Chapter 1
Problem and Its
Background
Introduction
Business-to-business marketing is considered by
companies to be a sound business strategy and more so when the electronic means
is utilized (Ramsdell, 2000). For buyers, B2B marketplaces promise not only to
deliver more competitive prices but also to rid the supply chain of a host of
inefficiencies. For sellers, B2B creates a channel for their product
distribution thus minimizing the cost of transaction attained when they
themselves engage with the end-users of their products.
In
business-to-business trade among buyers and sellers, the relationship involves
complex products traded where there are high levels of inter-dependencies. In
these situations it is necessary to co-operate in order to maximize the opportunities
for the network of companies, and to build in protection measures against
opportunistic behavior, either through trust developed over time, contracts, or
a combination of both (Agrawal and Pak, 2001; Ramsdell, 2000; Hollad, 1996).
Factors
such as trust and reputation are critical, and there is also the notion of
cooperative strategies based on mutual benefit rather than the simplistic idea
of maximizing revenues to individual organizations (Farrely and Quester, 2003; Archer and Yuan,
2000; Abramson and Ai,
1999).
There is widespread research and anecdotal evidence of the importance of
relationships in business-to-business markets and concepts such as the virtual
value chain (Rayport and Sviokla, 1995) and cooperative supply chain structures
(
extend the theory to market networks of separately owned organizations choosing
to work closely together.
practice, relationships in business-to-business marketing have come to mean
trust that results in protective and complementary relations in
resources (Hamzah-Sendut et al, 1990 in Abramson and Ai, 1999, p.10).
These factors are all part of the Asian concept of guanxi, the six key
constructs of which being: Mutual trust between parties; Commitment towards
mutual benefit; Empathy towards all parties; Maintenance of relationship;
Provision of favors to partners; and Full reciprocation of favors; (Abramson
and Ai, 1999, p.10).
seller--usually share information at each stage of the supply chain and
transaction process, and the nature and amount of what they share depends on
the quality of their relationship (Agrawal and Pak, 2001). Thus, the successful
exchange of information in the transaction of B2B reflects the amount of
investment and trust buyers and sellers bestow to each other.
The B2B
relationship is even more controversial in the emerging market of B2B
retailing. The business is lucrative where Internet business-to-business sales will reach $1.3 trillion by 2003 and;
by 2004, business-to-consumer sales will reach $100 billion (Lord, 2000). Aside
from the potentially huge market offered by the internet, E-commerce
technologies provide effective and efficient ways in which corporate buyers can
gather information rapidly about available products and services, evaluate and
negotiate with suppliers, implement order fulfillment over communications
links, and access post-sales services (Chaston and Mangles, 2003). From the
supplier side, marketing, sales, and service information is also readily
gathered from business partners. Building and maintaining B2B relationships is
the key to success in e-commerce and, unless service is maintained, customer
loss may result, more than offsetting any cost efficiencies due to introducing
e-commerce technology (Archer and Yuan, 2000). Since the core of e-commerce is
information and communications, support for managing customer relationships
particularly trust is of primary consideration in the buyer-seller relationship
(Archer and Yuan, 2000).
Although there is some
evidence of a move towards electronic markets, there is also strong evidence to
support the hypothesis that electronic communication technologies will forge
closer relationships rather than create more fragmented ones. This is
particularly true in business-to-business markets where the levels of
interdependencies between buyers and sellers are typically extremely high
compared with business to consumer markets (Johnston and Lawrence, 1988,
Konsynski and McFarlan 1990).
Background of the Problem
There is little empirical research that examines the
effects of business-to-business marketing orientation on the two most important
relationship marketing concepts, namely trust and commitment (Farrely and
Quester, 2003). Farrely and Quester (2003) argued that the business
relationship dyad aimed at securing long lasting sponsorship relationships
between the buyer and the seller is largely affected by the market orientation
of both parties.
due to the fast advancing B2B marketplace and its impact on changing the
business environment as a whole, the need to recognize the adaptation of
businesses to a new form of inter-organizational relationships need to be
addressed. They suggested that not only must B2B relationship focus on customer
relationship but also, suppliers and retailers must also establish a
relationship in order to maximize their business gains.
A glance in any business or consumer magazine will
clearly demonstrate that marketers are putting this suggestion into practice.
The Internet's one-to-one promise still appears to lie in the future. Duboff
and Spaeth (2000) suggest that the online population will more closely mirror
the general population in age and income demographics in the
the
cost of entry into this business, the necessary (product) ingredients, the
relevant differentiators and the unmet needs of potential customers. While
these factors will vary by product category and consumer segment, businesses
can gain insight by studying today's lead online consumers and successful
online businesses. Therefore, continuous market research is necessary in order
to understand the characteristics and dynamics of the online marketplace. Not
every business can sell online, but every business must bond with its most
profitable customers. Thus, an on-going dialog between marketers and their
customers is mandatory. In fact, an ongoing dialog can enable small businesses
to effectively compete against larger ones.
example of a company that has achieved virtual integration with its suppliers,
which has enabled the company to achieve remarkable growth and customer service
levels. Similarly, in business markets, CISCO system has also demonstrated
massive cost savings and strategic benefits from linking closely with customers
and suppliers (Klineberg 1998). It is clear that developments in
business-to-business markets will continue to create new methods of working.
these business-to-business examples are not examples of pure electronic markets
in which there is rapid switching between customers and suppliers. The
relationships between separate companies in business markets clearly matter particularly
in the retail industry where it is characterized as of high levels of
inter-dependencies.
B2B to work, good governance is needed in order to nurture the relationship
with the companies and organizations. Given that the marketplace is highly
competitive and conflict must be avoided in order to retain the loyalty of the
organizations, the seller usually establishes a strategy of management of
customer relations to avoid defections.
the factors affecting the relationship of business-to-business short-term and
long-term transactions, the impact of trust and commitment on the business
decisions of the supplier and buyer, the foundations of building trust in B2B
relationships and the challenges faced by this relationship. Moreover, the
relationship shall also be examined in the context of the worldwide web or the
e-commerce in terms of customer
electronics business markets.
Statement of the Problem
property rights, but businessmen can still make deals on the strength of a
handshake. Social scientists have argued that formal methods of enforcing
cooperation, like contracts, financial incentives, and the law, do not tell the
whole story. Trust may also play a part - as an alternative, informal means of
sustaining cooperation, which works alongside more formal guarantees, or even
in their absence. Some theorists claim that trust is a social virtue that
cannot be reduced to strategic self-interest; others argue that trusting
another person is ultimately a rational calculation based on information about
that person and the incentives they face. Lewis & Weigert (1985)
characterized trust as the "undertaking of a risky course of action on the
confident expectation that all persons involved in the action will act
competently and dutifully" (p. 971). Similarly, Robinson (1996) defined
trust as a person's "expectations, assumptions, or beliefs about the
likelihood that another's future actions will be beneficial, favorable, or at
least not detrimental to one's interests" (p. 576). Other influential
definitions construe trust as a more general attitude or expectancy about other
people and the social systems in which they are embedded (Garfinkel 1963,
Luhmann 1988).
the study intends to identify how buyers make choice of suppliers in term of
trust in
home furnishing and customer electronics business markets. Specifically, the
study intends to answer the following questions:
- How does a business-to-business
marketing relationship developed specifically in - How is trust
developed in the B2B marketing relationship between buyers and sellers? - What is the role of relationship marketing and trust in a
business-to-business trade orientation? - What are the effects of trust in the buyer-seller relationship in
terms of the company’s:
Complexity
Relationships as investments – their long-term nature
Adaptation
Power and dependence
Arial'>e.
Conflict and cooperation
Arial'>f.
Reciprocal trust rather then formality
- Is there a significant relationship between customer and company
trust and the overall performance of the company in terms of sales?
of the Study
The
topic on B2B relationship has been seldom discussed in recent literature,
specifically through electronic means. This might be due to its inherent
contemporary nature. This study would be a welcome addition to the existing,
although scarce, materials on e-commerce and B2B marketing. It shall as well be
an addition to the ample resources on the concept of trust between suppliers
and consumers.
The
study shall be contributing to the works on human behavior. The interaction
between the buyer and seller is of utmost focus of the study. Likewise, a greater
understanding of the process of acquiring trust shall be also uncovered through
the course of this study.
of Terms
Business-to-business
company and another company, as opposed to a transaction involving a consumer.
The term may also describe a company that provides goods or services for
another company.
Consumer
An individual who buys products
or services for personal use and it is not for manufacture or resale.
E-commerce
businesses and consumers over the Internet. Subdivided into three categories:
business to business or B2B (Cisco), business to consumer or B2C (Amazon), and
consumer to consumer or C2C (eBay); also called electronic commerce.
Online Trading
selling securities over the Internet, or to a lesser extent, through a broker’s
proprietary software.
an asset for payment. It is also referred in accounting as any event or
condition recorded in the book of accounts.
style='mso-ansi-language:EN-GB'>Chapter 3
METHODS AND PROCEDURE
style='mso-bidi-font-family:Arial;color:windowtext;mso-ansi-language:EN-GB'>This
chapter shall discuss the research methods available for the study and what is
applicable for it to use. Likewise, the chapter shall present how the research
will be implemented and how to come up with pertinent findings.
Method of Research to be
Used
type of research shall be the framework in illustrating the dynamics of B2B
transactions in
home furnishings. This can be done through the demonstration of the activities
of companies by interviewing key players in
interview with the personnel from home furnishings and electronic industry
shall be comprised of two parts: the structured interview and the survey
questionnaire. The interview shall provide a qualitative probing on the deeper
workings of the company, the reason for their choice of the B2B transaction,
the strengths and weaknesses of the method, the threats and the opportunities
of their B2B market and the impact of this in the home furnishing and the
electronic industry. Finally, the interviewees shall evaluate the value of
trust and commitment within B2B transaction.
other hand shall assess the perceived effects of business-to-business
transactions on the respondents’ companies’ long and short-term goals and how
it is complimented or threatened by the B2B method. Moreover, the strengths,
the weaknesses, threats and opportunities posed by the B2B in the respondents’
respective companies shall be assessed. Consequently, the perception of the
respondents on the worldwide web or the e-commerce in terms of
analyzed.
research method uses observation and surveys. In this method, it is possible
that the study would be cheap and quick. It could also suggest unanticipated
hypotheses. Nonetheless, it would be very hard to rule out alternative
explanations and especially infer causations. Thus, this study will use the
descriptive approach. This descriptive type of research will utilize
observations in the study. To illustrate
the descriptive type of research, Creswell (1994) will guide the researcher
when he stated: Descriptive method of research is to gather information about
the present existing condition. The purpose of employing this method is to
describe the nature of a situation, as it exists at the time of the study and
to explore the cause/s of particular phenomena. The researcher opted to use
this kind of research considering the desire of the researcher to obtain first
hand data from the respondents so as to formulate rational and sound
conclusions and recommendations for the study.
descriptive type of research also presents a lesser time frame in completing
the research without sacrificing the needed data for the study. The interview
and the survey can be administered within an allowable timeframe. In addition,
since working for the home furnishing and electronic industry for a long time,
it had allowed the researcher to establish contacts with people who can be
interviewed and surveyed for this study.
Research Design
described in this document is based fundamentally on both
This permits a flexible and iterative approach. During data gathering the
choice and design of methods are constantly modified, based on ongoing
analysis. This allows investigation of important new issues and questions as
they arise, and allows the investigators to drop unproductive areas of research
from the original research plan.
style='mso-bidi-font-size:12.0pt;line-height:200%;mso-ansi-language:EN-GB'>The
primary source of data will come from interviews conducted by the researcher
among companies and organizations involved in business-to-business transactions
with
Home Furnishings. After the target interviewees had been identified, a history
of financial transactions between the two companies shall be requested in order
to quantify the extent of the relationship financially. The data shall be compared
to the total amount spent on similar products in order to ascertain the value
of the B2B relationship.
sources of data will come from published articles from business and e-commerce
journals, theses and related studies on business management, particularly those
related to buyer-seller relationships.
design, the researcher will gather data, collate published studies from
different local and foreign universities and articles from social science
journals; and make a content analysis of the collected documentary and verbal
material. Afterwards, the researcher
will summarize all the information, make a conclusion based on the null
hypotheses posited and provide insightful recommendations on the dealing with
business-to-business market relationships.
Respondents
of the Study
font-style:normal;mso-bidi-font-style:italic'>The general population for this
study will be composed of selected buyers and sellers engaging in electronic
commerce, particularly those directly related to Singapore
home furnishing and customer electronics business markets
font-style:normal;mso-bidi-font-style:italic'>. The researcher seeks to gather
information from these personalities, five for each of the chosen company,
totalling twenty-five (25) respondents.
Instruments
to be Used
To determine
the effects of e-commerce to the
the researcher will prepare a set of guide questions for the interview that
will be asked to the intended respondents.
To determine
the perception of the respondents on B2B transaction in
furnishings, the researcher prepared a questionnaire and a set of guide
questions for the interview that was asked to the intended respondents.
Arial'>The respondents graded each statement in the survey-questionnaire using
a Likert scale with a five-response scale wherein respondents will be given
five response choices. The equivalent weights for the answers will be:
Range
– 5.00 Strongly
Agree
3.50 – 4.00
2.50 – 3.49
1.50 – 2.49
0.00 – 1.49
font-family:Arial;mso-ansi-language:EN-GB'>
style='font-size:12.0pt;mso-bidi-font-size:10.0pt;line-height:200%;font-family:
Arial;mso-ansi-language:EN-GB'>Validation of the Instrument
For
validation purposes, the researcher will initially submit a sample of the set
of interview questions and after approval; the survey will be conducted to five
respondents from five different companies engaging in e-commerce.
researcher will ask the respondents for any suggestions or any necessary
corrections to ensure further improvement and validity of the instrument.
of the interview questions to find out the reliability of the instrument.
questions and will change words that would be deemed difficult by the
respondents into much simpler terms.
style='font-size:12.0pt;mso-bidi-font-size:10.0pt;line-height:200%;font-family:
Arial;mso-ansi-language:EN-GB'>
style='font-size:12.0pt;mso-bidi-font-size:10.0pt;line-height:200%;font-family:
Arial;mso-ansi-language:EN-GB'>Administration of the Instrument
style='mso-bidi-font-size:12.0pt;line-height:200%;mso-ansi-language:EN-GB'>The
researcher will exclude the five respondents who will be initially used for the
validation of the instrument. The
researcher will also tally, score and tabulate all the responses in the
provided interview questions. Moreover, the interview shall be using a
structured interview. It shall consist of a list of specific questions and the
interviewer does not deviate from the list or inject any extra remarks into the
interview process. The interviewer may encourage the interviewee to clarify
vague statements or to further elaborate on brief comments. Otherwise, the
interviewer attempts to be objective and tries not to influence the
interviewer's statements. The interviewer does not share his/her own beliefs
and opinions. The structured interview is mostly a "question and answer"
session.
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