A competitive supply chain in the market can be characterized by efficient use of resources leading to lower product cost, a better quality of the product, faster response time and eventually higher market share (Storey et al., 2016). Core competencies create strong competitive advantages that apply to business development in the long run (Hoskisson et al., 2018). Any enterprise or company possesses resources and capabilities that are essential to compete favorably in the market (Ruivo et al., 2015).
2.2.2. The Network Perspective Theory (NT)
A firm’s performance depends on how well it cooperates with its direct partners and how well these partners cooperate with its direct partners in a collaborative-relationships (Li et al., 2015). The continuous interaction with key partners becomes important in developing new resources (Li et al., 2015). The value of the resource depends on its combination with other resources, which is the reason why inter-organizational ties may become more important than the mere possession of resources (Cavusgil & Knight, 2015).
The Network Theory (NT) contributes to an understanding of inter-organizational relations by emphasizing the importance of building trust through positive long-term cooperative relations (Li et al., 2015). When the firm has access to the network, it should expand its knowledge about it by learning of its current activities carried out in the network (Oparaocha, 2015). The main message in the network view is that collaboration and cooperation is more efficient than competition for a company’s development (Oparaocha, 2015).
In NT, the focus has been on developing long-term, trust-based relationships between the supply chain members (Kwahk & Park, 2016). Some of the issues include coordination, joint decision making, communication and management roles in the supply networks (Oparaocha, 2015). For companies to enhance their performance they need to be successful in their supply chain collaboration, including sharing risks, exchanging information, and sharing their resources to achieve common goals (Li et al., 2015).
2.2.3. Stakeholder Theory
Different researchers have given different definition of who stakeholder is (Jones et al., 2018; Miles, 2017). However, most studies have adopted the definition by Freeman who defined stakeholder as an individual or group affected by commercial activities of a company such as the supplier (Freeman, 2015). The theory argues that apart from shareholders of a company, there are also other parties involved including the government, trade associations, trade unions, communities, financial institutions, suppliers, employees and customers (Freeman, 2015).
For a business to create as much value as possible for its stakeholders, it must then keep the interests of suppliers being aligned and going in the same direction (Andriof & Waddock, 2017). A supplier is key to performance of any company (Miles, 2017) and businesses need to consider more than just maximizing profits but doing the right thing to its key suppliers for it is always a right thing for the business and more so, financially (Freeman, 2015).
According to (Jones et al., 2018), the performance consequences of ethical relationships with stakeholders, characterized with trust, cooperation and information sharing, leads to close relationship capability which is valuable and a potential source of sustainable competitive advantage. Managing supplier relationships will mean less risk for customers in terms of cost and enhancing timely delivery (Andriof & Waddock, 2017). Also there is a better guarantee of a company not running out of stock and enhanced supply chain visibility (Jones et al., 2018).