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 (Holland
In practice, relationships in business-to-business marketing have come to mean trust that results in protective and complementary relations in Asia , and will thus include the sharing or pooling of 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).
Two adjacent players--the buyer and the 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.
Lu and Anthony (2003) argued that 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 U.S. , Germany , the United Kingdom and Scandinavia . Businesses should ask themselves about 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.
Dell is an 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.
However, 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.
Moreover, Ramsdell (2000) suggested that in order for 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.
This paper attempts to investigate 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
Commercial transactions depend upon enforceable 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).
In this light, the study intends to identify how buyers make choice of suppliers in term of trust in Singapore
- How does a business-to-business marketing relationship developed specifically in Singapore Home Furnishing?
- 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:
a. Complexity
b. Relationships as investments – their long-term nature
c. Adaptation
d. Power and dependence
e. Conflict and cooperation
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?
Significance 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.
Definition of Terms
Business-to-business
Is also called B2B. A transaction occurs between a 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
The buying and selling of products and services by 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
The increasingly popular activity of buying and selling securities over the Internet, or to a lesser extent, through a broker's proprietary software.
Transaction
An agreement between a buyer and a seller to exchange an asset for payment. It is also referred in accounting as any event or condition recorded in the book of accounts.
Chapter 3
METHODS AND PROCEDURE
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
The descriptive type of research shall be the framework in illustrating the dynamics of B2B transactions in Singapore Singapore
The survey on the 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 customer electronics business markets shall be analyzed.
The descriptive 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.
Moreover, the 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
The research described in this document is based fundamentally on both qualitative and quantitative research methods. 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.
The primary source of data will come from interviews conducted by the researcher among companies and organizations involved in business-to-business transactions with Singapore
The secondary 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.
For this research 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
The general population for this study will be composed of selected buyers and sellers engaging in electronic commerce, particularly those directly related to Singapore
Instruments to be Used
To determine the effects of e-commerce to the Singapore
To determine the perception of the respondents on B2B transaction in Singapore
Range Interpretation
4.50 – 5.00 Strongly Agree
3.50 – 4.00 Agree
2.50 – 3.49 Uncertain
1.50 – 2.49 Disagree
0.00 – 1.49 Strongly Disagree
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. After the questions were answered, the researcher will ask the respondents for any suggestions or any necessary corrections to ensure further improvement and validity of the instrument. The researcher will again examine the content of the interview questions to find out the reliability of the instrument. The researchers will exclude irrelevant questions and will change words that would be deemed difficult by the respondents into much simpler terms.
Administration of the Instrument
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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