Inter Corporate Coordination:

Inter corporate coordination is the second level of coordination in the supply chain. In this
firm develops cooperation or alliances from outside parties or firms to improve efficiency.
Inter corporate coordination is simply a coordination between various corporate or firms.
According to Gulati, Inter corporate coordination / alliances encompass a variety of
arrangements whereby two or more firms agree to pool their resources to pursue specific
market opportunities.

Reason for Inter Corporate Coordination:

The fierce competition in todays markets is led by advances in industrial technology,
increased globalization, tremendous improvements in information availability, plentiful
venture capital and creative business designs. In highly competitive markets, the simple
pursuit of market share is no longer sufficient to ensure profitability and thus, companies
focus on redefining their competitive space or profit zone.
1. Mass Customization: It is a new way of viewing competition for both manufacturing
and service industries, and mass customization and its core provides a tremendous
increase in variety and customization without sacrificing efficiency, effectiveness, or
low costs.
2. Globalization: Firms are competing in a global economy and thus, the unit of
business analysis is now the world, not just a country or region. According to Kotler,
As firms globalize, they realize that no matter how large they are, they lack the total
resources and requisites for success. Viewing the complete supply chain for
producing value they recognize the necessity of partnering with other organizations.
3. Time and Quality Based Competition: Mainly it focus on eliminating waste in the form
of time, effort, defective units and inventory in manufacturing distribution systems.
4. Advances in Technology: La Londe and Powers suggest that the most profound and
influential changes that directly influence companies are information technology and
communications. With the advent of modern computers and communications,
monolithic companies, which had become highly bureaucratic, started eroding.
5. Increasing Knowledge Intensity: In the new competitive landscape, knowledge is a
critical organizational resource and is increasingly a valuable source of competitive
advantage. Bringing together the knowledge and skills to serve the market effectively
requires coordination.

6. Changing Government Policies: Finally, government policy may encourage

cooperative strategies among firms.

Requisites of Inter Corporate Coordination:

There are several characteristics that must be in place before supply chain cooperative
behavior will take place:
1. Trust and Commitment: Morgan and Hunt propose that cooperation arises directly
from both trust and commitment. they propose that trust has two dimensions:
a. Honesty: It is the belief that a partner stands by its word, fulfills promised role
obligations and is sincere.
b. Benevolence: It is the belief that a partner is interested in the firms welfare and is
willing to accept short term dislocations and will not take unexpected actions that
have a negative impact on firm.
2. Cooperative Norms: It reflects the belief that both parties in a relationship must
combine their efforts and cooperate to be successful. In this context, one defined
cooperative norms as the the perception of the joint efforts of both the supplier and
distributor to achieve mutual and individual goals successfully. While refraining from
opportunistic actions. Cannon suggests measures of cooperative norms that should
be developed inside firms:
a. No matter who is at fault, problems are joint responsibilities
b. Both sides are concerned about the others profitability
c. One party will not take advantage of a strong bargaining position
d. Both sides are willing to make cooperative changes
e. One does not mind owing each other favors.
3. Inter Dependence: It has a positive impact on cooperation. Dependence of a firm
on its partner refers to the firms need to maintain a relationship with the partner to
achieve its goals.
4. Compatibility: Organizational compatibility is defined as having complementary goals
and objectives as well as similarity in operating philosophies and corporate cultures.
5. Managers Perceptions of Environmental Uncertainty: The development of alliances
which are many forms of inter firm cooperation, is positively associated with key
managers perceptions of environmental uncertainty. Managers perceived
environmental uncertainty is posited as a multidimensional construct.

6. Extendedness of a Relationship: Heide and Miner defines that it is the degree to

which the parties anticipate that the relationship will continue into the future with an
indeterminate end point.

Dimensions to Implement Inter Corporate Coordination:

1. One of a Few Partners for Each Major Item: A powerful means of enhancing the
likelihood of achieving cooperative action among firms is the selection of partners
based on some good predictors of relevant cooperative behaviors.
2. Reward Sharing: In a complex relationship in which performance is difficult to
measure profit or income sharing based on incentive schemes is an important
cooperation mechanism a win win approach to share the rewards of the business
between both parties is required.
3. Joint Improvement Driven by Mutual Interdependence: A joint effort is driven by a
desire to improve to improve supplier performance in all critical performance areas,
including cost reduction, quality improvement, delivery improvement, and supplier
design and production capabilities.
4. Existence of Conflict Resolution Mechanisms: Participating firms work together to
resolve disputes through mechanisms that support joint problem solving.
5. Open and Complete Exchange of Information: Participating firms practice an open
exchange of information. For example to minimize inventory in the supply chain,
information systems must be able to track and communicate production and
customer requirements at different levels in the chain.
6. Working Together of Firms to Adapt to a Changing Market place: Participating firms
maintain a credible commitment to work together during difficult times. For example
a buyer does not eliminate a supplier who experiences a short term production.
7. Active Involvement of the firms in Supply Chain Activities: Finally, participating firms
are deeply involved in supply chain activities.