Alexandra Waterworth CMGT 500 ETSY and
WorkingPoint: MAKING SOME MOVES:
For this
week’s article, I read a blog about the homemade- crafts online, retail giant
Etsy, making a partnership with the online small-business management software
company, WorkingPoint. I thought this was an interesting article not only
because I am an Etsy fan but also because I thought this was a great example of
a business partnership. The main reason for this Partnership was that Etsy ‘s account
holders could utilize WorkingPoint tools, such as invoicing, bookkeeping, and
expense-management tools by simultaneously signing into both accounts: “If you already have both a WorkingPoint
and Etsy account, you can link your existing shop with WorkingPoint and import
your item listings and orders. The upshot of this is that you will no longer
have to enter your sales in two places, giving you more time to focus on the
tasks you love to do. . . To get started simply: Log into your WorkingPoint
account. Then, from the home-page dashboard, locate the Etsy Integration widget
and click “Connect your Etsy account” (WorkingPoint p.1).
The material from our readings
indicates that since this is a new partnership, and these are not huge
corporations, it took a lot of trust on the parts of both businesses to make
the partnership successful. The article does not provide the stipulations of
the agreement between Etsy and Working Point but I believe that it could be
classified as a “Weak form of Trust”; that the alliance and does not provide
either organization with a venerability that could affect the profit and/or
reputation of either company: “One reason that
exchange partners can have the mutual confidence that others will not exploit
their vulnerabilities is that they have no significant vulnerabilities, at
least in a particular exchange. If there are no vulnerabilities, from adverse
selection, moral hazard, hold-up, or other sources, then the trustworthiness of
exchange partners will be high, and trust will be the norm in the exchange”(Barney
and Hansen p.177). This idea would make sense because Etsy is a website that is
growing with people selling their homemade goods, and Working point can be used
by those retailers on Estsy to promote their products. Etsy is a one-stop-shop
for retailers and easily conduct business transactions. There is no inherent
risk to either business.
Having said that this is a partnership that only requires a “Weak form of
Trust,” the degree this trust should not undermine the power of this joint
venture. In this situation, the shared objective in the joint venture is to
increase accessibility to business tools for Etsy users: “At mid-range joint
ventures, companies pursue an opportunity that needs a capability from each of
them-the technology of one and the market access of the other, for example. The
joint venture might operate independently or [in the case do Esty and
Workpoint] might link the partners operations (Kanter, 98). Each partnership is
different, and each type of alliance/venture should be handled with different
amounts and types of trust, but also both businesses have a mutual respect for
each other and a confidence in each other’s joint venture.
In the theoretical sense, there are many reasons
why a company might join a partnership. It would be interesting to learn why
Etsy and WorkingPoint chose to partner. For example, “Kogut (1988a) highlighted
three main motivations which are broadly applicable to other types of alliances
as well: transaction costs resulting from small numbers bargaining, strategic
behavior that leads firms to try to enhance their competitive positioning or
market power, and a quest for organizational knowledge or learning that results
when one or both partners want to acquire some critical knowledge from the
other or one partner wants to maintain its capability while seeking another
firm’s knowledge” (Gulati p. 298). If I had to speculate about the motivations
behind this partnership, The reasons may be that a combination of increasing
transaction costs and enhancement of market power prove attractive to the
companies. These motives for partnership of the two businesses illustrate a
specific business management program (WorkingPoint), it expands Etsy’s appeal
for serving craft retailers; WorkingPoint will be attached to the ETSY name
recognition, and thus, it creates a hard to beat position in the online world
of selling handmade products.
References:
Barney &
Hansen, (1994). "Trustworthiness as a Source of Competitive
Advantage."
Strategic Management Journal, Vol. 15, pp. 175-190.
Kanter, R.
(2010). "Collaborative Advantage: The Art of Alliances."Harvard
Business Review. pp. 1-16.
Working
Point Team. (2012) . WorkingPoint.com. Etsy and
WorkingPoint: A Winning Team. Retrieved from: http://www.workingpoint.com/blog/etsy-and-workingpoint-a-winning-team/6818
Interesting post. According to Barney & Hansen (1994), weak form trust "does not depend on the erection of contractual or other forms of exchange governance." (177) Based on what you know about the Etsy/Working Point partnership, what is it that leads you to believe this is a relationship governed by weak form trust? The authors also note that weak form trust usually isn't a source of competitive advantage? Do you think Etsy/Working Point partnership will serve as a source of competitive advantage for these partners? Why or why not?
ReplyDeleteHello Dr. Neff,
ReplyDeleteI think that this agreement between Etsy and working point is a "Weak form of Trust" because based upon the contractual information that was given in this particular article (which was not much)I concluded that there was underlying "risk" involved in the partnership. Both had great reputations and both companies also hed very different services that they provide; therefore, I assumed and concluded that on the surface it did not require a more extensive form of trust. The quote below lead me to believe this about the Etsy/Working Point partnership:
" One reason that exchange partners can have the mutual confidence that others will not exploit their vulnerabilities is that they have no significant vulnerabilities, at least in a particular exchange. If there are no vulnerabilities, from adverse selection, moral hazard, hold-up, or other sources, then the trustworthiness of exchange partners will be high, and trust will be the norm in the exchange”(Barney and Hansen p.177)."
I see your point about how this may be a higher form of trust since there are no appearent vulnerabilities, but I guess I veiwed this alliance as more of a "casual" situation (could be due to lack of information in the article), it could possibly have alot of "loop holes" threfore a weak form of trust would be plausible. Either way I think I would have liked more information so I wouldnt make assumptions, more information on the part of the article is prpbably needed so I could have made a more accurate assment on that point.
Hi Alexandra- They didn't give you enough info in the article but I would speculate that the underlying risk/vulnerability is that Working Point could irreparably damage Etsy brand because of the transactional sales and bookkeeping functions. Both Etsy, vendors selling on Etsy and customers are affected- sales are lost and if Working Point software fails or the transaction isn't smooth. Etsy is not only risking it's relationship to those who sell on Etsy but the downstream customer. In addition, there's transactional costs from entering and exiting the partnership- it would be extremely difficult for both parties to extract themselves from alliance without losing sales.-Milissa
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