Professional Documents
Culture Documents
b2b e Commerce
b2b e Commerce
MASTER'S THESIS
B2B E-Commerce
Attributes and adoption
Bijan Khiabani
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4.3.1. Description of three different relationships.................................................... 91
4.3.2. Ranking three sample relationships with PROMETHEE in current B2B
relationship situation........................................................................................................ 95
4.3.3. Ranking each relationship with B2B e-commerce impacts on attributes
with PROMETHEE ............................................................................................................. 97
Chapter Five .......................................................................................................................... 100
Discussion, conclusions and further researches................................................................... 100
5. Discussion, conclusions and further researches ....................................................... 100
5.1. Discussions................................................................................................................ 100
5.1.1. What attributes are important to users in assessing relationships?......... 100
5.1.2. How do these attributes vary in importance?............................................... 101
5.1.3. How B2B e-commerce adoption is going to impact the each attribute in
the same set of attributes? ............................................................................................ 101
5.2. Conclusions ............................................................................................................... 102
5.3. Further researches .................................................................................................... 103
5.4. Recommendation to firms.......................................................................................... 104
References ............................................................................................................................ 106
Appendix................................................................................................................................ 110
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List of Figures
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List of Tables
TABLE 1: ESTIMATED SAVINGS FROM B2B E-COMMERCE .........................................................................9
TABLE 2: EVOLUTION IN RELATIONSHIPS ................................................................................................52
TTABLE 3: ATTRIBUTES OF B2B RELATIONSHIPS ....................................................................................54
TABLE 4: RESEARCH STRATEGIES............................................................................................................64
TABLE 5: DATA COLLECTION METHODS ...................................................................................................65
TABLE 6: MEAN, STANDARD DEVIATION AND MEDIAN OF ATTRIBUTES ...................................................84
TABLE 7:CORRELATIONSHIP BETWEEN ATTRIBUTES ...............................................................................86
TABLE 8:ASSESSMENT OF ATTRIBUTES IN THE SCALE OF 1 TO 100 ..........................................................86
TABLE 9:WEIGHT OF ATTRIBUTES ...........................................................................................................87
TABLE 10: MEAN, STANDARD DEVIATION AND MEDIAN OF ATTRIBUTES, AFTER E-COMMERCE ...............88
TABLE 11:WEIGHT OF ATTRIBUTES .........................................................................................................89
TABLE 12:COMPARISON OF WEIGHTS ......................................................................................................89
TABLE 13:APPROPRIATE CRITERION FUNCTIONS .....................................................................................90
TABLE 14:THRESHOLD SETTINGS OF ATTRIBUTES, GUASSIAN .................................................................91
TABLE 15:THRESHOLD SETTINGS OF ATTRIBUTES, LINEAR ......................................................................91
TABLE 16:ASSESSMENT OF SAMPLE RELATIONSHIPS ...............................................................................92
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ABSTRACT
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CHAPTER ONE
INTRODUCTION
1. Introduction
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1. A communication perspective - the delivery of information, product /
service or payment by electronic means.
By most measures, barely over a decade old, the Internet is having a profound
impact on every aspect of business marketing practice. Enterprises are competing
based on relationships, not just the basic products and services buyers have essentially
come to expect (Kanter 1994) and most commerce on the Internet remains business-
to-business (Reibstein, 2000). A Forrester report estimates a rapid growth, from half a
trillion dollar in 2000 to anywhere between 3 to 6 trillion dollar by 2005 (Sostorm,
2001). Forrester also forecasts that by the end of 2004 almost 80% of the global e-
commerce is in the form of B2B e-commerce.
8
the costs of integrating customers and their suppliers and through electronic networks
companies can achieve integration by tightly coupling processes at the interfaces
between each stage of the value chain. Table 1 shows an estimation of savings in
different industries in Europe (Timmers, 2000).
Source: EDIRA, 30 October 2000, Brussels, Paul Timmers, European Commission, Information Society
• Cost saving
• Improved efficiency
• Control
9
inflexible, rigid and therefore limited to largest sellers and buyers. The second, one-
to-many interactions, was epitomized by Dell and Cisco selling directly to buyers.
Consequently, anyone could transact with the company. The third generation saw the
advent of many-to-many pubic marketplaces or “hubs” like Transora or Covisint
connecting sellers and buyers, while the fourth brought the advent of private
networks, facilitating buy-side and sell-side interactions with strategic suppliers and
channel partners.
10
Figure 1: Stages of e-commerce adoption
The geographical territory for this study is Iran and all of the data is collected
within Iranian decision makers. The main reasons for that are 1) low growth rate of e-
11
commerce, both forms of B2B and B2C, in a developing country like Iran and 2) the
immature formation of supply chains in Iran.
On the other hand due to the lack of competition, external pressures are hardly
pressurizing businesses to adopt B2B e-commerce, as it is an important motivation for
some other countries. In the other words, B2B e-commerce adoption seems to be an
autonomous decision to be made by businesses in the lack of external and internal
pressures.
On the other hand, if firms identify the positive impacts of adoption of B2B e-
commerce there will be internal stimuli for adopting it. It also helps firms to better
prioritize their deployment plans for B2B e-commerce adoption according to the
attributes of their relationships and the expected impacts of adoption of B2B e-
commerce on these attributes.
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1.6. Research questions
This thesis consists of five different chapters. The first chapter introduces the
reader to the subject and gives an understanding of what will be researched. Then the
literature review will presents the findings in other researches by different authors. In
the third chapter, the research used for this research will be outlined. This will be
followed by presentation of data and analysis in chapter four. Finally the conclusions
drawn, the recommendations and the future researches suggestions will be covered in
chapter five.
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CHAPTER TWO
LITERATURE REVIEW
2.1. E-commerce
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There are two broad categories of e-commerce buyers: consumers and
businesses (Assael, 1998; Peter and Olson, 1996; Bonoma and Zaltman, 1978; Vasu,
Stewart, and Garson, 1998). One simplified definition of Business-to-Business (B2B)
and Business-to-Consumer (B2C) can be as follows: B2B covers the flow of products
from suppliers to manufacturers to wholesalers to retailers, while B2C covers the flow
of products from the retailers to the end customers.
15
institutions to manufacturers, retailers and others in the service sector. Electronic data
interchange (EDI) is important component of B2B e-commerce. EDI is the electronic
transmission of information and documents such as invoices or purchase orders
between computer systems in different organizations based on a standard, structure
and machine-retrievable format (Emmelhainz, 1993). The use of EDI has the natural
effect of increasing interorganisational co-ordination activities, as well as increasing
the integration that occurs between supply chain members (Hill and Scudder, 2002).
However, a line of research that has received little attention in the literature of EDI is
the influence that the company's level of co-operation in the supply chain has on the
adoption/use of EDI, and the relationship between the use of EDI and the co-
ordination activities of the supply chain members. Despite the fact that EDI was really
one of the two foundation blocks for electronic commerce at the business-to-business
level (the other was electronic payments), its diffusion rate has been disappointingly
slow (Angeles, 2000). EDI was generally limited to large corporations. 95% of
Fortune 1000 firms have implemented EDI. Only 2% of the remaining 6 million
businesses, including both hubs (i.e. firms initiating the EDI network) and spokes (i.e.
firms responding to the hubs' efforts) in the U.S. have done so (Densmore 1998)
Though the largest firms have aggressively encouraged EDI adoption, they have, on
average, been able to motivate only 20% of their partners to adopt. The remainder
often comprised of small- and medium sized enterprises (SMEs), have resisted
adopting EDI for reasons that are not fully understood (Bouchard 1993, Hart and
Saunders 1997). Barriers to its widespread acceptance and usage were due to cost,
demanding technical requirements (with specific data formats such as EDIFACT or
X12), and the control exercised by individual providers over the value-added
networks on which it is based (Angeles, 2000).
Internet EDI also allows the automation of the entire supply chain (i.e. the
synchronization of the demand, supply, and production from the raw material supplier
to the ultimate product consumer) and extends the boundaries of intranets so that they
may transform themselves into extranets. Intranets are closed-loop networks involving
only the internal organizations and personnel of a corporate entity. Extranets go
beyond the intranet boundaries by including customers, suppliers, and other strategic
partners as well. The Internet is addressing the weakest link in supply chain
management: information sharing and timely communication across systems (White,
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1996). Covered in this network of activities are business-to-business, business-to-
supplier, business-to-customer, business-to-payment system, and business-to-
fulfillment system transactions (Baum, 1997b). The Internet has the potential to
accomplish a key goal of supply chain management, which is to cut "cycle time", not
in incremental steps, but in broad swaths, by completely cutting out queue time, move
time, and other aspects of costs and waste. The Internet broadcasts simultaneously and
not serially to all points in the supply chain, thus speeding up coordination among
trading partners directly involved in specific transactions (White, 1996). The Internet
also expands a company's universe of potential trading partners to all firms
conducting business via the Net and there is great ease in adding or subtracting
trading partners in real time (Mohta, 1997; Smith, 1996). The usual requirements in
setting up such partnerships are an agreement among trading partners on the nature of
the information to be exchanged, the business procedures to be followed, technical
arrangements governing the transactions, certification authority for users, and the
means of securing both the platform and applications (Mohta, 1997; Smith, 1996).
EDI is expected to be the default standard for the corporate extranet (Tucker, 1997).
2.3. E-marketplaces
In the area of supply chain management, much attention has been focused on
e-marketplaces and their potential benefit to an organization's supply chain
capabilities. However, many e-marketplaces have failed to deliver on promises that
were made. Although they have been well publicized and promoted, most e-
marketplaces have not able to attract the numbers of buyers and sellers that their
business model required. A Forrester Research report predicted that of the 1,000-plus
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exchanges that were in existence in 2000, only about 180 would survive until 2003
(Kafka et al., 2000).
In an e-marketplace, buyers and sellers are brought together for the purposes
of information exchange, the buying and selling of products and services, and
financial transactions. All of these exchanges take place through a Web site instead of
a physical space. These e-marketplaces result in benefits for both buyers and sellers.
There are several criteria for classifying e-marketplaces. Laudon and Traver
(2002), for example, offered a classification based on business functionality. An e-
marketplace can either provide indirect goods that support the production process or
the direct goods used in production. The way the buying process occurs can also fall
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into two categories: long-term contractual buying between two entities, or a one-time
(spot) purchase with no long-term relationship between the two parties. Based on
these two criteria, Laudon and Traver (2002) classified e-marketplaces into four
categories, as shown in Figure 2. These categories are not mutually exclusive, and an
e-marketplace may fall into more than one class. Direct materials are purchased in
"vertical" e-marketplaces, and indirect materials are purchased in "horizontal" e-
marketplaces. The chemical site Chemdex and the electronics component industry
exchange e2open are good examples of vertical e-marketplaces, while MRO.com and
Bizbuyer.com are horizontal e-marketplaces. The setting up of an e-marketplace
requires buy-side procurement capabilities, sell-side electronic commerce and order
management capabilities, and a centralized portal or network. Most e-marketplaces
were driven first by the implementation of a buy-side e-procurement solution by
buying organizations. So although a buy-side procurement application is essential for
an e-marketplace, sell-side electronic commerce and order management functionality
is equally important. It is important for buyers who are looking to turn their internal e-
procurement implementations into revenue-generating opportunities as well as for
suppliers who are looking to connect with the various emerging e-marketplaces.
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Figure 3: E-marketplace architecture
Although taking supply chains online can reap significant benefits, there are
some executives who are still reluctant to embrace e-marketplaces fully. Their reasons
for this choice are well warranted, and more often than not reflect a general concern
for security, as well as other relevant concerns. Additionally, confidentiality is an
enormous issue even among those who have embraced the movement because of the
fears of competitors gaining access to highly confidential, business-critical and
company-specific information. Companies are also concerned about sharing sensitive
data such as engineering information, demand forecasts and production schedules.
20
Other e-marketplace concerns deal with industry-wide standards. Agreements
on items like common supplier qualification criteria, consistent item coding schemes
and XML-based integration guidelines need to be established to ensure quick and easy
use of these e-marketplaces. The integration of a company's systems with an e-
marketplace is also an area of major concern. Because of the uncertainty of the future
of many e-marketplaces, integration is a very risky endeavor. Statistics show that
there will be a sharp decline in the number of e-marketplaces within each industry,
and there could be a tremendously negative impact on a company if it chooses to
integrate with an endangered e-marketplace. The most difficult part for both buyers
and sellers is identifying which e-marketplaces are most endangered. Using
integration brokers will eliminate this risk and increase a company's chances of
selecting the appropriate e-marketplace. Among the major challenges, those related to
antitrust, technological integration and security warrant special consideration.
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innovation diffusion theory to predict intent to adopt financial EDI in Singapore.
Their findings show that complexity is a strong inhibitor of intent to adopt, as is their
measure of the perceived risks of adopting.
22
not adopted EDI: (i) proactive technological organization, (ii) internal push, (iii)
market assessment, (iv) competitive need, and (v) impediments. Reich and Benbasat
(1990) examined the adoption of customer-oriented strategic systems, finding that
adoption was related to customer awareness of need and support. Rogers (1995)
examines the factors leading to organizational innovativeness, which include, among
others, organizational slack and size. (Because this model focuses on the overall
innovativeness of an organization—i.e., the process approach to innovation—rather
than the adoption of a particular technology, it does not provide a testable model of
EDI adoption.) The size and slack factors are one possible explanation for the greater
rate of EDI adoption among very large (e.g., Fortune 1000) firms, as organization size
has consistently been recognized as a driver of organizational innovation
(Damanpour, 1992).
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EDI. They find that perceived costs reduce intent to adopt as does, somewhat
surprisingly, trust. Bouchard (1993) found that DOI factors were insignificant in the
EDI adoption decision, whereas the use or requirement of EDI by major business
partners were the key drivers of the adoption decision. Premkumar and
Ramamurthy (1995) found that the technological factor internal need (akin to
perceived benefits) and the organizational factor top-management support, as well as
the interorganizational factors competitive pressure and exercised power, influence
whether a firm’s EDI adoption decisions proactive or reactive. Iacovou et al. (1995)
hypothesized a model that includes three factors as determinants of EDI adoption and
impact in SMEs: perceived benefits (technological), organizational readiness
(organizational), and external pressure (interorganizational). Premkumar et al. (1997)
examined EDI adoption in the European trucking industry, finding that firm size and
top-management support (organizational factors), as well as competitive pressure and
customer support (interorganizational), were significant in predicting adoption of
EDI. Hart and Saunders (1997) developed a theoretical framework, positing relative
power and trust between trading partners as determinants of EDI adoption and usage.
This framework was illustrated with the case study of an office supplies retailer. Hart
and Saunders (1998) examine the impact of customer power and supplier trust on the
use of EDI (transaction volume) and diversity of EDI (number of transaction sets) for
the customers of two firms (an office supplies retailer and a chemical company). Their
overall empirical findings are mixed, showing that: (i) increased supplier trust leads to
increased diversity of EDI use; and (ii) increased customer power leads to reduced
diversity of EDI use (opposite to hypothesized effect).
The factors influencing the integration of EDI within adopter firms and the
subsequent impact has been studied in the motor carrier industry (Ramamurthy et al.
1999). Both technological/organizational factors (internal support, EDI’s benefits
potential, EDI-compatibility, and resource intensity) as well as interorganizational
factors (customer support and competitive pressure) were shown to influence EDI
integration. Crook and Kumar (1998) examined EDI use in four diverse industries,
using a grounded theory approach to explain types of use in different contexts,
strategies for encouraging EDI, and its consequences. They derived a model that
includes factors that are part of perceived benefits, external pressure, and readiness as
described in the Iacovou et al. (1995) model.
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EDI has also been studied using the perspective of microeconomics, and some
of this work has provided direct estimates of the financial impact of adopting EDI
(see, for example, Mukhopadhyay 1993, Wang and Seidmann 1995, Mukhopadhyay
et al. 1995, Barua and Lee 1997). A framework of interorganizational coordination by
Bensaou and Venkatraman (1996) posits that “performance” is determined by the
degree of fit between the information-processing needs and information-processing
capabilities of an organization.
More recently, Son et al. (1999) use transaction cost theory and social cost
theory to propose a model of the extent of EDI use, defined as volume and diversity of
transactions, between trading partners that have already adopted EDI. Factors
hypothesized to influence EDI use are asset specificity, uncertainty, reciprocal
investments, trust, and power. In summary, the adoption of EDI has been studied
using several approaches and operationalizations.
Currently, there are a number of overlapping, divergent models that have been
shown to partially explain the EDI adoption decision by examining different factors.
These factors can be categorized as addressing three levels: the technological, the
organizational, and the interorganizational. While each has contributed to the
cumulative knowledge of researchers, and explained a part of the adoption decision,
no single study has tested a model of EDI adoption that incorporates constructs that
comprehensively address all three.
Shaw (2000) has noted that security and access privilege are two important
issues in implementing Internet and extranet technologies in supply chains. In this
regard, Warren and Hutchinson (2000) have stressed the need of trust and security
aspects when using IT in supply chains. To counter security problems, many
researchers (Bender, 2000; Kilpatrick and Factor, 2000; LaLonde, 2000) have stressed
25
the need for a reliable IT infrastructure in supply chains. Forge (1994) has stated that
low-cost and high-power computing techniques will catalyze new thinking about the
core business processes of the value chain.
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2.6. E-Readiness
27
processes, IT applications (customer orientation, supplier orientation and internal
orientation), and systems integration.
Larsen, Tonge, and Roberts (2001) posit that a proper implementation plan is
the key factor for successfully implementing e-business. A good plan should cover the
following important aspects: the identification of the opportunities for e-business, the
identification of the weaknesses in current information systems (IS) applications,
working out an effective e-business budget, monitoring an e-business project,
evaluating e-business investment, analyzing e-business trends within the industry and
the identification of e-business skills training and development. The e-business
implementation plan is an indispensable part of a company’s e-business development
strategy.
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Four readiness models used commercially were found. They were developed
by:
5. Harvard University
6. Cisco
7. MIT
8. PricewaterhouseCoopers
• The e-readiness assessment models are proposed mainly based upon the
e-business experience in developed rather than developing countries. An e-business
model in a developed country may not be directly applicable to a developing country.
Huang et. Al. (2000) proposed a new e-business assessment model that
addresses the two major limitations of the prior models for developing countries.
(Figure 4 and figure 5)
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Figure 4: e-readiness assessment framework
30
over time of strong bonds based on trust with the aim of securing a “win” for both
supplier and buyer (Tucker and Jones, 2000; Ford et al., 2002).
A partnership approach will not be appropriate in every situation, and the buy
class framework developed by Robinson et al. (1967) still helps to determine the type
of buyer-supplier relationship that is likely to be most suitable. The strategic
significance of the item being purchased (straight rebuy, modified rebuy or new task)
influences the nature of the relationship, as well as the original make vs. buy decision.
Hence frequent purchases at the center of a firm’s operations may call for a
partnership approach, whereas single purchases of low value items in plentiful supply
may be viewed as an adversarial opportunity (Iyer, 1996).
31
Adversarial relationships involve contractual and competence trust, whereas
goodwill trust is more likely to develop in the partnership approach (Tucker and
Jones, 2000).
Works in this area can be classified into three groups, based upon differences
in the relation between the organization and its environment as proposed by Van de
Ven et al. (1975). It is also possible to classify marketing literature along similar lines,
again depending on the perspective of researchers when dealing with organization–
environmental relationships. Sweeney (1972) presented such a categorization of the
marketing literature. In this chapter inter-organizational literature and the marketing
literature will be considered in parallel according to IMP group project (1982).
32
seller by buying or not buying. The selling firm is the active partner in the buyer–
seller relationship. Further, this relationship is largely seen to be between the seller,
and some generic `market', rather than with individual customers.' It is worth noting at
this stage that a side effect of this approach to the study of marketing has been that the
study of buyers has developed along somewhat separate lines from the study of
sellers. Here, researchers have analyzed the factors which affect both the individual
and company buying processes, e.g. previous purchase experience, the importance of
`task' and `non-task' variables, the effect of different organizational forms and the
degree of formality in hypothesized decision-making processes. These analyses have
concentrated on the stages in a discrete purchase. Thus, there has been an emphasis in
the industrial buyer behavior literature on single rather than continuing purchases
from a particular supplier. Additionally, the study of the buying process has taken
place with relatively scant regard to the influence of the selling firm in that process.'
Thus, the first group of studies includes two distinct and separate approaches
to the study of what occurs in industrial markets. On the one hand, there is an analysis
of the manipulation of marketing variables by the seller to achieve a desired market
response. On the other hand, there is the separate analysis of a single buying process
and the factors that affect that process, from which lessons can be drawn for
marketing.
Two aspects of this network have mainly been studied. Firstly, the
characteristics of the different organizations have been investigated as they relate to
the other organizations within the same network. Secondly, the links between the
units have been analyzed in terms of, for example, formalization, intensity, and
standardization.
33
The parallel to these studies in the marketing area are those from a
`distribution system perspective'. In this, the field is viewed as a system of
interconnected institutions performing the economic functions required to bring about
exchange of goods or services. This perspective is, of course broader than the
organizational system perspective. The boundaries of marketing at this level of
aggregation include those institutions involved in the distribution of goods within the
society. The focus is on the nature of the functions being performed by the system and
on the structure, performance and inter-relationships of the institutions that comprise
the system.
Aspects of these areas which have received study are the division of roles and
responsibilities between different members of a manufacturing–distribution channel,
the conflicts between different levels and within levels in the channel as well as the
patterns of power and communication which exist between them.' During recent
years, a number of works on more general aspects of marketing and purchasing have
appeared which fit within this group.'
34
However, the major focus of IMP group (1982) attention is on the units (the buying
and selling firms) and the link between them (the process of interaction).
The second theoretical area outside the marketing literature that IMP group
(1982) have built upon has been characterized by Williamson (1975) as `the new
institutionalists'. This line of thought within micro-economic theory is based on a
criticism of certain aspects of traditional economic theory. Williamson discerns two
alternative ways in which the exchange (transaction) may be handled between
technologically separable units in a production or transformation process. Firstly, the
transaction can take place within a market setting. On the other hand it can be
internalized in one organizational unit (a hierarchy), i.e. two successive stages in the
production process are vertically integrated in a hierarchically built organization.
Williamson (1975) argues that many transactions that are internalized in one
organization could be carried out by separate organizations, from the point of view of
technological separability. However, the co-ordination of these units by means of
market relations involves disadvantages. Markets may be considered to operate
inefficiently in certain instances, due to human and environmental factors. When the
environment is characterized by complexity and uncertainty, then the bounded
rationality of man makes it very costly to design and negotiate viable contracts. An
example would be between two subsequent stages in a steel mill. Furthermore, the
parties to such transaction may become very dependent on each other. This evolves
into a small-numbers bargaining relation. Although the parties in a formal sense retain
the option of selecting partners in the market, this is not a viable alternative due to
transaction costs. Thus it will be very costly to design and negotiate contracts with
new partners. This is because it is often difficult for one party to achieve information
parity with the other party, which is necessary for a `fair' deal. Man is not just
characterized by bounded rationality but also by opportunism ('self-seeking interest
35
with guile'), and this makes markets operate inefficiently when there is an imbalanced
dependence between the parties.
The high transaction costs that would be associated with operations in markets
of the atomistic kind provide incentives for the internalization of such expensive
transactions in vertically integrated units. Conflicts are considered to be settled in a
more efficient and less costly way within an organization (by fiat rather than by
haggling), and sequential, adaptive decision-making is facilitated. Opportunism is
checked by control and audit.
Thus there are several factors that influence transaction costs and there are
also intermediary settings for the exchange relations. Many industrial markets can be
seen as such intermediary forms. Here we find such market characteristics as
established small-numbers bargaining relations and lack of information parity to
established social relationships. Often a specific atmosphere has evolved that is
characterized both by environmental and human factors.
36
4.2.1.5. Outline of the model
Firstly, that both buyer and seller are active participants in the market. Each
may engage in search to find a suitable buyer or seller, to prepare specifications of
requirements or offerings and to manipulate or attempt to control the transaction
process.
Secondly, the relationship between buyer and seller is frequently long term,
close and involving a complex pattern of interaction between and within each
company.
The marketers' and buyers' task in this case may have more to do with
maintaining these relationships than with making a straightforward sale or purchase.
Thirdly, the links between buyer and seller often become institutionalized into
a set of roles that each party expects the other to perform, for example the division of
product development responsibility, or the decision as to who should carry inventory
and test products. These processes may require significant adaptations in organization
or operation by either or both companies. Clearly, these relationships can involve both
conflict as well as co-operation.
37
IMP group (1982) focus is generally on a two party relationship, but the
approach can be applied also to a several party relationship. This, indeed, may be
necessary to accommodate the study of the simultaneous interactions between several
buying and selling companies in a particular industry. The main components of IMP
group (1982) approach are illustrated in Figure 6.
In the figure IMP group (1982) identified four groups of variables that
describe and influence the interaction between buying and selling companies:
The approach does not only involve an analysis of these groups of variables
but it also includes the relations between them.
38
4.2.1.6. The interaction model
In this section each of these four basic elements will be described more
extensively according to IMP group (1982). The major focus here is on description of
buyer–seller relationships and interactions. Only secondary emphasis is placed here
on the interplay between the separate elements, which IMP group (1982) discusses.
These interrelationships are developed in International Marketing and Purchasing of
Industrial Goods (IMP project group, 1982).
IMP group (1982) has already noted that the relationships between buying and
selling companies in industrial markets are frequently long term. Thus, it is important
to distinguish between the individual `Episodes' in a relationship, e.g. the placing or
delivering of a particular order, and the longer-term aspects of that relationship which
both affects and may be affected by each episode. IMP group (1982) considers these
individual episodes, first:
(a) Episodes
39
The exchange of product or service is often the core of the exchange. As a
result, the characteristics of the product or service involved are likely to have a
significant effect on the relationship as a whole. For example, one major aspect of the
product or service that seems important is the uncertainty with which they are
associated. The exchange process will be quite different depending on whether or not
the product is able to fulfill a buyer need that is easy to identify, and for which the
characteristics of an appropriate product are easy to specify. It will also be important
whether either buyer or seller is uncertain as to the requirements or resources of their
opposite number.'
2. Information exchange
3. Financial exchange
4. Social exchange
40
Social exchange has an important function in reducing uncertainties between
the two parties (Hakansson and Ostberg, 1975). This is particularly significant when
there exists spatial or cultural distance between the two parties or where the
experience of the two parties is limited. Social exchange episodes may be important in
themselves in avoiding short-term difficulties between the two parties and in
maintaining a relationship in the periods between transactions.
(b) Relationships
Social exchange episodes are, as has been described above, critical in the build
up of long-term relationships. Exchanges of product and service (which can be in both
directions) and of the other elements of money and information can also lead to the
build up of long-term relations. The routinization of these exchange episodes over a
period of time leads to clear expectations in both parties of the roles or responsibilities
of their opposite numbers. Eventually these expectations become institutionalized to
such an extent that they may not be questioned by either party and may have more in
common with the traditions of an industry or a market than rational decision making
by either of the parties (Ford, 1978).
41
technical, commercial, or reputational nature. These patterns can interlock the two
parties to a greater or lesser extent and they are therefore an important variable to
consider in analyzing buyer–seller relationships. It is important to note that
information and social exchange between parties can continue for a considerable time
without there being an exchange of product or money. Thus, literature, specification
development, and visits between companies can occur before the first order is placed
or between widely spaced individual' orders.
Thus one party may make a decision not to offer special products to a
customer out of a wish to be more distantly involved with that customer, rather than
being closely involved and/or heavily dependent on it.
42
4.2.1.8. The Interacting Parties
The process of interaction and the relationship between the organizations will
depend not only on the elements of the interaction but also on the characteristics of
the parties involved (IMP group, 1982). This includes both the characteristics of the
two organizations and the individuals who represent them. The organization factors
include the companies' position in the market as manufacturer, wholesaler, etc. It also
includes the products which the selling company offers, the production and
application technologies of the two parties and their relative expertise in these areas.
Below, some of the major factors will be discussed in more detail as per IMP group
(1982).
(a) Technology
The size and the power of the parties give them basic positions from which to
interact. In general, a large firm with considerable resources has a greater possibility
of dominating its customers or suppliers than has a small firm. The structure of each
organization and the extent of centralization, specialization and formalization
influence the interaction process in several ways; this influence is seen in the number
and categories of persons who are involved. It also affects the procedures of the
exchange, the communications media used, the formalization of the interaction and
the substance of what is exchanged – the nature of product or service and the finance
which is involved. In the short term, organizational structures can be considered as the
43
frameworks within which interaction takes place. In the longer term, it is possible that
these organizational structures may be modified by the emerging interaction process
or indeed by individual episodes.
A further factor is the company's experience not only in this relationship but
also its experience and activities outside it. This experience may be the result of many
other similar relationships and will equip the company with knowledge about the
management of these kinds of relationships. It may also affect the level of importance
attached to any one relationship, and hence the company's commitment to that
relationship.
The variables which IMP group (1982) discusses under the title of Interaction
Environment will be mediated by the experience of specific individuals in a company
as well as by the more generalized `experience' of a company. Thus the company's
experience in particular markets will enable it to be more or less fitted for dealing in
that market. Similarly, its experience of international operations will affect its
willingness and ability to establish international relationships.
(d) Individuals
Their reactions in individual episodes could condition the ways in which the
overall relationship builds up. Further, the role, level, and function of central persons
44
in the interaction may affect the chances of future development occurring in the
relationship.
IMP group (1982) believes that the interaction between a buying and selling
firm cannot be analyzed in isolation, but must be considered in a wider context. This
wider context has several aspects.
This has a clear bearing on the pressure to interact with a certain counterpart
within the market.
(b) Dynamism
The degree of dynamism within a relationship and in the wider market affects
the relationship in two ways that are opposite to each other. Firstly, a close
relationship increases the knowledge of one party of the likely actions of the other
party and hence its ability to make forecasts based on this inside information.
45
Secondly and conversely, in a dynamic environment the opportunity cost of
reliance on a single or small number of relationships can be very high when expressed
in terms of the developments of other market members.
(c) Internationalization
46
customer, e.g. in the automobile industry, has to learn both the `language' and the
rules before it will be accepted in that industry.
According to IMP group (1982), the relationships between buying and selling
firms are dynamic in being affected by the individual episodes which take place
within them. At the same time they have the stability which derives from the length of
the relationship, its routinization and the clear expectations which become held by
both parties. The relationship is influenced by the characteristics of the parties
involved and the nature of the interaction itself. This in turn is a function of the
technology involved and the environment within which the interaction takes place.
Organizational strategy can also affect both the short-term episodes and the long-term
relationship between the parties. One of the main aspects of the relationship which
may be affected by conscious planning is the overall atmosphere of the relationship.
This atmosphere
There are several types of cost that can be reduced for a firm by a closer
interaction with a buying or selling firm. One of these costs is that which Williamson
(1975) describes as the transaction cost. A closer connection means that it may be
possible to handle distribution, negotiations, and administration more efficiently.
47
Another type of cost which may be reduced is the production cost. A close
relationship gives opportunities to find a more optimal division of the production
process between the supplier and the customer. The supplier and buyer may reallocate
some production processes between each other or co-operate in the design so as to
make the product easier to produce or for the customer to develop further. There are
also increased revenues which can be gained by a closer interaction. Both sides may
achieve positive gains by better use of the other's competence, facilities, and other
resources. New products can be developed together or old products may be
redesigned. Furthermore, the parties can also often give each other valuable technical
and commercial information.
48
everyday terms this is exemplified by a selling company which has a large proportion
of its sales to one single buying company. It is the management of the closeness of the
relationship, with its associated power and dependence which is perhaps a crucial
aspect of many industrial marketing and purchasing strategies.
Summing up this discussion of the reasons for a close interaction, IMP group
(1982) concludes that relationships are established and used in order to gain economic
benefits, lower costs, higher profits, and/or improving the organization's control of
some part of its environment. A critical aspect of the management of these
relationships is the extent to which the firm can balance its inter-dependence with
others. The firm must seek to balance the advantages of a close relationship, perhaps
in terms of cost reduction and ease and speed of interaction, against the opportunity
costs of that single relationship and the dependence which it involves.
49
It has been suggested that e-commerce may lead to more adversarial
relationships, as the use of electronic intelligent search agents and reverse auctions
give organizations a greater choice of supplier (Emiliani and Stec, 2002; Spekman et
al., 2002). In addition, there may be less chance for relationships which began as
adversarial, to mature into partnerships because of the lack of frequent face-to-face
communication in the development stage of the relationship. For firms already within
well developed buyer-supplier networks characterized by goodwill trust and
subjective loyalty, this tendency towards more adversarial relationships may be offset,
however, by managers continuing to deal with suppliers they have dealt with
successfully in the past. In this situation, buyers and suppliers are already selectively
committed to doing business with each other. Indeed, the introduction of e-commerce
may lead to a new form of "lock-in" as greater integration of business processes
increases the need for shared information and resources (Tucker and Jones, 2000).
Enterprises are competing based on relationships, not just the basic products
and services buyers have essentially come to expect (Kanter 1994) and most
commerce on the Internet remains business-to-business (Reibstein, 2000). Much of
this commerce represents a shift in the manner of purchasing: businesses are
purchasing from the same vendor, but using the Internet rather than the phone or fax
to achieve cost efficiencies. For example, IBM now requires that all purchases be
made electronically.
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will continue to send sales staff to court buyers, and buyers will continue to demand
personal commitments from their suppliers. However, ongoing relationship
management is likely better coordinated on the Internet.
A growing number of firms are discovering that the potential of the Internet is
best exploited by creating seller-buyer partnerships where both parties benefit. The
long-term viability of many businesses stems from value-stream robustness which
directly influences revenue streams (Mahadevan 2000).
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Napster model applied to B2B–allowing for real-time construction of modular shared
business processes across enterprises. The shift to work flows over transactions will
continue as B2B e-commerce is conducted fundamentally through interactions in the
context of collaboration (Sawney 2001) among relationship-oriented businesses.
In the past, there was a short-term focus with transactional exchanges marked
by recurring negotiations, consideration and use of many brands as well as minimal
information exchange and commitment.
The purchase decision was neither complex nor of strategic importance, and
supply markets were viewed as stable. Subsequently, an intermediate term focus
called collaborative exchange recognized the value to both sides for repeat business,
limited brand consideration and usage, restricted alternatives with less restrictive
information exchange and a sense of enduring commitment.
The current era and beyond, continuous exchange has a cooperative systems
focus, recognizes the almost infinite mutual interdependence with strong coupling and
fosters commitments for multi-level information exchanges and operational linkages.
Indeed, to implement a decision to cease doing business might take months or even
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years. The time frames and costs to uncouple are very high for both sides. For
example, this would likely be the case between chemical companies whose linkages
include pipelines as well as computer systems and many interfaces of operations staff.
Special assets (economic and social), which are costly to recreate, reduce a propensity
toward variety and alternative seeking behavior. For some business sellers and buyers,
the foreseeable future includes focused, if not unique brand usage given the very high
level of commitment.
Morgan, Naudé and Baxter (2003) defined a set of attributes for any business-
to-business relationship. These attributes are mainly derivate from the class of thought
of interaction model that has been developed by IMP group.
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Ttable 3: Attributes of B2B relationships
Attributes Description
Delivery
d1 Reliability Offering products on time, making and keeping the
agreement
d2 Production process Degree of impact of the company’s processes on our
business
d3 Information Clarity and correctness of information and documentation
d4 Lead times Time elapsed between making and receiving orders
d5 Delivery quality The extent to which orders are delivered on time and in
full
Financial terms
f1 Value The extent to which price and quality combine to give
value
f2 Payment Extent of the company’s flexibility in payment terms
f3 Prompt quotes The extent to which quotations are given on time
f4 Flexibility The extent to which price negotiations are flexible
Image
i1 Strategy Vision and coherence of the company’s strategy
i2 Customer focus The extent to which the company puts the customer first
i3 Reputation Covers both innovation and being a caring company
i4 Market position The extent to which they are globalised and committed to
the future
Interrelationships
r1 Ease of contact Supply of information and support for problem solving
r2 Access Ease of contact with other functions within the company
r3 Information Information flow about potential problems and market trends
r4 Company representative Knowledge and professionalism
Product
p1 Stable range The extent to which the product range is stable over time
p2 Quality levels Absolute quality of the product
p3 Consistent quality Consistent quality and consistent specification
p4 New product Extent of NPD and willingness to work with customers
development (NPD)
Service performance
s1 Technical issues Covers both rapidity and effectiveness of service
s2 Literature Quality of technical literature
s3 Facilities The extent to which the company’s facilities are available
for our use
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2.10. Multi-criteria decision analysis
55
facilitate the inclusion of the inherent uncertainty in the criteria performance values
(PVs) in the decision analysis process.
However, the selection of the function for each criterion is a complex and
ambiguous task for DMs and actors and therefore adds another element of uncertainty
into the decision analysis process. In addition, the generalized criterion functions do
not take into account the subjectivity and ambiguity in the assignment of the criteria
preference values (i.e. criteria weights, CWs) by the actors. The impact that the
uncertainty in the CWs has on the ranking of the alternatives is generallyassessed
using sensitivity analysis at the conclusion of the decision analysis and the combined
impact with the criteria PVs is not considered. Therefore, despite the inclusion of the
generalized criterion functions, potential sources of considerable uncertainty remain
when utilizing PROMETHEE to analyze decision problems, which may result in a
lack of consensus between the actors and reduced confidence in the outcomes of the
decision analysis by the DMs. Int the following section a more detailed overview of
PROMETHEE is covered.
2.10.1. PROMETHEE
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Where wj is the weight assigned to the criterion j. The outranking index of a in
the alternative set A (i.e. how much an alternative is dominating the other ones) is
defined as:
The alternative having the largest value of f(a) is considered as the ‘best’
alternative (i.e. a outranks b iff f(a)>f(b), a is indifferent to b iff f(a)= f(b)).
57
Figure 7: Criterion functions
58
2.10.2. Limitations of PROMETHEE
This may be due to the limited availability of guidelines on how to select the
functions, in addition to the difficulty in conceptualizing the uncertainty in each of the
criteria in this form.
CWs are the other main input parameters which indicate a criterion’s relative
importance and allow actors’ views and their impact on the ranking of alternatives to
be expressed explicitly. It should be noted that the inclusion of the generalized
criterion functions does not address the inherent imprecision and subjectiveness of the
CWs, which are elicited by the decision analyst from the actors for each criterion
using one of a variety of available techniques. In addition, when multiple actors are
involved in the decision analysis, generally, either an average of the actor’s preference
59
values is used or a separate analysis is undertaken for individual actor’s preference
values. It is therefore inevitable that difficulty may be encountered in obtaining a
decision that achieves consensus between the actors. A considerable amount of
valuable information is also disregarded when an average value is utilized.
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CHAPTER THREE
RESEARCH METHODOLOGY
3. Research methodology
The preceding chapter will cover the research methods used in this study. This
chapter will describes the chosen methods, research purpose, research strategy, and
data cohdkwllection method and analysis approach.
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Exploratory studies aim for basic knowledge within the research purpose.
According to Bengtsson and Bengtsson (1995), the purpose of this type of study is to
decide and demonstrate the character of a problem by collecting information through
exploration. These types of studies are conducted in order to create a basic
understanding of conditions, events, courses of events and actions.
Reynolds (1971) stated that the goal with the descriptive study is to develop
careful descriptions of different patterns that are expected during the exploratory
stage. The purpose could be to develop empirical generalizations and to explain these.
This might lead to theory development.
The best technique for gathering the information in the context of the research
is identified as interviews. Therefore a number of ten interviews with decision makers
in different firms is arranged in order to gain a better understanding of B2B
relationships. And the impacts of possible adoption of e-commerce at firm level.
When conducting a research there are different ways to address the matter.
There are two main research approaches to choose from when conducting a research
in social science: qualitative and quantitative method (Yin, 1993:Holme and Slovang,
1991).
The qualitative and quantitative methods refer to the way the researcher
chooses to treat and analyze the selected data. Selectivity and distance to the object of
62
research characterize a quantitative approach, whereas a qualitative approach is
characterized by nearness to the object of research. Both approaches have their own
strengths and weaknesses. There is one significant difference between these two
approaches. The results of a quantitative approach are based on numbers and statistics
that are presented in figures, while, in qualitative approach, the focus lies on
describing an event with the use of words.
Characteristics of qualitative studies are that they are based largely on the
researcher’s own description, emotions and reactions (Yin, 2003). The qualitative
approach also includes a great closeness to the resonant or to the source that the data
is being collected from (Holme and Solvang, 1997). It is characterized by gathering
abundant information and to investigate several variables from few numbers of
entities.
According to Yin (2003) the best research method to use for a study depends
on that the study’s research purpose and the accompanying research questions.
The qualitative approach was found to be more suitable for the purpose of this
research. The rationale behind this selection is to gain better understanding of how
Iranian firms intend to adopt e-commerce in the context of B2B relationship and its
attributes. On the other hand, uncertainty about the knowledge of respondents about
B2B relationships, B2B e-commerce and impacts of adopting it urged the researcher
to choose interviews in order to explain more, address the issues and explore the real
belief of each respondent.
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survey, history, an analysis of archival records and a case study. Different research
strategies are shown in table 4.
Case study: the essence of a case study, the central tendency among all types
of case study, is that it tries to illuminate a decision or set of decisions: why they were
taken, how they were implemented, and with what result (Schramm, 1971).
History: the historical method deals with past, and s used when no relevant
persons are alive to report (Yin, 1994).
Archival analysis: archival information holds that the goals are to describe the
incidence or prevalence of a phenomenon (Yin, 1994).
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Due to the structure of this research, either case study or survey could be suit
best. In the case of this research, the survey strategy has been chosen.
According to Yin (1994) there are six available forms of collecting qualitative
empirical data as documentation, archival records, interviews, direct observation,
practical observation and physical artifacts. A summary of different methods and their
strengths and weaknesses is shown in table 5.
The data collection methods that will be used for this research are interviews
and documentation. The interview is chosen as the major primary data collection
65
method because of its strength in focusing directly on the topic of this research.
Interviews are strong ways of collecting targeted and insightful data. Interviews
conducted personally.
McDaniel and Gates (1999), state that the basic issue when defining the
population of interest is to specify the characteristics of those individuals from whom
information is needed.
There are two sampling methods that can be used; probability sampling
methods and non-probability sampling ones. Probability samples must be selected in
such a ways that every element of the population has a known non-zero probability of
selection and every member of the population has equal chance of being selected
(McDaniel and Gates, 1999). Any sample that does not meet the requirements of a
probability sample is a non-probability sample (McDaniel and Gates, 1999).
66
For the purpose of this research, a sample of 10 non-randomly selected
professionals who are currently in relationship with other businesses have been
selected and interviewed. This sample ahs been selected from different industries in
order to reduce the bias toward any specific industry in the research. Selecting the
respondents with the right knowledge about the research area is crucial for qualitative
research (Holme and Solvang, 1991).
After coming to the conclusion that this study intends to exercise non-probability
sample selection, there are different methods that can be used (Cooper and Schindler, 2003).
Convenience sampling is about when the researcher has the freedom to choose whomever
they find. Judgment sampling occurs when a researcher selects sample members to conform
to some criterion. Quota sampling is the second type of purposive sampling. It is used to
improve repesentativeness. The logic behind quota sampling is that certain relevant
characteristics describe the dimension of population. If a sample has the same distribution on
these characteristics, then is likely to be representative of the population regarding the
variables that are not under control of the researcher. Snowball sampling is used in
applications where respondents are difficult to identify and are best located through referral
networks (Cooper and Schindler, 2003). A judgment sampling is used for the purpose of
this study.
Data analysis consists of three concurrent flows of activities. These three are
data reduction, data display and conclusion drawing and verification. Data reduction
should not be separated form analysis, but a part of it. This reduction allows
researcher to sharpen, sort, focus, discard and organize the data in a way that final
conclusions to be drawn and verified. (Miles and Huberman, 1994) during the current
research the data gathered during each interview reduced and the major parts related
to the context of the research remained in hand of researcher.
Data display, as the second major activity, is about displaying the reduced data
in an organized, compressed way so that conclusions can be more easily drawn.
PROMETHEE and GAIA plans are mainly used to display the collected data.
Conclusion drawing and verification is the final analytical activity for the
qualitative researcher. This research drew the conclusion based on applying the
findings in the context of two other B2B relationships. In order to verify the findings,
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three different B2B relationships were chosen to be examined under the situation after
finding the important data.
Validity and reliability helps to measure the research and add strength to the
findings. According to Yin (2003), three forms of validity need to be considered as
construct validity, internal validity and external validity.
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Chapter Four
Reserch data description, findings,
conclusions
In this chapter the empirical data that had been collected during ten
interviews are presented first. Then the result of these interviews are analyzed and the
findings are presented. Eventually the conclusions of the current research based on
the findings are explained.
The data used in this study has been collected in interviews. Total number of
ten interviews conducted with decision makers in top level of different organizations.
Ten respondents had different educational background, from high school diploma up
to PhD. The fields of their business activities were also diversified in order to cover a
wider span of business activities. Summary of all ten interviews are followed in this
chapter.
69
4.1.1. Interview one
The father of the respondent has established this company in 1971. They have
established their office in Dubai in 1981 and are working as an exclusive distributor
for some consumer electronics and air conditioning products. Their mobile telecom
business started their activity almost 7 years ago. They are traders who supply number
of wholesalers in their telecom industry while distributing their other products to big
retailers as well. They try to differentiate themselves by differentiating their after sales
services from competitors.
He confirms the attributes of B2B relationship and can hardly add any other to
the list either on the main attributes or sub-attributes. He believes that “product” is the
most important in any B2B relationship when saying, “if the product is not good
nobody is going to buy it”. When the interviewer asked him to elaborate more on this,
he added, “today, we never waste our time to make a brand hero in the local market if
it is not one of them globally” and added” we normally choose a well-known product
and promote it in the local market along with our superb after sales services. This will
be the perfect match”. At this point the interviewer argued that they maybe focus on
the “image” category of attributes. Then the respondent stated that it was very hard for
him to rank “image” and “product” as they are very much interrelated in his opinion.
However, he concluded that the product itself is the most important attribute as
consumers make the final decision based on the product itself.
In the spite of their focus on after sales services, he believes that service
performance is the least important attribute in their B2B relationships. The rationale
behind his opinion was” as far as we can get documentation, guidelines and spare
parts, we can manage our after sales services easily and even better than the supplier
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because it is more or less is a matter of understanding the customer expectations of
after sales services in the local market”
He is very well aware of e-commerce and it’s impacts on global business and
firms. However, he never tried to consider e-commerce impact on B2B relationships.
After a relatively short discussion, due to his level of knowledge about e-commerce,
he anticipated the impact of e-commerce adoption on B2B relationship.
Even though his rationale for ”product” is very much in line with other
respondents, interviewer argued the “service performance”. He then justified his point
of view by referring to the “independence” in more than 90% of cases. He believes
that e-commerce adoption will only improve B2B relationships in 10% of cases which
is very low impact.
Although this company has been established a year ago in Iran, it is a member
of a group of companies that is involved in mobile telecom business for over 8 year in
13 different markets in Middle East. The local presence of the group of companies is
acting as a distributor for a very well known European vendor in Iran. The
respondent, General Manger, is a 26 years old male who has been educated in
Western Europe on marketing. He is extremely good on sales and marketing while he
needs significant improvements in the areas of financial management and strategy.
His management style could be summarized as “short term vision”, “quick” and
“emotional”. The respondent created a distribution channel consisting of 530 key
retailers and 15 own showrooms in less than one year. He managed to increase his
sales drastically while gaining a healthy margin during this time.
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He confirms that the attribute set is gathered correctly and it is not possible for
him to add any other to the set. The respondent believes that “product” is the most
important attribute in their B2B relationship with their vendors and buyers. He stated”
whenever the product of my vendor is not as much good as it is today, my distribution
channel is not willing to buy from me anymore and I have to switch to another good
product to cover my investments on distribution channel”. In his opinion, the product
is the tie-up belt in the value chain that he is a part of it.
After a short discussion about e-commerce and its possible impacts on B2B
relationships he shared his idea about the impact level on each attribute. He believes
that “ delivery”, “interrelationship” and “financial terms” will impact highest by
adoption of e-commerce in business-to-business relationships. He also believes that
“product” and “image” will be least impacted by adoption of e-commerce. “Image”
has bee argued by interviewer. Although he could hardly justify his evaluation on this
attribute, he stated, “In the Iranian market with a low Internet penetration image is
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not something to be affected by B2B e-commerce adoption. It is mainly coming from
other channels of advertising”.
Respondent three is a 35 years old civil engineer who continued his education
in Insead by achieving MBA. His colleagues know him as a “visionary” and
“trustworthy” leader. He is now heading a company that is distributes products and
solutions of an office equipment giant in Iran. He employed around 400 individual in
Tehran and 17 other cities and providing sales, marketing and after sales services to
the market. The company product portfolio is containing few hundred dollars
equipment up to multi million dollar solutions. Five years ago, when he has been
appointed to this position, the company was suffering from non-satisfactory cash
projection. Today, according to him, the company is a cash rich company and is
heavily investing in other line businesses like IT.
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impact of e-commerce adoption on “interrelationship”. In his opinion all processes in
these two attributes are strongly interrelated with “interrelationship”.
Respondent four is a 45 years old male. He educated in USA and held a master
degree in software engineering. He is heading a company involve in sales, marketing
and after sales services of fixed line telecom equipment; i.e. PABX, advanced
telephone centers; from known vendors. He has been appointed to his position 8 years
ago in order evaluate the business. At that time the board of directors was decided to
lay off their 27 personnel and close this line of business for starting another business
activities. After six months, he decided to continue the business. Today the have more
150 personnel and having more than 90% market share. His colleagues describe him
as “very detail oriented”, “wise” and “long term visionary”. Currently they are
expanding their business into Middle East region.
He believes that “product” is the most important area in any B2B relationship.
He explains his success as:” I never had the chance to witness any success if I did not
have a good product in hand” in his opinion the only task he accomplished was”
understanding what a great range of product they are representing and cascading it to
the market”. He also believes that “financial terms” is the second important attribute
in B2B relationships. He justifies his evaluation by referring to their customer
investment on their solutions that requires more flexibility to build and maintain the
relationship. Based on this, he always provide after sales services to its customers free
of charge as a matter of being flexible to them and reduce the total cost of ownership
of their solutions.
74
was finding the right equipment, hardware, for connecting different departments or
people together whiles today the soft part of solutions is playing more important role.
Today we have to have specialist who are capable of analyzing our customers
businesses and provide them with solutions like call centers to improve their business
performance”. He is using this to compare two of their vendors the first one is the one
with the right strategy to grow with the same pace of world on IT and the other one
that still sticks to its traditional view towards the business. In his opinion the second
one made itself non-scaleable while the other one brought more scalability into the
perspective and guaranteed more growth and profit for itself and its business
counterparts.
The respondent was very optimistic about the impacts of e-commerce on most
of the attributes of B2B relationships. In his opinion, only the impact on “product”
will be low.
In response to the question: “Are you going to start e-commerce for your own
company?” the respondent replied as “ we are mainly working with end-users and the
low adoption of e-commerce by them will be decrease the success of it. However, we
are currently using what prepared by our vendors to optimize our operations”.
Respondent five has PhD degree on political science and currently working as
the head of planning for an investment organization as well as teaching at universities.
He is 34 years old and was involved in huge development projects in Iran. He is
typical researcher and has a very in-depth knowledge of new technologies and their
impact globally. His management style is described “ fair”, “logical” and “moderate”
75
by his co-workers. The interview with respondent five was a relatively long one due
to his debates about the concepts.
The interviewer had the opportunity to discuss the attributes and sub-attributes
with respondent five. His view to attributes is somehow different from the majority of
the respondents. The respondent had a very interesting opinion on the attributes, as he
believed that some of them are the cause for other effects as attributes. For instance he
explained his point of view about “product” as the effect of “image”. He also
mentioned an interrelationship between “financial terms” and sub-attributes of
“delivery”. After almost one hour of discussion, the interviewer and respondent
reached to the conclusion that the cause and effect relationship in this research is only
might affect the order of priority in ranking attributes. However, if one attribute is the
effect of any other this will not affect the impact of e-commerce on it. In the other
words, e-commerce may impact one attribute more while it is not affecting cause of
that too much. On the other hand, although he could not add any other attribute to this
set, he believed that “governance” needs to be taken into consideration in such a
study.
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then the B2B relationship will fail. This could be happened in the relationship by itself
or as a reflex from other tiers into the primary relationship”.
Respondent five is a 35 years old civil engineer who heads a planning and IT
department of a distributor of office equipment distributor. He holds a master degree
on civil engineering and had completed different IT as well as MBA courses abroad.
His co-workers believe that he possesses a “moderate” and “hesitant” management
style.
He can only confirm the set of attributes and believes that “product” is the
most important attribute to be considered in a B2B relationship. “ Everybody can
minimize his investment risk by selecting a product which is good” in his opinion. He
continues, “ good product is selling itself and the obstacles will be less in this case in
compare to an unknown product”. He then refers to “time-to-market” as a very
important factor in distribution and concludes, “Delivery is the second highest
important attribute”. He believes that technology products life cycle is short and firms
need to serve the market timely or someone else, competitor, will absorb the demand.
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He believes that “financial terms” is key to orchestrate firm’s business
activities. He uses “pillar” when explaining this attribute importance.
After a very brief discussion on e-commerce and its effects due to his very
good knowledge of these, he anticipated the impact of adoption of e-commerce. In
response to the point raised by interviewer about the highest impact of e-commerce on
“interrelationship” and “image” he replied, “ Please do not get me wrong! If I believe
that these two attributes are of least importance that does not mean that e-commerce
adoption is not affecting high”. “Service performance” will effect high in his opinion.
He believes that e ,as a suffix, will improve knowledge sharing which will affect a key
element in service level improvement.
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4.1.7. Interview seven
Respondent seven is 51 years old male who hold a master degree on financial
management. He is currently working as financial deputy for an investment company
that is member of a manufacturing holding. His colleagues describe him as “fair”,
“kind” but “tough” and “conservative”.
It took almost 45 minutes to share the e-commerce effects with him and
discuss it, as he himself believes that he belongs to “the past”. He then evaluated the
impact the effects of e-commerce adoption. He believes that “interrelationship” will
be impacted as “very high” by adoption of e-commerce as “ what we are in shortage
of is a quick and direct relationship between the ones who are really in charge” he
believes. He continues, “ Have you ever noticed to the lead time between sending a
letter to an organization in Iran and receiving their reply? Is it less than two weeks?
Just compare it with how others are communicating in even other developing
countries in the region”.
79
He believes that e-commerce impact on other attributes is either low or very
low due to the less effect it may have on them in his opinion.
80
to pay easily. Five years ago, it took me days to get the same information and our
shipments were always surprised me”. And continues “ I am sure that I am the first
who knows any price change either by the vendor or market as far as my employees
are monitoring everything on web or by email”.
He also believes that “product” and “image” will have very low or low impact
from e-commerce and “service performance” will have medium impact as “his people
can access to experts easier”.
He agreed with the set of attributes and believes that “product” is the most
important attribute in their B2B relationships. “The reason for our rapid growth was
the product we are promoting” he clarifies. “Frankly speaking, we are all new to this
business and could not manage such a growth without having a superb product”.
81
Respondent nine is optimistic on high and very high impact of e-commerce
adoption on “service performance” and “ interrelationship” as well as “image”
respectively.
On the other extreme he does not believe that e-commerce will have a
significant impact on “ product” and “financial terms” by evaluating the impact as
very low. He also expects e-commerce adoption to have low impact on “ delivery”.
“Financial terms and delivery are more or less dependant to the domestic regulations
and the financial capability of any business in its relationship” he quotes.
He believes that e-commerce would have its maximum impact on “image” and
“interrelationship”. However, the impact is evaluated a medium on these two
attributes. He expects a very low impact on other four attributes by e-commerce
adoption. He justifies his pessimism about the impact of e-commerce as: “ the
regulations do not allow us to have the flexibility of doing business freely with our
business counterparts. On the other hand, mutual trust is a prerequisite for starting
82
such an activity financially for instance. I have learnt to have very limited trust to our
business counterparts as the only payment I can understand is what is in my bank
account”. Interviewer argued his opinion about “service performance”. He justified
his answer by “ it is the responsibility of the manufacturer or the distributor to invest
heavily on its after sales services and train people to the certain level of knowledge
and expertise to be as independent as possible. This will routinze the procedures and
requires less access to the knowledge bases”.
4.2. Findings
The results of interviews are showing that all respondents agree on the same
set attributes to be involved in any B2B relationship. Some of them had a different
point of view for categorizing the sub attributes but none of them was able to
formulate the idea.
In one case the respondent believed that the sub attributes need
recategorization. However he could not identify how it could be changed. At the sub-
attribute level he confirmed that this is a correct identification of B2B relationships.
83
4.2.1.2. Assessment of the attributes of B2B
relationships
Eighty percent of the respondents believe that “product” is the main attribute
in any B2B relationship. The remaining twenty percent also believe that “product” is
the second most important attribute in B2B relationship. It seems that “product” is the
most important attribute in a B2B relationship as the standard deviation of the
rankings by respondents is the lowest for this attribute.
“Delivery” and “Image” are the third important attributes with a similar
average ranking by respondents. However, the respondents’ opinions were more
supportive towards delivery with lower standard deviation. On the other hand the
opinions about rankings of “image” is more dispersed. Twenty percent of respondents
believe that “image” is the most important attribute in B2B relationships. It is
believed by thirty percent of respondents that “delivery” is the second important
attribute while only ten percent believe that “image” is second ranked one. Twenty
percent of respondents ranked both “image” and “delivery” as the third important one
equally. “Delivery” is assessed as forth important by ten percent of respondents and
84
“image” assessed with the same rank by twenty percent. “Delivery” is the fifth
important attribute for thirty percent of respondents and ten percent believe so for
“image”. “Image” by ten percent and “delivery” by thirty percent ranked as sixth
important attribute.
The results show that there is rather strong negative corelationship between
“image” and “product” as well as “delivery” and “image”, and “service performance”
and “interrelationship”. These are showing the difference in class of thoughts or
management style of decision makers. In the other words, “image” is more or less
important for decision makers with more strategical preference while tactical
decision makers prefer “delivery” and “product”.
At the first glance it might seem strange that a strong negative corelationship
exists between “service performance” and “interrelationship” as the sub-attributes of
these two are somehow similar by nature. Perhaps the vision/mentality/ attitude of
respondents is also reflected in their opinion. Also “service performance” has a
slightly strong corelationship with “financial terms” as per the respondents.
85
Table 7:Correlationship between attributes
The results confirm that “product” is still the most important attribute.
“Financial terms” is not considered as it is used for relative assessment of weight of
other attributes. The results show that “delivery” is assessed slightly higher than
“image” but with higher standard deviation. This can confirm the previous absolute
ranking of the attributes. “Service performance” and “interrelationship” are also
assessed at the relatively same positions as before. This check shows that the absolute
ranking is reliable for weighting each criterion for the next steps of this study.
In order to use PROMETHEE for analyzing the situation, it was needed to find
the weight of each attribute in B2B relationships. Based on the absolute assessment of
attributes by respondents, each attribute finds its weight as it is shown in table 9.
86
Table 9:Weight of attributes
In another part of each interview, the respondent was asked to share his
expectation of possible impact of e-commerce adoption on each attribute of B2B
relationships. They have been asked to rank the impact between 1 to 5, as very low to
very high respectively.
“Product” with ninety percent of respondents’ opinions will have the least
impact from B2B e-commerce adoption. However, the other ten percent assessment is
low on the impact.
87
Figure 8:Distribution of respondents’ opinion on importance of attributes
It is also found that due the opinions can be evaluated as very different due to
the slightly high standard deviation.
With the same scale for measurement, the impact on “interrelationship” will
be very high. While, the impact is expected to be high on “delivery”, “financial
terms”, “ image’ and “ service performance”. And, “product” will have very low
impact after adoption of e-commerce. The summary is shown in table 10.
Table 10: Mean, standard deviation and median of attributes, after e-commerce
The scale of 1 to 100 was used for identifying the impact of adoption of e-
commerce as weight of each attribute. The mean of each attribute weight is posted in
table 11.
88
Table 11:Weight of attributes
Table 12 shows the changes in the weight of each attribute in case of adoption
of e-commerce:
89
4.2.1.7. Which function describes each attribute best?
Furthermore, the respondents has been asked, “How do you expect B2B e-
commerce adoption influence each attribute? Minimizing or maximizing it?” with no
exception all of the respondents chose maximizing as their expected impact of B2B
adoption.
90
Table 14:Threshold settings of attributes, Guassian
Without any doubt 25% was chosen for “delivery”, “financial terms” and “
service performance and 50% for “ interrelationship” due to higher preference by
repondents. This is showing that the expectation of respondents on “ interrelationship”
improvement is higher than othe attributes.
For linear function of “delivery” a scale with steps of 10% has been selected.
According to the number of responses 10% was selected for the indifference threshold
and 50% for preference threshold. (Table 15)
Three different companies have been selected to test the findings of this
research. These three are distributors of same vendor but having their own marketing
channels. Their channels are more or less the same. Their relationships, with a typical
buyer, are different. The differences in their relationships are summarized in table16.
91
Table 16:Assessment of sample relationships
92
In other words, its buyers do not have too much dilemma in their financial issue with
distributor2. Its product portfolio is not rich and therefore the “product” attribute is
rated as medium. “Service performance” is also rated medium. Distributor2 provides
the basics of after sales services and does not allow its channel to provide service to
consumers. Figure 10 shows the profile of relationship 2.
93
Figure 11:Profile of relationship 3
94
4.3.2. Ranking three sample relationships with PROMETHEE
in current B2B relationship situation
95
market, as far as B2B relationship is concerned. Figure 14 is showing the described
situation.
On the other hand, a successful B2B relationship in the current situation could
be gained by using the model of relationship1 while improving the performance in
some of the criterions. The reason for this is laid behind the importance of different
attributes that causes the decision stick, Pi, to be in a middle point of attributes like
“product”, “service performance”, “interrelationship” and “delivery”. In the current
96
situation B2B relationships is based on “how well a supplier supplies and serves its
buyers”.
The other side of this for relationship3 is that distributor3 will benefit most if it
adopts e-commerce as its current relationship is far below the impacted weights in
B2B relationships. Figure 15 shows the complete ranking by PROMETHEE.
97
Figure 15:Complete ranking, impacted
A closer look at GAIA plan, figure 17, disclosing that Pi, the decision stick, is
changed its direction and magnitude. It will be more on the direction of “service
performance”, “interrelationship” and “delivery”.
98
Figure 17:GAIA plan, impacted
99
Chapter Five
Discussion, conclusions and further
researches
5.1. Discussions
The results of this study are showing that B2B relationships in Iranian firms
are having the same attributes. Businesses in Iran are dealing with the same attributes
that have been identified and tested in B2B relationships in other geographical areas.
This means that B2B relationships are more influenced by the characteristics of
industries rather than the domestic situation. At least one attribute, “image”, seemed
100
to have causal effects on another attribute’ “product” in the eyes of couple of
interviewees.
Furthermore, these attributes are hardly covering some soft issues i.e. mutual
trust between businesses that are aspects in B2B relationships.
The results of this study are showing that “product” is the most important
attribute in B2B relationships in Iran.
80% of the respondents believe that “product” is the main attribute in any B2B
relationship. The remaining 20% also believe that “product” is the second most
important attribute in B2B relationship. It seems that “product” is the most important
attribute in a B2B relationship as the standard deviation of the rankings by
respondents is the lowest for this attribute.
101
the improvement on it by adoption of e-commerce and 3) the nature of Iranian
businesses in this study which is more biased toward trade than manufacturing.
5.2. Conclusions
This study shows that B2B e-commerce adoption in Iran can affect firm-to-
firm relationship positively in the absence of supply chains in most of Iranian
industries. The current B2B relationships are hardly seems mature enough to motivate
firms to improve it by adoption of e-commerce. The findings of the current study are
showing that interaction between businesses in value chains is hardly considered as
the modus operandus. Most of the relationships are still in their early stages as
transactions between businesses. Relationships and improving them need more
considerations at the current stage prior to adoption to e-commerce. In the other
words, the improvement in the current B2B relationships is possible by consideration
of B2B relationship’s attributes. This requires the right strategy towards long-term
relationship or interaction as a critical success factor for businesses.
102
Service performance is also another attribute of B2B relationships that is
expected to have an impact of B2B e-commerce adoption. The conclusion of ten
interviews with Iranian decision makers shows that there is a gap between the current
performance of service and their expectations about it. Perhaps the ability of sharing
knowledge via an e-enabled relationship is the reason for the improvement in this
particular attribute of B2B relationships.
Financial terms, image and delivery are expected by the interviewees to have a
low to medium impact by adoption of e-commerce. At least on financial terms this
seems to be under-evaluated, as the current infrastructure and services by financial
institutions as well as regulation are seemed to be obstacles in this regard. In the other
words, given that the infrastructure and services by financial institutions are having
their improvements in near future, the B2B relationships can affect more than the
interviewees expectations. For instance, almost all Iranian banks are moving towards
redefining their services by IT enablement.
The interviewees answers, all of them without any exception, to the question “
Do you have a clear strategy for your next five to ten years?” were “no”. Their
answers can be evaluated as reflect of their uncertainty about the future. This fact is
also brings up a debate on the assessments on “image” as an attribute. In the other
words, shortsightedness in decision makers’ views could be an obstacle for
improvement on the relationships as well as B2B e-commerce adoption.
103
2. The respondents were mainly from trade-oriented organizations.
On the other hand, the effect of corporate strategy on B2B relationships at firm
level and its impacts on the adoption of e-commerce can be useful for firms and other
researchers.
The last but not the least could be considering the effects of taking part in
international supply chains in formation of domestic B2B relationships and the
impacts of adoption of e-commerce.
Based on the findings of this study few recommendations will help firms to
experience a smooth B2B e-commerce adoption transition as well as adjustment of
their current B2B relationships.
Firstly, defining a clear strategy based on the medium to long term objectives
will impact the current B2B relationships and improve them in case of adoption of e-
commerce. It is highly recommended to firms to define their strategy prior to any
attempt to adopt B2B e-commerce.
Secondly, firms need to focus more on all aspects, attributes in this text, of
their relationships with their business counterparts. Understanding their needs in B2B
relationship will help them to minimize the uncertainties and risks involved in their
relationships.
104
Fourthly, e-enablement of any firm value chain could speed up the process of
maturity of their business relationships.
105
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Appendix
Any relationship; i.e. social, business to business; has different attributes. In social
relationships we consider attributes like trust, honesty, etc. while in business to
business relationships the attributes can be categorized as follow:
84. Delivery
85. Financial terms
86. Image
87. Interrelatipnship
88. Product
89. Sevice performance
110
1- How do you rank these attributes in compare to each other?
111
2- Given that financial terms have a value of 1 in the following scale, how do you
weight other attributes?
0 1 10
Financial terms
112
4- How do you rank sub-attributes of each attribute?
113
5- According to e-commerce explanation and the discussion we had, how do
you think B2B e-commerce implmentation impact will be on each attribute?
Please use a 1 to 5 scale 1=Very high, 2=High, 3=medium, 4=very low,
5=low.
114
6- In your opinion which function suits e-commerce impact on each attribute
best?
1 2 3
4 5 6
115
Please complete the following personal information:
116