In a typical retailer-manufacturer outsourcing relationship, retailers are gaining greater control over strategic activities and locus of power, which were formerly the remit of manufacturers. Given the diversity of different cultures (Hofstede, 1980), channel behavior is expected to be different in different countries. Understanding the concept of power merely from a western perspective may not be relevant for developing countries like India. Also, very few studies conducted in India have focused on supplier-buyer relationships post economic liberalization that was initiated in the early 1990s. The objective of this study is to propose and test an effective conceptual model using power sources and selected behavioral constructs (satisfaction, trust, cooperation, switching costs, and commitment). The research is based on primary data collected from 230 respondents representing 128 apparel manufacturing units. The results of the study show that mere economic satisfaction with reference to monetary benefits to the Indian manufacturer will not alone be sufficient to develop trust in relationship. Economic and non-economic satisfaction factors positively influence cooperation and trust in the apparel retailer manufacturer relationship. Therefore, it is suggested that the retailers who are engaged with manufacturers for direct outsourcing must focus on trust and cooperation and benefit mutually.

By the year 2015, apparel sales in India, according to a Mckinsey Report (2010), is expected to reach $55 bn. In India, apparel is the second largest retail category (behind food and groceries), representing approximately 10% of the total market. Looking at the sheer potential of this market, a number of players—national as well as international—wish to make their mark felt in India. On the other hand, there is increased pressure on retail firms to improve quality, delivery performance and responsiveness while having a tight control on costs. As a response to these challenges, retail firms are exploring ways to leverage their supply chains by increased outsourcing of activities that are not related to their core activity. Speaking positively, these changes must lead to sustainable improvements in product quality and innovation, enhanced competitiveness and increased market share. Literature supports the view that apparel retailers are gaining greater control over strategic activities, which were formerly the remit of manufacturers.

El Ansary (1979) outlined a four-way classification of studying marketing channel, channel coordination and channel performance: structural, behavioral, environmental and managerial perspectives. One of the more important debates to emerge from the managerial/behaviorist approach is the issue of power and its relationship with important aspects of a long-term relationship between channel, that is, cooperation, switching costs, trust, long-term orientation and commitment.

Business Strategy, Journal, Manufacturers, Retailers, Power and Its Behavioral Consequences, Retailer-Manufacturer, Outsourcing, Relationship, Research Framework, Conceptual Framework, Hypotheses, Satisfaction and Power.