The nature of industrial buying decisions

Integration in the Global Sourcing Organization — An Information Processing Perspective

“…In comparison with testing an existing theory (Popper 1959) or developing a new theory (Glaser and Strauss 1967;Eisenhardt 1989), the key idea of theory elaboration as applied in this paper is to extend the IPF to the global sourcing context, thereby providing theoretical explanations for the use of different integration mechanisms across different categories. The (1) Purchase novelty Experience the firm has on purchasing the item: new task, straight rebuy or modified rebuy New tasks are more uncertain because the firm does not have the experience and knowledge of the purchase Cardozo (1980), Hill (1972, McQuiston (1989) (2) Product complexity Degree to which the product is a commodity or highly customized Customization increases the understanding of product characteristics and purchasing process, making the situation more uncertain Hill (1972), McQuiston (1989), Xideas and Moschuris (1997) (3) Purchase importance Degree and type of risk perceived in the purchasing situation and purchase volume High volume and risk increase the exposure to loss, making the purchase more uncertain Cardozo (1980), Hill (1972), Bunn (1993) (4) Demand volatility Degree to which the demand of the purchased item changes across periods Strong demand fluctuations make the planning of purchase difficult, increasing uncertainty of the situation Walker and Weber (1984) (5) Supply market characteristics Degree of global availability of the item, uncertainty in production and supply, stability of supply A turbulent environment characterized by a rapid rate of change and lacking transparency of supply markets, making the situation more uncertain Cardozo (1980), Bunn (1993), Xideas and Moschuris (1997) outcome of the paper can therefore be classified as middle-range theory (Merton 1968;Bourgeois 1985;Layder 1993) which is defined as theory that generalizes beyond a particular case but within a particular context or setting (Woodside, Liukko and Vuori 1999;Ketokivi 2006).…”

“…The use of several integration mechanisms, particularly more elaborate lateral ones like global teams, indicates that uncertainty and subsequent information processing requirements are high. The category characteristics indicate low uncertainty as nearly all cases are characterized as straight rebuy (Robinson et al 1967) with stable demand patterns (Walker and Weber 1984) and high degree of standardization (Hill 1972;Cardozo 1980;McQuiston 1989). Thus, the purchasing task is largely planable with little need to gather additional information during task execution.…”

“…Implementation of complex integration mechanisms indicates a high level of uncertainty in completing the purchasing task. In contrast to the first group with the focus on economies of scale, here uncertainty induced by category characteristics is significant; cases are characterized by either a new buy or modified rebuy (Robinson et al 1967;Cardozo 1980), high category importance (Bunn 1993;Lewin and Donthy 2005), high level of technical complexity (Hill 1972) and volatile demand pattern (Walker and Weber 1984;Woodside et al 1999). For example, consulting and agency services are tailored to customer needs and therefore represent mostly new buy, are of high relevance for the business, and the specification of service needs is challenging and requires expertise.…”

The use of bundling in B2B online reverse auctions

“…Industrial buying is frequently influenced by the complexity or specification difficulty of the individual items to be purchased (e.g., Hill, 1972;Fisher, 1976;Lilien and Wong, 1984;McQuiston, 1989;Kotteaku et al, 1995). High specification difficulty can be described by the item being complex or technical in nature, or having a high engineering content (cf., McCabe, 1987;Heide and John, 1988).…”

Towards a New CISG

“…(1) An earlier account of complex goods refers to a differentiated product, which is new and technically complex, constituting an initial purchase by the customer and intended for a new application, requiring specialized installation and technical after-sales service (Hill, 1972).101 While groundbreaking at the time, this definition describes a run-of-the-mill purchase in today's B2B world; (2) A second generation takes into account two factors: "the number of functions the product performs (product complexity) and the number of technologies or functional specialties across which the project must be managed (management complexity)" (Griffin, 1993, p. 115). From this perspective, total complexity is a combination of functional and technological complexity, and complex goods normally perform a number of different functions; (3) The third generation of complex goods is based on information, Global Positioning System (hereinafter, "GPS"), drones, 3-D printing and nanotechnology;102 focus is no longer on the good itself, but on how actively it interacts with other goods and people, how much data it is able to blog along the Internet and how visible it sits throughout the mapping of the real into the virtual world.…”