Purpose of exchange: single transaction versus long-term relationship |
Nature of communication: anonymous versus firm to firm |
Formality of exchange: formal versus informal |
Type of contract: classic (closed) versus relational (open) |
Long-term relations exist between retailers and suppliers. Increasingly, the relation is formalized into written contracts (especially in the case of new market concepts). Objective of these contracts is to guarantee a (preferably flexible) supply of pork meat for the retailer, and for the slaughterhouse to guarantee a constant demand for its products. |
Firm-to-firm communication. Stipulation of (contract and/or supply) conditions are determined at high levels within each type of organization. |
Relations between slaughterhouses and retailers are strictly formal and contractual. | Contracts are closed, specifying strict (quality) requirements, and penalties in case of non-compliance, etc. |
Retail actions, like price reductions or seasonal stunts, make it more difficult for slaughterhouses to obtain value from all parts of the pig. This is because only for specific parts of the pig amount and price are set, while the remaining parts of the pig still need to be sold at fair prices also. Because of pressure on the amount to be delivered and on delivery time and price, pressure is put on selling the remaining parts of the pig. A balanced profit is difficult to achieve in this case.