Network Organization and Systems Competition: A Marketing Analysis

• Author: Gregory T. Gundlach,Ravi S. Achrol
• DOI: 10.1177/0003603X1405900403
• Published date: 01 December 2014
• Date: 01 December 2014
• Subject Matter: Article

THE ANTITRUST BUL L E T I N :Vol. 59, N o. 4/Winte r 2014 :743

Network organization and systems

competition: A marketing analysis

BYRAVI S. ACHROL*AND GR EGORY T. GUNDLA CH**

Network organization and systems competition challenge

competition policy and antitrust law. Networks can be powerful

engines of marketing and innovation, but they can also function in

ways that raise competition questions and antitrust concerns.

Drawing on the marketing literature, the authors explain the nature

and competitive behavior of firms operating in and competing

through networks. Key questions for u nderstanding and analyzing

marke ting n etwor ks in co mpeti tion po licy a nd anti trus t law are

dis cus sed . The a rti cle a dds m ark et ing i nsi ght s to th e gro win g

dialogue o n network f orms of busi ness organi zation and s ystems

competition. It also demonstrates the benefits of including

knowledge fro m marketing a nd related disc iplines in com petition

policy and antitrust analysis.

KEY WORDS:networks, network organization, systems competition, market-

ing, distribution, vertical marketing systems, business ecosystems

I was once in the habit of telling pupilsthat firms might be envisaged as islands of

planned coordination in a sea of market relations. This now seems to me a highly

misleading account of the way in which industry is in fact organised . . . . Firms

are not islands but arelinked together in patterns of cooperation and affiliation.1

© 2014by Federal Legal Publications, Inc.

* Profe ssor of Ma rketi ng Sc ienc e and Inte rim Ass ocia te De an fo r

Research & Doctoral Studies, The George WashingtonUniversity.

** Coggin Distinguished Professor of Marketing, University of North

Florida and Senior Research Fellow,American Antitrust Institute.

1G.B. Richardson, The Organisation of Industry,82 ECON.J.883, 895 (1972).

I. INTRODUCTION

Competiti on is a fundamental tenet o f antitrust . However, as cap-

tured above by Richardson, understanding of competition has come a

long way s ince Adam Smith’s concept ion of lai ssez fai re.2Due to

infor matio n techn ology, globalization , and oth er fact ors, ma rket-

media ted rel atio ns amon g inde pendent fir ms hav e given w ay to

exchanges that are sub stantia lly more com plex in nature. Modern

commercial exchanges are increasingly negotiated and coordinated

among a large number of interdependent participants and structured

based upon a longer-term, as opposed to transactional, view.A grow-

ing theme in competition policy and antitrust involves the dilemmas

posed by the new types of exchange and the forms of business organ-

ization through which they are conducted. Particular interest and

questions surround network organization and systems competition.3

In their most basic form networks are interorganizational exten-

sions of the classic manufacturing firm across its vertical market (that

is, distribution) interfaces.4Participating firms are organized under

agreed-upon terms of exchange and act in a coordinated and longer-

744 :THE ANT I T R U S T BULLETIN:Vol. 59, No. 4/Winter 2014

2ADAM SMITH, ANINQUIRY INTO THE NATURE AND CAUSES OF THE WEALTH

OF NATIONS (1776).

3Gregory T. Gundlach & Diana Moss, Symposium: New Perspectives on

Systems Competition, 56 ANTITRUST BULL. 1 (2011).

4See Ravi S. Achrol, Evolution of the Marketing Organization: New Forms

for Dynamic Environments, 55 J. MARKETING 77 (1991); Ravi S. Achrol, Changes

in the Theory of Interorganizational Relations in Marketing: Toward a Network Par-

adigm, 25 J. ACAD.MARKETING SCI. 56 (1997); Ravi S. Achrol & Philip Kotler,

Marketing in the Network Economy, 63 J. MARKETING 146 (1999); Ian Wilkinson,

A History of Network and Channels Thinking in Marketing in the 20th Century, 9

AUSTRALASIAN MARKETING J. 23 (2001); James C. Anderson, Hakansson Hakan

& Jan Johanson, Dyadic Business Relationships Within a Business Network Con-

text, 58 J. MARKETING 1 (1994); Robert Dahlstrom & F. Robert Dwyer, The Polit-

ical Economy of Distribution Systems: Network Perspectives and Propositions, 2 J.

MARKETING CHANNELS 29 (1993); Geoff Easton, Methodology and Industrial Net-

works in Business Marketing: An Interaction and Network Perspective,in.), BUSI-

NESS MARKETING: ANINTERACTION AND NETWORK PERSPECTIVE 411 (Kri stian

Moller & David Wilson eds., 1995); H.B. Thorelli, Networks: Between Markets

and Hierarchies,7STRATEGIC MANAGEMENT J. 37 (1986); Fred E. Webster, Jr., The

Changing Role of Marketing in the Corporation, 56 J. MARKETING 1 (1992).