The value of trading relationships between buyers and sellers of wine grapes in Australia

Abstract

The following dissertation uses an exploratory and confirmatory approach to explain relationship value within the grape and wine industry in Australia. Specifically, the research develops and empirically captures and compares buyers’ and sellers’ perceptions pertaining to relationship value. A three phase model was developed from a comprehensive literature review and further enriched through a qualitative field study involving sixteen in-depth interviews with wineries and their grape suppliers in Western Australia. The hypothesised structural equation models were tested using data gathered from a comprehensive survey of 175 wineries and 400 wine grape suppliers located in South Australia, Victoria, New South Wales and Western Australia. Research findings highlight the similarities and differences in relationship value antecedents and outcomes for wineries and grape suppliers. In Phase One, it was evident from the working relationships studied that partner attributes included in the model – conflict resolution, communication, performance satisfaction, trust and cooperation - all made an important contribution towards the realisation of relationship value for both parties. A restrained use of power was found to be critical to avoid a reduction in the ability to resolve conflict, the level of performance satisfaction and trust in the relationship.In Phase Two, profitability benefits were shown to be the strongest predictors of relationship value, whilst the realisation of market and scout benefits strongly assisted firms to innovate. Perceptions of relationship costs were comparatively low for both customers and suppliers. The results of the Phase Three model provide rare empirical evidence which showed that while both parties share these same key relational antecedents and value outcomes (profitability benefits, innovation and market/scout benefits and relationship costs), the means by which relationship value is conferred was significantly different. For customers, satisfaction with a supplier’s performance enhanced perceptions of the value of that relationship due to the potential to increase profitability. Also, customer perceptions of relationship value increased through trust and cooperation. In contrast, suppliers in a trusting and cooperative relationship with a customer have the opportunity to increase the value of their relationships to the extent that they are willing to innovate to build strategic position, reduce costs and improve quality to increase profitability. Cluster analysis revealed there were those firms with a high relational orientation and others with a low relational orientation within both winery and grape supplier groups. Specifically, those wineries and grape suppliers with higher levels of conflict resolution, communication, performance satisfaction, trust and cooperation had corresponding higher levels of relationship value.