark, or package design)
intended to identify the goods or services of either one seller or a group of seller, and to differentiate those
goods or services from those of competitors. A brand thus signals to the customer the source of the product,
and protects both the customer and the producer from competitors who would attempt to provide products that
appear to be identical (Aaker, 1991).
Although there exists a tremendous interest in branding and its benefits for achieving competitive
advantages in the long term, the focus is overwhelmingly on the consumer markets (Kim, J., Reid, D., Plank,
R. and Dahlstrom, R., 1998; Michell, P., King, J. and Reast, J., 2001). Many businesses operating in the
business-to-business (B2B) markets consider branding as a tool directed to end-users, and thus they have
trademarks rather than brands. In parallel, academic interest in branding in organizational markets is also
scarce (Lynch and de Chernatony, 2004).
However, as in consumer markets brands lead to purchase, enhance loyalty and minimize price
sensitivity, strong brands in the organizational markets also help the business get a foot in the door, achieve
long-term relationships and hence, reach more potential customers by using highly cost effective and targeted
tools. Therefore, being a “branded supplier” should become a basic priority for businesses that are trying to
achieve and maintain competitive advantages in the markets, where the high costs of branding for consumer
markets cannot be easily afforded. Global markets are undoubtedly one of these.
A branded supplier is the company with a positive image and reputation as a whole. Creating such
goodwill enhances greater selling opportunities and more profitable relationships. Because business-to-
business brands are often corporate brands rather than product brands, understanding branding from such a
perspective becomes critical (Keller, 2003). Corporate branding is where the corporate name is the brand, and
the attention should be focused on the personality of the organization, both internally and externally on a long-
term basis. Therefore, corporate branding is not, merely a nice logo or powerful advertising as it is usually
regarded, but is concerned with giving an organization a clear and publicly stated sense of what it stands for
(Inskip, 2004).
Being a branded supplier in business context play crucial roles in several ways. First, because brands
build trust, the reassurance of a well-known supplier brand eases the possibility of stepping into the market in
greater volumes. Additionally, because the decision-makers in the procurement process are more concerned
with the outcomes of their decisions, they are likely to choose suppliers with strong brands. Secondly, brands
add value to the products, which enables companies to maintain premium prices and avoid destructive price
wars. Third, and the most important, brands create loyalty and enable the suppliers to enjoy stronger
relationships with their buyers, while reducing new customer acquisition costs significantly. These three
consequences of being a branded supplier may be used as powerful tools for businesses to solve the continuity
problem in the global markets.
As stated before, due to misconceptions about branding processes in B2B markets, best practices in
the field are relatively scarce. However, derived from the corporate branding literature and practices, some
useful guidelines may be stated as follows:
Developing a brand strategy supporting the business strategy: The brand strategy is an inseparable
part of the business strategy. Therefore, the brand propositions should emphasize the priorities and objectives
of the firm attempted in the medium and long-term. For example, if the objective of the supplier is to provide
products in the quickest way compared to competitors, then the brand strategy should focus on swiftness, not
technical sophistication.
Building a clear brand identity and strategies to support the process: Brand identity is the total
proposition that a company makes to its customers or the promise it makes. It may consist of features and
attributes, benefits, performance, quality, service support, and the values that the brand possesses. Brand
identity is developed by the producer, and it transforms into brand image on the side of the customer. The
brand / corporate identity should be clear and understandable, and focus on a few (preferably only one) key
values that the brand / supplier firm deliver. All the marketing and business strategies should be organized
accordingly to support the brand identity.
Deciding on and operationalizing a value proposition that is most valuable to the organizational
customers: As mentioned, trying to focus on all the features that the firm / product delivers only makes the
situation complicated and result in ignorance by the customer. Hence, the value proposition should be selected
to grasp the feature that is valued the most by the customer. Communication strategies are of great importance
when operationalizing this value proposition.
Aligning the organization accordingly to make the brand and value proposition a reality: No branding
program can survive without corporate support from all layers of the organization. Branding a company is not
solely the responsibility of the marketing department, but of all the departments and employees as a whole.
Therefore, in the attempt of being a branded supplier, the notion should be internalized by the whole
organization and necessary strategy developments should be realized to ensure this.

CONCLUSION

This study highlights the importance of branding strategy to gain and maintain competitive advantage
in the global supply chains. The new era of domestic and international business pushes companies to integrate
into supply chains and operate interdependently with various firms across the world. However, this process is
extremely challenging to many organizations, as the lack resources and know-how that are needed to provide
continuity in the chain. In this aspect, it is obvious that companies with strong brands have a number of
advantages to maintain their position the chain for the long term. However, it should also be noted that
building a strong consumer brand requires remarkable amount of resources devoted to the process, which is
usually not affordable for companies having smaller scales. Yet, rather than directing brand building efforts to
the end-users, these companies may find building “supplier brands” a more profitable and cost-effective
option. By being a branded supplier, these companies will generate long-term trust and loyalty, and benefit
from collaboration opportunities with their organizational buyers, which will enhance the possibility to fully
integrate into supply chains and maintain competitive advantages in the long run.

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