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This is to certify that the
thesis entitled
AN EXPLORATORY STUDY OF SITUATIONAL VARIABLES
IN INDUSTRIAL BUYING IN RIO GRANDE DO SUL, BRAZIL

presented by

DENNI S. ALAN GUTHE RY

has been accepted towards fulfillment
of the requirements for

Ph - D . degree in W.

   
   

 

, ‘ / ,,
T /' / '
/ mjoryrgfeésor

Date August 30, 1979

 

0-7639

AN EXPLORATION OF SITUATIONAL VARIABLES
IN INDUSTRIAL BUYING BEHAVIOR IN
RIO GRANDE DO SUL, BRAZIL

by
Dennis Alan Guthery

A DISSERTATION
Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of
DOCTOR OF PHILOSOPHY
Department of Marketing and Transportation Administration

1979

ABSTRACT

AN EXPLORATORY STUDY OF SITUATIONAL VARIABLES
IN INDUSTRIAL BUYING IN RIO GRANDE DO SUL, BRAZIL

by
Dennis Alen Guthery

Environmental or situational variables have been major components
iii several industrial buying models. Despite the importance model build-
ers attach to these variables, this area of industrial buying has received
relatively little attention from marketing researchers. This lack of
empirical research prompted this exploratory study.

The purpose of this study of situational variablesin industrial
buying was twofold. First, understanding was sought of their power to-
explain differences in buying behavior between industrial firms in the
United States and in Rio Grande do Sul, Brazil. Second, individual pur-
chases of industrial firms were studied to identify situational factors
which restrict or eliminate the need for decision making.

The first phases of the research focused on comparative buying
behaviors. The study respondents were twenty-four purchasing officers
representing firms from six industrial sectors: chemicals, electro-elec-
tronic equipment, mechanical equipment, metallurgical, textiles, and
transportation equipment. The first research instrument was a thirty-
item interview guide. Four of the questions were selected from the

literature review as representative of major areas of industrial buying.

 
 

The remainder were chosen to gain information concerning existing buying
practices, procedures, and preferences; Brazilian environmental factors,
that is, those not found in the United States; and relevant personal in-
‘for1nation about the respondents.

The second instrument was a translated version of a thirty-item
questionnaire which has been used in the United States. The questionnaire
focused on identifying the buying decision makers for purchases of mater-
ials, component parts and equipment.

In the second phase, five modified rebuys were mapped over a two-
month period in three mechanical equipment firms. Information was gathered
through interviews with buying center members and by examining correspon-
dence between the buyer and potential vendors.

Two situational factors, a working capital shortage and government
monoploy over processes, appeared to explain the difference in buying
behavior which were found between firms in Rio Grande do Sul and the United
States. Concerning buying respondibilities, quality control was found to
have the major responsibility for inviting bids and for evaluating sub-
unitted materials, component parts, and equipment. This increased responsi—
bility vis-a-vis quality control's role in these decisions in the United
States appears to be due to the problem identified in other research stu-
died of finding and maintaining qualified vendors in developing countries.

In the case studies, two situational factors, monopoly and import
restrictions did eliminate the need for decision making in choosing vendors.
In other instances, exclusive dealerships and new product introductions
restricted the decision making to consideration of generically competing

products.

In summary, the study findings support the inclusion of situational
variables as important components in models of buyer behavior. Some find-
ings of U.S. studies were supported, however, situational factors appeared
to have been responsible for differences in buying behaviors. Care should
be taken, therefore, to study the impact of relevant situational variables

before applying the conclusions from the U.S. studies in other business

environments.

TABLE OF CONTENT

EAQE
CHAPTER I
INTRODUCTION
1. Purpose of the Study ................. 2
II. The Study Location ................. 2
III. Overview of Methodology ................. 3
IV. Organization of the Study ................ 6
CHAPTER II
REVIEW OF THE LITERATURE
I. The Concept of Models ................. 7
II. Research Findings ................. 10
Environmental Influences ................. lO
Organizational Influences ................ l4
Interpersonal Influences ................ 25
Individual Influences ................ 4O
Personality ................ 40
Role Set ................ 42
Motivation ................ 44
Learning ................ 47
Predispositions and Preferences ............ 48
Perceived Risk ................ 54
Information Processing ................ 73

ii

TABLE OF CONTENTS (cont'd.)

fygg;

Information Source Credibility ............. 82
Decision Style ................. 87
Interorganizational Influences .............. 92
Buyer-Seller Dyads ................. 92
Reciprocity ...... . .......... 95
Influence Tactics ................. 101
The Search and Evaluation Process ............. 104
Information Sources ................. 104
Search Behavior ................. 119
Evaluation Criteria ................. 123
III. Models and Theoretical Essays ............... 156
The Hobbesian Model ................. 157
The Webster Model ................. 159
The Robinson-Paris Model ................. 162
Environmental Factors ................. 166
Roles of Buying Influences ............... l67
User-Supplier Relationships .............. 168
The Mind Model ................. 168
Buyer's Characteristics ................ 169
Interpersonal Variables ................ 171
Organizational Variables ................ 171
Source Characteristics ................ 172
Environmental Variables ................ 173
The Cardozo Model ................. 173

iii

IV.

TABLE OF CONTENTS (cont'd.)

Purchasing Strategy ................
Individual Characteristics ..............
Problems and Perceived Risks .............
Purchase Requisitions ................
Environmental Forces ................
The Webster and Mind Model ...............
Environmental Influences ...............
Organizational Influences ..............
The Behavioral Theory of the Firm ..........
Social Influences ................
Individual Influences ................
The Sheth Model ................
The Hill and Hillier Model ...............
The Exchange Model ................
A Synthesis of the Industrial Buying Literature .....
Major Research Trends ................
Buying Influences, The Buying Center, Conflict
Resolution ................
The Industrial Buying Process ..............
Perceived Risk, Risk Reduction and Decision Style . . . .
Buyer Motivation and Vendor Evaluation .........
Interorganizational Studies ...............

Environmental/Situational Variables ...........

iv

3555
175
177
177
177
178
179
181
183
185
186
186
187
193
197
215
215

221
225
229

241
244

TABLE OF CONTENTS (cont'd.)

PACE

CHAPTER III

THE RESEARCH INTERVIEW

'1. Four Comparative Questions ................. 249
II. The Remaining Questions ................. 253
III. Comparative Findings and Conclusions ........... 254
IV. A Summary of the General Findings ............. 261

CHAPTER IV

THE RESEARCH QUESTIONNAIRE

I. Introduction . ................ 265
II. Decision Making for Material Purchases .......... 266
III. Decision Making for Component Part Purchases ....... 270
IV. Decision Making for Equipment ............... 272

CHAPTER V

FIVE CASE STUDIES OF MODIFIED REBUYS

I. The Participating Firms ................. 276
II. Case Number One: Oil Gauge Casing ............. 277
III. Case Number Two: Galvanized Sheet Steel .......... 278
IV. Case Number Three: Gas Forklift . . . ........... 279
V. Case Number Four: Steel Bending Machine .......... 280
VI. Case Number Five: Air Conditioner Filter ......... 282
VII. Conclusions ................. 282

TABLE OF CONTENTS (cont'd.)

£A§§_

CHAPTER VI

STUDY CONCLUSIONS AND LIMITATIONS

I. Theoretical Findings ................. 286
II. Practical Applications ............ i ..... 287
III. New Areas of Research ................. 288
IV. Limitations ................. 288

APPENDICES
Appendix A Interview Guide ................ 289
Appendix B Questionnaire ................ 291

Appendix C Cover Letter from the President of the

Federation of Industries of Rio Grande do Sul . 292
Appendix D Cover Letter from the Director of Graduate

Programs in Administration at the Federal

University of Rio Grande do Sul ........ 293

SELECTED BIBLIOGRAPHY ................. 294

vi

LIST OF TABLES

 

 

 

M 88.6.5.
1. A Behavior Role Matix for Organizational Buying ....... 44
2. Types of Buying Situations -- "Buyclasses" . . . ...... 163
3. The Buygrid Analytical Framework for Industrial

Buying Sitiation ................ 164
4. Venor Selection Strategies ................. 176
5. Pattern of Buying Decisions ................. 197
6. Power System Interactions of Industrial Marketing ...... 214
7. A Summary of Product/Supplier Ranked Criteria ........ 254
8. The Purchase of Materials: A Comparison of Study Findings

in Rio Grande do Sul, Brazil, with How Industry Buys/1970 . 267
9. The Purchase of Component Parts: A Comparison of Study

Findings in Rio Grande do Sul, Brazil, with How Industry_

Buysgl970 ................. 271
10. The Purchase of Equipment: A Comparison of Study Findings

in Rio Grande do Sul, Brazil, with How Industry_Buys/l970 . 273
11. Summary Results of the Five Modified Rebuy Case Studies . 284

vii

LIST OF FIGURES

FIGURE

1.

0'1 «h u N
I O

DQNO‘

11.
12.
13.
14.

An Overview of the Study Purposes and Research Approaches. .
The Buyer's Filtering Process ................
Buyer-Seller Interpersonal Communication Model .......
. Generalized Flow Chart of Vendor Selection Process .....
. Outline of the General Model on the Industrial
Purchasing Process ................
. Initiation of a New Supplier ................
Feedback on Current Suppliers Process ...........
Adjustment of Size of Vendor List (Reduction) .......
. Conditions for Buyer Responses . ..............

10.

A Proposed Framework for the Analysis of the Various

Determinants of the Buyer's Behavior ............
Cardozo's Conceptual Scheme of Vendor Choice Factors . . . .
A Model of Organizational Buying Behavior . ........
An Integrative Model of Industrial Buyer Behavior .....

Exchanges in Industrial Marketing and Purchasing

Interactions ................

viii

PAGE

81
81
124

148
150
151
152
153

CHAPTER I
INTRODUCTION

Enviornmental or situational variables have been major components
in several industrial buying models, including those developed by Robin-
son and Faris (1967), Eind (1967a), Cardozo (1968), Webster and Wind
(19728), and Sheth (1973). Sheth (1973) spoke of the "critical role of
situational factors" in discussing the last component of his model:

The model described so far presumes that the the choice

of a supplier or brand is the outcome of a systematic deci-

sion-making process in the organizational setting. However,

there is ample empirical evidence in the literature to sug-

gest at least some of the industrial buying decisions are

determend by ad hoc situational factors and not by any

systematic decision-making process...and for which theori-

zing or model building will not be relevant or useful.

What is needed in these cases is a checklist of empirical

observations of the ad hoc events which vitiate the neat

relationship between the theory or the model and a speci-

fic buying decision (pp. 55-56).

Webster and Wind (1972a) did not view environmental variables as
determinants but as constraints on decision making which also affected,
sometimes decisively the operational outcome of buying decisions. They
also noted that these factors are likely to vary from one country to
another, and that environmental influences are subtle and pervasive as
well as difficult to identify and to measure. Despite the importance
model builders attach to these variables, the problems mentioned by Webster
and Wind probably explain why this area of industrial buying has received

relatively little attention from marketing researchers. This lack of

empirical research prompted the exploratory study discussed in the follo-

wing sections.

Purpose of the Study

The purpose of this study of situational variables in industrial buy-
ing was twofold. First, understanding was sought of their power to explain
differences in buying behavior between industrial firms located in the
United States and in Rio Grande do Sul, Brazil. Second, in response to
the need identified by Sheth (1973) for a checklist of empirical observa-
tions of these situational factors, individual purchases of industrial
firms were studied to identify factors which substantially restrict or

eliminate the need for buying decision making.

The Study Location

Firms in the state of Rio Grande do Sul, Brazil, were chosen for this
study for two reasons. First, the business environment in Braxil, in gen-
eral, and in Rio Grande do Sul, in particular, differs substantially from
that in the United States, which facilitates the identification of situa-
tional variables. The Brazilian business environment is characterized by
(1) an annual inflation rate of more than 40 percent (1976 to date);
(2) price controls on many basic materials and products; (3) restrictions
on all importations above US $2,000. Above this value, a deposit must be
with the government in order to import. The deposit is equal to 100 per-
cent of the F.0.B. price of the importation and is returned one year after
the product clears customs. The government pays no interest on the deposit.
nor is the sum subject to monetary correction; and (4) a shortage of work-
ing capital as industry must compete with all other sectors, expecially

the speculative real estate sector, for operating capital. A primary

c"

a,

feature of the Rio Grande do Sul business environment is the fact that it
is located 600 miles from Sao Paulo, Brazil's largest industrial complex.
Sao Paulo is the source of many suppliers for and is the closest sheet
steel mill to Rio Grande do Sul firms.

The second reason for choosing this location is that the author is a
permanent resident of Rio Grande do Sul. Because of past associations
with local university and industry leaders, it was felt that the coopera-
tion of enough firms to complete the study could be enlisted. This con-
sideration is most important in view of the difficulties of conducting
marketing research in a developing country. Gaining confidential informa-
tion from consumers is particularly difficult (Erickson, 1963, and Boyd
et a1, 1964). It was felt that obtaining data from industrial firms,
especially when they had lttle motivation for participating, would be

highly unlikely without local sponsors of the research.

Overview of Methodology

A schematic diagram of the relationships between the study purposes
and the research approaches is found in Figure 1. Research approaches A
and B were designed to meet the first study purpose of examining the role
of situational factors as explanatory variables for differences in buying
behavior between firms located in the United States and in Rio Grande do
Sul. The research instrument for approach A was a thirty-item interview
guide. Four of the questions were selected from the literature review
as representative of major areas of industrial buying. The remainder were
chosen to obtain information concerning existing buying practices, proce-
dures, and preferences; Brazilian environmental factors, that is, those not

found in the United States: and relevant personal information about the

FIGURE 1

AN OVERVIEW OF THE STUDY
PURPOSES AND REASEARCH APPROACHES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STUDY
PURPOSES:
A B
SITUATIONAL FACTORS AS CHECK-LIST OF EMPIRICAL
EXPLANATORY VARIABLES OBSERVATIONS OF
FOR DIFFERENCES IN SITUATIONAL FACTORS
COMPARATIVE BUYING WHICH RESTRAIN OR ELIMINATE
BEHAVIORS DECISION MAKING
LITERATURE
REVIES
RESEARCH
APPROACHES:
A . B C _
"'——'-_7
SAMPLE COMPARATIVE REPLICATION OF
RESEARCH QUESTIONS HOW INDUSTRY BUYS/1970 FIVE CASE STUDIES
FINDINGS FINDINGS FINDINGS
GENERAL
FINDINGS:

 

V

 

imm%UManma .
lPRACTICAL APPLICATIONS:
ENEW AREAS OF RESEARCH i

 

respondents. The second research approach used a questionnaire concerning
buying decisions regarding materials. components and equipment. This in-

strument was based on the Scientific American study, How Industry Buys/1970

 

(The Research Department of the Scientific American, 1969). These research
instruments are reproduced in Appendices A and B.

The two research instruments were informally tested with a sales and
a production executive and formally tested with three purchasing agents.
This procedure resulted in the rewarding of some questions for clarity in
Portuguese.

After the pretest, contact was made with the director of Graduate
Programs in Administration, Federal University of Rio Grande do Sul, and
the president of the Federation of Industry, Rio Grande do Sul, both of
whom furnished letters of introduction (see Appendices C and 0).

Four firms from each of the following sectors were selected as parti-
cipants: metallurgical, mechanical, transportation equipment, electro-
electronic equipment, textiles, and chemicals. The requirements were that
firms be located in the Porto Alegre or Caxias do Sul metropolitan areas
and that they have a minimum of 500 employees. The geographical restriction
was necessary to permit comparisons, as these cities are the first and
second largest industrial complexes in the state. The size restriction
was necessary to enable comparisons with the U.S. firms (only 18.5 percent
of the respondents in the Scientific American study were in firms with
less that 500 employees). The location restriction does not limit the
study findings to the firms in these two metropolitan areas; only three
firms in the selected sectors were excluded from the study due to their
location outside these areas.

The president of the Federation of Industry provided a list of personal

"‘1 1

 

‘a.
UV

 

 

 

I
‘

i'.
‘ I
‘b

1"

5.-71

friends as contacts in a majority of the firms in the study pOpulation. In
industries for which no such contacts in the required number of four firms
were available, participants were chosen by convenience from a list of
firm directors in the Industry Annual (Anuario das Industrias do Estado do
Rio Grande do Sul, 1979). Although a convenience sample was used in the
data collection, it is felt that the results are representative of the
study population. Including the firms that participated in the pretesting
as well as in both phases of the research project, 30 of the total 43
firms in the study population contributed information. This constitutes

a sample of 70 percent of the study population. Only one firm among the
31 contacted expressed a desire not to participate.

Potential participants were contacted by telephone and an interview
with the highest level purchasing executive in the organization was arranged.
Because of the delays involved, this method was changed, and the secretar-
ies of these executives were called. They either made the appointment or
put through the call so that the author might do so.

After the data were collected, they were tabulated for comparison
either with the findings from the literature review (in the case of the
interview guide) or with How Industry Buys/1970 (in the case of the ques-
tionnaires). Explanations for the observed differences were proposed.

The objective of the third research approach was to gather and analyze
data relevant to the second research purpose of identifying situational
factors which substantially restrict or eliminate the need for buying deci-
sion making. Three firms, all in the mechanical industry, participated
in this phase. The firms were chosen by convenience. Since there was a
need for virtually free access to different members of buying centers in

addition to examination of documents and correspondence, a personal friend

5./f5

with many contacts in industry agreed to serve as a character witness and
personally persuade the directors of the firms in question to participate.
Five modified rebuys were mapped over a two-month period. Research
centered on causes for rebuys, how contact was established between buyer
and seller, the composition of the buying center, and why the particular
product or supplier was chosen. This information was gathered from inter-
views with at least two members of the buying center and from correspon-
dence related to the purchase. Finally, a list was made of the situational

variables which were operative in these purchases.

Organization of The Study

Chapter 2 reviews the concept of models, presents the research find-
ings of industrial buying studies, discusses the major models of industrial
buyer behavior, and offers a synthesis of the industrial buying literature.
Chapter 3 explains the development of the interview guide and offers ten-
tative explanations for the differences between the survey results and what
was expected based on the buyer behavior literature. Chapter 4 discusses
the How Industry Buys/1970 survey and suggests explanations for the differ-
ences in the findings between that study and this one. Chapter 5 traces
five modified rebuy purchases and identifies the situational variables
which substantially restrict or eliminate the need fbr buyer decision making.
Finally, Chapter 6 discusses the theoretical findings of the research, iden-
tifies practical applications and new areas of research, and discusses the

study limitations.

CHAPTER II
REVIEW OF THE LITERATURE

This chapter contains an introduction to the literature of marketing
models and research findings in industrial buying. The research findings
are grouped under the six headings of environmental, organizational, inter-
personal, individual, and interorganizational influences and the search and
evaluation process. A presentation is also made of industrial buyer behav-
ior models and theoretical essays. In the final section, the major research
trends in industrial buying are identified and a synthesis of research

findings is presented.

us. @5222 2: we;

Models are frequently encountered in the study of buyer behavior.
Since industrial buying models are presented in a following section it is
appropriate to discuss the concept of models.

What is a model? Rigby (1965) suggests that a model is any structure
which purports to represent something else. The modeling of marketing
Phenomena involves the translating of perceived marketing relationships
“no constructs, symbols, or mathematical terms and relating them in a
logical manner (Lazer, 1962, p. 9). Models may be classified by the means
Ufrepresentation which is used. Mathematical models use mathematical
embols to represent certain characteristics of phenomena. Verbal models
are prose and graphic models use flow diagrams as the means of represent-

ation. Iconic models visibly resemble what they represent (Hunt, 1976, p.26).

The two basic purposes of models are to describe phenomena and to
aid in decision making. A descriptive model seeks to explain and/or
predict marketing phenomena as they occur. It attaches no value conno-
tations to the description -- it simply tries to represent things as
they exist (Cox and Enis, 1972, p. 37). Buzzell (1964, p. 205) points
out that descriptive models can, but do not necessarily, specify the
relationship between model inputs and model results. Models not speci-
fying this relationship are called "black box“ models. When an attempt
is made to specify the relationships, the descriptive model is called
behavioral.

Decision models, in contracts to descriptive models, attempt to
determine what should be done in a given situation. Decision models may
be classified as optimization of heuristic models. Optimization models
use analytic techniques to find the best possible solution, given the
model assumptions. Heuristic models do not attempt to yield the best
solution, but rather sacrifice optimum solutions for a reduction in the
time and/or cost required to achieve a satisfactory solution (Cox and
Enis, 1972, p. 38).

Although the terms “models" and "theories" are often used interchange-
ably, they are not synonymous. A11 theories are models since all theories
Purport to represent real world phenomena. However, the converse is not
true; all models are not theories since many models do not possess all
the requisites of theoretical constructions (Hunt, 1976, p. 136). Theory
any be defined as, "... a systematically related set of statements, in-
cluding some lawlike generalizations, that is empirically testable"
(Hunt, 1976, p. 136). Many models do not contain lawlike generalizations

and many are not operationally defined so as to make them empirically

testable.

 

 

The difference between models and theories becomes important when
answering the question, "What makes a good model?". Bartels (1970, p. 9)
suggests that explanation rather than prediction is generally the objec-
tive of theory in the social and behavioral sciences. However, in his
discussion of the objective of theory, Hunt (1976, p. 136) argues con-
vincingly that prediction is inherent in explanation so that all adequate
explanations must have predictive capability. A good theory, therefore,
is one that has predictive capability. Since models are not theories.
the criteria for evaluating models differs from theory evaluation criteria.
Lazer (1962) speaks of this in the following manner: "As a theory, a
marketing model can be accepted or rejected on the basis of how well it
works. The actual model, however, is 'right or wrong' (internally con-
sistent) on logical grounds only" (p. 13).

Lazer, therefore, suggests the criterion of internal consistency for
judging models. A second criterion, completeness, is related to the
representative aspect of models. Webster and Wind (1972a), although
using the term complexity instead of completeness, state that organiza-
tional buying is a complex process and many models are deficient in that
they consider only one variable or set of variables as factors influencing
organizational buying responses to marketing efforts.

Models are useful in marketing in a number of ways. Kotler (1972,
p.336) identifies two major uses of models:

1. To describe the structural arrangements of the elements in a system
2.1o describe the causal relationships among a set of elements in a

system

In addition to these uses of models Lazer (1962, pp. 13-14) adds
that:

" Pt.
I w
w “1‘

5,.

l .
We ‘

10

1. Marketing models provide a frame of reference for solving marketing
problems.
2. Marketing models are useful aids in making predictions.
3. Marketing models can be useful in theory construction by stimulating
the generation of hypotheses which can be tested.
To be useful, models must be based upon reality. Research findings
in industrial buyer behavior are presented in the following sections.
These studies serve as the 'reality' on which the models presented later

are largely based.

Research fjgglggs.
As a rule, the following research studies are classified according
to their major research thrust. While some studies were of very limited
scope and were easily classified, others explored more than one aspect

of buying behavior and could be placed in more than one of the divisions.

Environmental Influences

Environmental influences reflect the interaction of the business
firm with physical, technological, economic, political and cultural
factors and institutions. While these influences are operant domest-
ically, the impact of environmental influences outside the United States
has been the focus of most research in this area.

Skinner (1967) investigated procurement problems of thirteen U.S.
unnufacturing companies operating in six developing countries. The study
was based on visits to forty-nine manufacturing plants in India, Pakistan,
South Africa, Spain, Turkey and Vietnam, as well as interviews in the
home office of each company.

Problems of foreign sourcing were identified as:

1. Foreign exhange. In nearly all of the cases studied, companies had

11

problems obtaining foreign exchange for importing.

2. Import Regulations. In efforts to increase local manufacturing
content, governments of the developing countries required import
licenses and long bureaucratic processes aimed at reducing imports.

3. Lead Time. Companies surveyed had to order six months in advance of
needs to avoid stockouts due to increased time necessary for trans-
portation and related paper processing. Consequently, inventories
were high and order errors could only be corrected by premium trans-
port.

4. Specifications. Foreign plants had problems obtaining properly
specified items due to the barriers of distance, language and customs.

5. Internal Relations. Plants in the developing countries suffered
strained relations with the home office over discussions about missing
parts, wrong dimensions, credit and payment controversies and missed
delivery promises.

6. Paper Work. Parts shortages and delays occurred when forms for im-
ports, permits, tariffs, and payments were improperly filled out by
home office staff.

In summarizing the difficulties involved with foreign sourcing,
Skinner stated: "These examples are typical of the difficulties fre-
quently experienced in importing across international boundaries. The
delays and the consequent voluminous correspondence often resulted in
stockouts, frustrations, mounting paper work, errors in the item received,
and excessive inventories" (p. 9).

Problems in local sourcing were identified as:

1. Finding Sources. Local management found it difficult to find out

"who made what." Catalogues and listings by trade associations and

12

governmental agencies could not be relied upon as complete.

2. Quality. After a sauce for an item had been found, local management
frequently learned that the vendor was not as qualified as first
appeared since the U.S. manufacturer typically insisted on more con-
sistent quality and more rigorous standards than the foreign vendor
was accustomed to delivering.

3. Understanding Specifications. Vendors often were not familiar with
blueprints and engineering specifications but preferred to work with
actual models. Vendors expressed that they were doing the best they
could and that the purchaser should figure out how to use the item
provided.

4. Reliability in Delivery. In some cases the lack of reliable delivery
was due to a different cultural emphasis on time, in others the pro-
blem was due to a lack of ability in scheduling and production control.

5. Favoritism. Managers often had to develop special procedures for
handling purchasing relationships so as to avoid favoritism, relatives
and kick-backs.

Skinner summarized the problems encountered in local sourcing:
The net effect of difficulties in local purchasing was
a low degree of assurance of receiving on-time deli-
veries of adequate quality. The high cost of this
uncertainty was a common management complaint. It
represented a considerable source of frustration and
difficulty, in addition to the actual costs of inter-
mittent production, extra inspection, rejects and
rework, and extra inventories (p. 11).
The Skinner study revealed how environmental influences, seldom
studied in depth domestically, can significantly affect the procurement
process.

Hutchin (1975) studied the Canadian government's influence on pur-

chasing policies. He noted that increasingly foreign governments, as

13

in the case of Canada, are demanding a higher percentage of local suppliers
to be used in manufacturing operations. These local content requirements
often are made explicit and are enforced by the manipulation of import
licenses, currency restrictions, and tax rates. These pressures for more
local content in products manufactured within a country are not restricted
to governments of developing countries which must resort to these measures
in an attempt to counter balance of payments problems. Hutchin noted that
the rise of nationalism accounts for these pressures in both Canada and
France. To examine the impact of government pressure in procurement
practices, Hutchin interviewed key executives in thirty-three American
controlled companies in western Canada. It was found that thirty-one
companies were "purchaSing Canadian." Of those thirty-one, twenty-one
stated government pressure was a major reason for their policy.

While the study shows that governmental influence is an important
factor in Canadian procurement policies, the small sample size and the
absence of data on how many firms would purchase locally without govern-
mental pressure restrict conclusions. Furthermore, since no local con-
tent percentage of final product is stated in the government directives,
it is unclear what buying Canadian really means.

Schooler (1965) used two hundred Guatemalan university students to
test product bias in Central America. The students rated identical pro-
ducts under labels from member countries of the Central American Common
Market. Consistently, Guatemalan products were rated highest. While
two consumer products were used in the testing, the study showed how a

cultural factor, nationalism, may bias product evaluations.

14

Organizational Influences

Students of industrial marketing have long emphasized the need for
understanding organizational influences in the purchasing process.
Writing in 1950, Lewis (1950) stated that:

It is a basic principle of good marketing that to
be successful those in charge of the distribution policy
of a company should know as much as possible about the
buyers....It is not enough for a manager of industrial
sales to know only that a given manufacturing concern
is a potential customer-~he must know who in that com-
pany is involved in making the purchases and how deci-
sions regarding such purchases are made (p. 48).

The following material identifies who is involved in the purchasing
process and notes situations where certain participants have more in-
fluence in the purchasing decision.

Walsh (1961) conducted a study to determine how many individuals
were involved in the purchase of ninety-nine industrial products in two
St. Louis manufacturing plants. Influence was determined by first asking
each company to supply a list of individuals considered to be operation
management personnel. The advertising manager of each firm then polled
each manager asking if he was or was not an influence in the purchase of
the ninety-nine items. The average number of individuals involved in
the purchasing process at these firms was nine and twelve. Walsh con-
cluded that these figures demonstrated group of committee buying. While
the study did show multiple involvement in the purchasing process, Walsh
did not say how the managers were polled, and thus, the validity of the
results can be questioned.

Harding (1966) reported a study made by Motivational Programmers,
Inc., MP1, to determine who made the purchase decision. Interviews were

conducted with 181 executives in 10 companies concerning procedures used

in actual non-repetitive purchases had been made and then examined the

15

actual requisitions for the purchases involved. MPI interviewed those
executives who had initialed the requisitions and these executives,

in turn, supplied a list of other executives whom they had contacted

about the item purchased. This tracking continued until no new influencers
could be identified. Product categories studied included raw materials,
components, accessory equipment, and subcontracted services. Influencers
were classified as being a part of upper, middle, or lower management

or purchasing. Middle management was defined as anyone from the appro-
priate rank of superintendent up to staff level.

The results are summarized below:

In 88% of the purchases studied, the initiator was a
member of middle management. In 12% the initiator
came from below that level. In no case was a member
of top management or of the purchasing department
the source of action.

In 74% of the purchases, middle management
named the supplier pool. In 4%, ranks below that
did the specifying. The remaining 22% was handled
by purchasing.

Middle management designated the supplier 69.5%
of the time, and colaborated with purchasing in an-
other 12.2% of the cases. Alone purchasing made the
selection in 4% of the cases. Top management never
exercised the choice, but did participate in one
buying decision.

And was it the computer that was important enough
to warrant top management attention? Not quite. It
was the carpeting for a reception area (p. 78).

This study confirmed the importance of non-purchasing personnel at
the various stages of the purchase process.

Weigand (1966) studied bias in self-reported measures of responsibility
by purchasing agents, PA's. In fifty-one firms, fifty-five PA's and
fifty-five randomly selected executives were interviewed and asked to
rate the concern of the purchasing agent in six aspects of a widely used,
inexpensive fabricated part. The aspects were: design of product, cost

of application, performance life, naming the manufacturer, engineering

16

help and reduction in rejects. Purchasing agents rated their concern

as great on all six aspects. In only two cases, naming the manufacturer
and reduction in rejects, did the other executives concur that pur-
chasing's concern was great.

The implication of this study is that self-reported measures of
purchase responsibility, even on seemingly insignificant products, can
be biased and, therefore unappropriate as a sole measure of this factor.

In a paper presented and discussed before a British association of
industrial marketers, Lister (1966) reported the results of a mail survey
of British PA's concerning their influence in the buying decision of
seven categories of equipment and materials. PA's reported their influence
as decisive in five catefories and significant in the remaining two. Al-
though Lister distinguished between two basic purchasing decisions, the
technical and the commercial, no indication was given as to which deci-
sion the PA's referred.

The discussion of the paper revealed the limited usefulness of the
conclusions. Criticism focused on the lack of verification of the buyer
comments and on the inherent questionnaire bias, which did not allow the
buyer a face-saving answer if in fact he had little influence in the
buying decision. In addition, the possibility of bias from self-reported
measures was present.

Groves (1966) reported some major findings of a buyer behavior study
which covered fifteen Standard Industrial Classification metal working
categories. Funded by Iron Age magazine, the study involved interviewing
a probability sample of 3,339 executives in 748 plants over a three-year
period. Groves reported the titles of those involved in the purchase

pT‘OCES S 2

17

The study found that 28 percent of metal working's
purchase decision executives said Top Management

was their primary function...32% indicated Operating
Management...and nearly 1 out of 3 had either Pur-
chasing, Production, Design and Development or
Maintenance Engineering and Purchasing as their
primary function (p. 256).

In addition, the study found that the titles of purchase decision
executives differed with the size of the plant, type of product and
nature of the sales problem. The study confirmed that technical/engi-
neering personnel were most frequently involved in specifying components
and manufactured parts. PA's were most frequently involved in compiling
potential supplier lists.

In a frequently cited article, Weigand (1968) discussed the complex-
ity of buying influences in industrial purchase decisions. Weigand
noted that not only is the purchase responsibility diffused through an
industrial firm, but those who share the responsibility may not be con-
cerned with the same characteristics of the prospective seller's product.
As examples, Weigand contrasts purchasing's preoccupation of obtaining
the best price for a component part with manufacturing's concern for
reducing rejects on the assembly line.

Weigand also pointed out that many factors over which the purchasing
agent has no control may dominate the industrial purchase decision. For
example, Weigand cited the common budgetary practice of each division
or operating unit submitting a proposed budget spelling out its buying
intentions for the next operation period. Approval of this budget meant
that the administrative unit gave the authority for the division to use
the money as requested. This was often interpreted to mean discretionary
power over selecting suppliers for the budgeted items. In addition,

Weigand illustrated how reciprocity, binding arrangements such as verti-

cal integration and franchising, and outside influences such as consultants,

 

18

governmental agencies and labor unions exerted forces which had the
effect of by-passing the PA as the decision maker in industrial buying.

By examining the various influences and their impacts upon the
industrial purchasing, Weigand increased awareness among marketing re-
searchers of the complexity of the purchase process. While previous
writers had concentrated on individual behavior, Weigand showed the
importance of environmental, organizational, and interpersonal influences
upon the purchase process.

Davis, Eppen, and Mattsson (1974) surveyed and interviewed purchas-
ing officers of 110 multinational corporations to determine whether the
home office or subsidiary should select suppliers. The authors first
defined three types of companies based on marketing strategy employed
and degree of geographical dispersion:

The first type of company corresponding to a stage
of market strategy is the domestic-minded. Its markets
are primarily domestic or national, and all manufacuring
units are located within the home country. The venture-
minded has one foreign manufacturing subsidiary, which
is usually farther away from corporate headquarters
than any of its other manufacturing operations. And the
international-minded has sales large enough/or balanced
enough among several major areas (for example, North
America, South America, Europe, Japan) to require manu-
facturing units within each area (p. 82).

The authors then gave their arguments for global or local sourcing
for each type of company over twelve factors in seven categories. Factor
categories included (1) product categories, (2) distance between supplier
and buyer, (3) government policies and regulations, (4) nationalism,
(5) market vs product pressures, (6) characteristics of supply industry
and (7) characteristics of buyers. Of these product categories, two
stand out as factors not included in the domestic centralization vs

decentralization decisions.

 

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19

First, the authors noted that companies desiring to locate plants
abroad may encounter governmental policies and regulations not faced at
home, all of which encourage sourcing from the host country. These
measures include tariffs, local content regulations, and regulations to
protect consumers that many governments maintain on material content or
processing procedures. An example of the latter is given as different
regulations for car safety/performance than are faced in the home market.

The other important factor not encountered by companies operating
in just one country is nationalism. The authors stated:

Closely related to government pressures, and indeed
underlying many regulations, is the factor of nation-
alism. Because of national pride, negative stereotypes
about foreign suppliers and language differences, many
purchasing departments find it easier to do business
locally. While the impact of nationalism on purchasing
is difficult to pinpoint, it was commonly mentioned in
our interviews with purchasing executives (p. 87).

In another part of the survey, the authors attempted to determine
the percentage of product categories selected by central authority. The
percentage was highest for capital goods and raw materials. In each of
these categories in 66 percent of the companies, central authority selected
over 25 percent of the products category. The impact was less for com-
ponents and subassemblies and the supply category. In these cases 25
percent of the product category was selected by the central authority
in 44 percent and 21 percent of the companies.

The Davis, Eppen and Mattsson article revealed the complexity of
multinational purchasing. While the authors did discuss the pros and
cons of global versus local sourcing for each factor, they did not
suggest how trade offs between factors should be made. This has the

affect of not endorsing a local or global sourcing strategy for any of

the three company types. In addition to revealing the complexity of

20

the purchase decision, the authors discussion of how factors may influence
companies differently, depending upon type of company, is recognition of
organizational variables in the industrial purchase process.

Grnhaug (1975a) studied differences between autonomous and joint deci-
sions in organizational buying. An autonomous decision was defined as
one in which only one person made the purchase decision. The study pop-
ulation consisted of thirty retail stores in Bergan, Norway. Grnhaug
hypothesized that the presence of joint buying would correlate positively
with (1) the novelty of the buying problem, (2) the purchase of production
goods (gonds directly related to the end-output of the organization),
(3) the size of purchase and (4) organizational size. Positive correla-
tions were found for the four variables. The highest correlation coeffi-
cient was .43 for organizational size. These four variables were entered
in a discriminate analysis and correctly classified 77.5 percent of the
purchases. This result was found to be significant at the .01 level as
measured by the F ratio.

Finally, Grnhaug examined the relationship between joint decisions
and search activities. Positive correlations were found between joint
decision making and (l) solicitation of bids, (2) contact with suppliers,
(3) the reading of advertisements, (4) the reading of brochures and
(5) the number of information sources used. Both the contact with
supplier and the number of information sources used were significant
at the .001 level.

The findings of this study are supportive evidence that more than
one person is often involved in the purchase of new products and items
purchased for resale. It also supports the idea that joint decisions

will be more prevalent for larger purchases and for larger organizations.

 

 

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Limitations of the study first concern the population. Grnhaug admits
that the findings may be generalized due to the selected population. The
population, however, restricts the validity of the study results. Firms
with as few as four employees were included in the study. In such ex-
tremely small retail shops one might imagine that the decisionmaker is
the owner and the employees are clerks. In such cases the owner would
be expected to make all the purchase decisions. If large department
stores were included in the same study, one might expect purchase respon-
sibility to be more diffused. It is not surprising then that in the
discriminate function, organizational size was the most significant
variable. Concerning the relationship between joint decisions and search
activities, Grnhaug only presented the results and did not give the opera-
tional measures used in the study. Finally, the industrial buyer behavior
literature strongly suggests that while there may be deciders, influencers
are also significant participants in the purchase process. By not study-
ing the influencers jointly, marketing efforts may be misdirected to
concentrate on the decider without giving proper attention to influencers.

Czepiel (1976) studied decision group and firm characteristics of
adopters of a major technological innovation. Eighteen steel firms which
adopted the continuous casting process over a period of ten years were
studied. 0f the sixty-one persons identified as having participated in
the decision process, thirty were interviewed in depth. The firms were
(flyided into two groups: early adapters and later adopters. Decision
group characteristics included the following variables: age, education,

size, average authority level and indexes for previous experiences and
technical/scientific/professional activities. Using a one-tail test for

the students's t distribution, Czepiel found significant differences

 

 

22

between groups existed for group size, which was significant at the .19
level. Contrary to the research hypothesis, the decision group size of
later adopters was larger than for the decision groups of early adopters.
Concerning this finding, Czepiel stated that the size of the decision
group may be merely an artifact attributable to the fact that later
adopters were larger and invested more in adopting the new process. Al-
though not statistically significant, Czepiel found the average decision
group of later adopters had fewer members than early adopters. In addi-
tion, early adopters were slightly better educated, had more previous
work experience, were involved slightly more in technical/scientific/
professional activities and had silightly more authority than groups in
the later adopter category.

In the analysis of firm characteristics, Czepiel found significant
differences to exist on two of the seven variables studied. Early adopters
had a more organic organizational structure than later adopters (signifi-
cant at the .04 level). However significant statistically, Czepiel ad-
mitted that a five-point scale was used and only one half-point separated
the two categories on this measure. Czepiel expected more differentiation
since he later visited the firms and found the later adopters typical of
the stereotype of the very large formal organization. Contrary to the
research hypothesis, early adopters used less external agencies as the
source of innovation (significant at the .05 level). Although not signif-
icant. Czepiel found that early adopters were younger firms, had less
sales, had less technical/scientific/professional support, attributed a

greater percentage of innovation initiative to internal sources and
correspondingly attributed a smaller percentage of the innovation initi-

3tive to suppliers than later adopters.

 

 

23

Although the Czepiel study has some shortcomings, as the author admit-
ted, it is the first attempt to study the adoption characteristics of buy-
ing groups. Since adoption research has concentrated on individual behavior,
such difficulties should be expected. In spite of this, one cannot question
whether the indexes and other measures created for this study were valid and
reliable. 0n thirteen measures five relationships were in the opposite di-
rection than hypothesized and Czepiel's explanations do not seem to totally
explain these findings.

Cooley, Jackson and Ostrom (1977) examined the relative power of pur-
chasing, production and engineering groups in modified rebuy situations.
TWenty-six Arizona and California firms participated in the study involving
fasterners, electronic components, and castings. The firms ranged in size
from 400 to 15,000 employees. Initial contact with each firm was made with
the top purchasing executive who identified the buyers responsibile for
Purchasing the specific products. The buyers then identified the production
and engineering personnel involved in the procurement process. A question-
naire was administered through personal interviews with each of the partic-
ipants in the purchasing decision. Power was measured by asking the partic-
‘ipants to allocate 100 percent of the power among those involved in the pur-
chase decision, based on perceived power distribution. Since this method
resulted in the power variable having three elements, one way multivariate
analysis of variance was used to determine difference in the distribution.
If'differences were found, univariate F tests were used to find the source
of variation.

Engineering was found to be the dominant power in the product selec-
tfon decision with a rating of 61.1, followed by purchasing (19.5) and pro-

duction (16.6). In the supplier selection decision, purchasing was the

 

24

dominant power (67.5) followed by engineering (67.5) followed by engineering
(24.5) and production (4.9). No significant differences were found in power
for the product selection decision across products. The authors stated that
differences existed across products for the supplier selection decisions.
They stated that purchasing had the most power for electronic components.
However, the table referred to did not support this statement. The table in
question clearly showed purchasing as the dominant power for all three pro-
ducts. Concerning power differences for type of production, e.g. customer
order or for stock, significant differences were found only for the product
selection decision. Purchasing had more power where production was for stock
and engineering had more power when production was for customer order. Com-
pany size was found to be an important variable for determining power. Pur-
chasing had significantly more power in both decisions in firms with employ-
ment under 1,000.

In regard to product characteristics, purchasing was found to have more
relative power in the selection of products which were technically simple or
required minimal installation. Purchasing had more relative power in the
selection of supplier when there was supplier similarity or extensive pro-
duct modification. Engineering had more relative power in the selection of
supplier when minimal modification was required.

Although the authors stated that they were examining a modified rebuy
situation, doubt exists as to whether this is the case. Robinson and Faris
(1967) give two characteristics of the modified rebuy situation as (l) the
buying alternatives are known but they are changed and (2) some additional
information is needed before the decisions are made. Therefore, products

99" 58 do not automatically fall into new task, modified rebuy or straight

”buy 57 tuations. The authors, however, selected the firms for the study

 

 

25

population because the firms purchased the three products specified. There
is no indication that the authors examined the purchase of these products
to verify if they were purchased as modified rebuys.

The research findings are important for marketers. By indicating pro-
duct and firm characteristics which are associated with the relative power
of the different decision makers, seller firms can better formulate strat-

egies aimed at reaching these individuals.

Interpersonal Influences

Interpersonal influences are important in the study of buyer behavior
because of the interaction of the various individuals participating in the
purchase process._ Emphasis of the articles in this section is on the per-
ceptual differences and interaction of the members of buying groups.

Spekman and Ford (1977) investigated perceptions of uncertainty with
buying groups. PA's were asked the names and titles of the organizational
"embers with whom they interacted with respect to the purchase of specific
items. By using this procedure, fifty-two buying groups for twenty-one
items were identified.

The buying group members were asked to rate a series of questions con-
cerning uncertainty. Factor analysis indicated four underlying factors. The
authors concluded that the four factors related to uncertainty with respect
to:

l. The firm's external environment
2. The lack of information regarding changes in internal and external
operation conditions

3. The ability of meeting the expectations of non-buying group organizational

mentaeeres,

 

 

26

4. Having sufficient information to meet the goals of the firm

A discriminate function using the questions having the highest loading
on each factor explained 80 percent of the variance in the discriminate
space and was statistically significant at the a = .005 level. The funtion
correctly classified 41.8 percent of the buying group members (users, in-
fluencers, and purchasing agents). The percent expected by chance was 36.1
percent.

In interpreting the discriminate analysis, Spekman and Ford found pur-
chasing agents to be more concerned with environmental factors external to
both the buying group and the firm. Users, on the other hand, appeared to
be more concerned with those uncertainties emanating from purchasing related
factors internal to the firm which are perceived to impact upon it's day-
to-day operations. No clear conclusions were drawn for influencers.

The Spekman and Ford study may be accepted as partial confirmation
that buying group members view the potential purchasers from differing points
of view. Through understanding these differing orientations, marketing
strategists can better develop more appropriate marketing communications.

McMillan (1973a) surveyed 148 purchasing agents, scientists, and man-
agers in a study of perceived influence and responsibility in the purchase
of three chemical products. In each firm the PA was sent the survey ques-
tionnaire and requested to give additional questionnaires to the manager and
scientist whom he considered to be most involved in the purchase of the pro-
ducts. Survey participants were asked to rate themselves and the two other

"embers of the buying group on the amount of influence and responsibility
(in the case that events showed the choice was not the best) in the vendor

“faction process. Analysis of the ratings on the five-point scale showed

27

that all three buyer group members exerted considerable influence and
shared the responsibility in the vendor selection decision. Bias from
self-reported answers was observed since each participant felt that he
exerted the most influence and shouldered the majority of the responsi-
bility. When combining the results, the scientist was highest rated

on both influence and responsibility. Self-confidence measures were

also included in the questionnaire. Specific self-confidence was found

to be a surrogate indicator of the influence a buying center member exerts.
The scientists' specific self-confidence was greater than the other two
roles at the .01 level. Sixteen products, company and salesmen variables
were rated on a five-point scale to determine their importance and un-
certainty in industrial purchase decisions. Using these sixteen variables,
the discriminate model correctly classified 55 percent of the PA's, 57
percent of the scientists, and 54 percent of the managers. Since the
groups were approximately the same size, one could expect only 33 percent
correct classifications due to chance. 0f the three role positions, man-
agers perceived the most risk followed by the scientists. One explanation
for this is that these individuals are less likely to receive information
‘which might reduce risk than PA's. All role positions rated the salesman
as higher risk than either product or company variables.

McMillian's study indicated that the PA, scientist, and manager were
all greatly involved in the vendor selection decision. This reveals the
folly of communication keyed to only one member of the buying group. Not
0'17! are the group members important, but they differ in perceived risks.
11115 difference indicates that information supplied to each role may have

to be di fferent.

Lambert (1976) compared the post—decision self-confidence levels of

28

engineers and PA's in the simulated purchase of a minicomputer. Lambert
argued that engineers should possess higher levels of specific self-confi-
dence in the evaluation of technical products such as minicomputers. In
addition, Lambert also presented the reasoning for proposing that an indi-
vidual with a lower level of self-confidence concerning a particular task
would be more affected by feedback from others concerning his performance.

The population of the study was composed of thirty-three PA's and
forty-four engineers. The subjects participated in a simulated buying
game in which they were asked to choose from among three vendor proposals.
The proposals varied in price and delivery and in terms of vendor perform-
ance to simulate the subject's previous experience with the vendor. The
decision taks was sufficiently complex to ensure that support or criticism
of the choice of any of the vendors could be made to sound plausible since
none was objectively superior to the others.

Feedback on the “soundness" of the decision made was bogus and deter-
nfined by random assignment of subjects to treatments. The feedback was
of three types: (1) support of the choice made, (2) criticism of choice
nude, or (3) a control group which engaged in a non-evaluative discussion
of the decision process.

Situation self-confidence was measured before the subjects partici-
pated in the game. In addition, a semantic difference question was in-
cluded following the game but prior to the feedback. The question was
asked, "How confident are you that your choice was the best one?" This
was termed decision confidence.

The research findings showed that PA's rated higher than engineers
on both situational self-confidence and on decision confidence. The

difference was not statistically significant. Lambert did not discuss

29

this finding. Concerning the impact of post-decision feedback on self-
confidence, Lambert found that decision confidence affected only the
participant's attitudes toward rejected alternatives--attitudes toward
the chosen vendor did not tend to vary as a function of decision confidence.
The groups expressing the higher level of confidence in their vendor deci-
sion tended to evaluate more positively their rejected alternatives than
did the lower confidence group. The results of this multivariate analy-
sis of variance was significant at the p < .03 level.

Lambert's results differ from those of McMillan (1975) which showed '
scientists to have significantly higher self-confidence than PA's. One
would also question that engineers should have a higher level of self-
confidence. Lambert argued that their technical competency should give
them more self-confidence in the purchase of complex technical products.
While this might be true for the product selection process, it seems that
the PA would be more aware of the importance of service and delivery as-
pects of supplier selection. Therefore, it does not seem warranted to
say that engineers should have more self-confidence than PA's. Lambert's
study did show how self-confidence may bias product evaluations. Game
participants lacking high levels of self-confidence differentiated sharply
between the product he chose and the remaining products. He rated his
chosen product highly while rating the others as vastly inferior. Lambert
concluded that in this way, the manager who lacks self-confidence tries to
increase the "distance" between decision alternatives, hoping to avoid
criticism.

Dickinson (1970) surveyed purchasing and non-purchasing agents in
180 industrial firms in an analysis of the perceived role of the PA. The

major emphasis was on discovering discrepancies between (1) the work

M

A r

30

function assigned to the PA by the purchasing literature and (2) the PA's
authority role in relation to those functions as he, his superior, and
organizational peers perceive it.

Dickinson concluded that the duties of PA's as described in the pur-
chasing literature did not provide a clear indication of the job's author-
ity scope as it was perceived by PA's. The PA's saw themselves as exer-
cising more authority than did superiors. and superior perceptions of pur-
chasing authority exceeded that of peers.

Grnhaug (1977) studies aspects of the buying process for sixteen
Norwegian organizations purchasing computers. Twelve of the organizations
were business firms, or market dependent firms as termed by Grnhaug, while
the remaining were non-business organizations. Initial contact in each
firm was with the person indicated as the most heavily involved in the
purchase decision. This person then indicated other buying group members
who were then interviewed about organizational structure, buying motives
and information sources used. In addition, information from a variety
of written sources such as letters, brochures, and organizational charts
were collected. For analysis the firms were classified as market or non-
market dependent and small (thirty or less employees) or large.

Grnhaug found that in all cases a sudden need perception for the
computer was found in the small firms. The author offered the explanation
for this that smaller organizations are confronted with more environmental
disturbances, partly due to lower capacity and more modest resources.

Concerning the roles of initiator, influencer and decider, Grnhaug
found that in all twelve of the business organizations the initiative for
the purchase came from top management. In nonmarket organizations the

initiators were primarily the users. Likewise, the deciders in the business

31

firms were all top management but in the nonbusiness firms the deciders
were teams not including top management. No clear image of influencers
could be determined as they varied greatly in member composition Grnhaug
found that in nine of the cases team members emphasized differing criteria
and this was a strong source of conflict among buying group members. Cri-
teria tended to Vary with organization size. Computer capacity was the
most often given first criterion, but smaller market oriented firms
stressed economy/savings. The most conmon source of information was bro-
chures followed by contact with suppliers and bids. The firms were not
asked to rate the sources of information for usefulness in decision making.
Finally, it was found that in all but one of the cases the purchase was
initiated by the buyer, only in one case was the latent need recognized
by a seller's visit.

While the Grnhaug study was of only sixteen firms buying a complex

technical product, it does reinforce other findings in the industrial

buyer behavior literature. Conflict in buying groups was found to exist
based on differing criteria. Problem solving behavior was evidence by

the fact that the firms initiated the purchase process. Grnhaug's finding
of very active participation in the decision process differs sharply from
the Harding (1966) study previously discussed.

Patchen (1974) studies the locus and basis of influence in industrial
purchase decisions. The study was conducted by the Survey Research Center
of the University of Michigan. The study population consisted of eleven
large industrial corporations with national or divisional headquarters
in Chicago. Thirty-three new task or modified rebuy purchasers were stud-

ied. An average of 5.5 interviews were conducted for each purchase.

32

For all thirty-three decisions in eleven companies, an average of
fifteen persons were mentioned by respondents as having been involved
in some way in each decision. The number of participants in a decision
varied more by the magnitude of the decision involved than by the company.
Patchen rated twenty of the purchase decisions to be of moderate or major
importance and the remaining thirteen to be minor. An average of 19.8
persons were mentioned for the major decisions while only 7.9 persons were
mentioned for the minor decisions. Overall, an average of 4.8 out of 5.5
respondents indicated they had some responsibility for or were contacted
about either the purchase of a general product or the decision about pur-
chasing a specifc product.

Concerning difference of opinion about making the dicision to get a
product in a general category, Patchen found at least some differences of
opinion (one or more reports) in twenty-two out of the thirty-three cases
and considerable evidence of disagreements (reports by half or more of
the respondents) in thirteen cases.

With respect to the decision about what specific product to buy,
there was at least some evidence of differences of opinion in eighteen
cases and considerable evidence in nine cases. Respondents were asked,
"How were the differences resolved?" Respondents gave thirteen different
answers. The data showed that getting more information or further anal-
yzing information was the method most frequently reported as a way in which
differences were resolved. This was mentioned forty-seven times. Men-
tioned secondly (twenty times) as a way of conflict resolution was meetings
and discussions. Also mentioned with moderate frequency (ten times) was
finding a new solution to the problem which apparently satisfied everyone.

Less frequently used means were discussions and getting consensus. No

33

mention at all was made of differences being resolved in ways which could
be coded as "rewards promised or expected" for giving in or as "threat or
expectation of penalities” for not giving in.

Patchen concluded:

In general, the picture that emerges from these data is

that difference of opinion concerning the company purchases

seemed to be resolved with a heavy emphasis on problem solv-

ing, especially by getting more information and devising new

solutions and occasionally by further defining goals. The

data also suggests a frequent emphasis on reaching consensus,

as indicated especially by the references to meetings, dis-

cussions, persuading, and getting consensus. Even the few

references to taking a poll or vote seem to reflect a con-

cern with widespread agreement, if not total consensus. Also,

the mention of devising a new solution, which is in part pro-

blem solving, may sometimes be used to help reach consensus

(p. 206).

Patchen also investigated who was the most influential in the pur-
chasing process. Respondents were asked to indicate the individual whom
they felt to have the most influence in both decision to purchase a pro-
duct type and in the decision to purchase a particular product. About
the results Patchen says, "The most striking fact about the answers to
these questions about influence is that the peepleinvolved in each deci-
sion do not agree very much about who had the 'most influence.'" For
both types of decisions, the number of persons named as most influential
increased almost as fast as the number of informants increased. Patchen
suggested several possible reasons for such variation. First, the respon-
dents probably differed in the amount and kinds of information they re-
ceived about the entire decision process. Secondly, some individuals
inflated their own influence as confirmed by Weigand (1966) and McMillan
‘(l973) previously discussed. Patchen gives evidence that this effect may
not be large. The average number of persons naming themselves was 1.3

per decision out of an average of 5.5 informants both for the decisions to

34

purchase and for decisions about what particular product to purchase. Fur-
ther, Patchen noted that the data on resolution of differences suggested
that purchase decisions were made by mutal agreement. The processes of
consensus and accommodation diffused the decision making influence over
several individuals.

The study also attempted to discover why persons were felt to have
the most influence in the decision process. Patchen categorized twenty-
five responses as to why the most influential decision maker was able to
exert influence on the purchase decision. The most frequently mentioned
reasons for influence (24.5 percent) were the ones relating to the extent
to which a person was affected by the decision. Often given responses in
this category were, "He (his department) uses the product," and, "He (his
department) has need for the product." The seond most frequently mentioned
characteristic of influentials were ones related to their expertise (16.9
percent). This category included both responses about general expertise
and knowledge on specific matters. Another reason mentioned with some
frequency was a person's formal responsibility to recommend products (15.5
percent) or to provide vital information for the decision (5.7 percent).
Although respondents were asked to judge who had the greatest influence
"regardless of who had the final authority," some respondents (5.4 percent)
referred to a person's authority. Activities performed by organizational
members was also given as a reason for influence. Two activities mentioned
were prodding others to act (6.7 percent), e.g., "I just pushed it," and
information gathering activities (5.5 percent), such as conducting tests.

In the final section of the study, Patchen showed the importance of
the means of conflict resolution suggested by his study of contrasting his

findings with what other researchers have suggested are common means of

35

conflict resolution. Patchen found no indication of coercive, reward,
or referent power, or sanctions. The only power relationship found was
expert power. Bargaining was also not indicated by the respondents.
Patchen suggested that the explanations given for an individual being the
most influential center on the fact that he will be most affected by the
decision. Patchen interpreted this as a form of cooperation in which
other buying group members 'give in' to the person most affected. This
is done with the expectation of receiving corresponding cooperation when
they find themselves in a similar situation.
Strauss (1962) studied the tactics used by PA's to influence their
relationship with other departments. The study was based on field inter-
views and a survey of 142 PA's in different firms. Strauss admitted that
the results were largely impressionistic. In order to influence the other
individuals and departments, he noted the following tactics were employed:
1. Rule-oriented tactics - such as appealing to the boss for the enforce-
ment of organizational policy and appealing to rules and formal state-
ments of authority

2. Rule-evading tactics - such as complying literally with requests from
users that violate organizational policies

3. Personal-political tactics - such as reliance on informal relationships
and friendships to get decisions made and exchanging favors with other
members of the buying center

4. Education tactics - such as presenting other departments with facts
supporting the purchasing department's point of view

5. Organizational-interaction tactics - including such tactics as sitting
in on production planning meetings so as to make the asking of questions
easier and attempting to take control of other related functions such

as traffic

 

 

 

36

The tactics observed by Strauss serve as informal leverage in the

buying group decisions.

Strauss found that the PA's used a variety of tactics, depending
upon the specific problems that he faced and the conditions of the organ-
ization. Some agents sought formal grants of power while others sought

merely to be influential. Some agents wanted to influence decisions be-
fore they were made while others sought to have their post decisions
upheld often enough to be a deterrent to unwanted requests from other de-
partments. Some agents thought in terms of a long-range strategy for
achieving their desired changes while others dealt with each conflect
separately.

The Strauss study had important implications for students of buyer
behavior. The PA appears as a buying group member intent on having his
Way in the buying process. Previously discussed studies have emphasized
that many individuals may be involved in the purchase process. Strauss,
hOwever, demonstrated that the PA is of special importance because he
Often views other buying members and their roles as conflicts and, there-
f‘Ore, has developed tactics or weapons for 'getting his way.’

Strauss (1964) used the same study to conment on workflow frictions,

i hterfunctional rivalry and professionalism. He emphasized that purchasing
'1 8 often discontent with the prospect of being at the end of the work-

f1 ow in the purchasing process. Normally, orders flow in one direction,
f"‘om engineering, through scheduling to purchasing. Strauss noted how
his interviews with PA's revealed that they felt that they should be more
involved in initiating the work-flow process. Conflicts between purchasing
and engineering arose because engineers (l) specified brand names, thus

1 Saving no discretion to the PA, (2) over specified or wrote specifications

 

 

37

that were so restictive that the PA had little freedom in the supplier
selection decision, (3) wrote incomplete specifications, (4) were not
open to discussing new suppliers, and (5) permitted back-door selling
or encouraged salesmen to bypass the PA and to deal directly with them.
PA's also had conflicts with production scheduling over (1) the length
of lead times, (2) inventory policy and (3) expediting of orders.

As a summary, Strauss said:

1. The PA seeks to increase his status and power in
the organization, particularly he seeks to influ-

ence the terms in which requisitions are given to
him.

2. This leads him into conflict with functional groups
which are adjacent to him in terms of work-flow.

3. In this conflict the PA looks instinctively for
help form higher management, but higher management
gives him less attention than he would like.

4. For this reason (among others) he turns to profes-
sionalism, which helps bolster his self-image and
which, hopefully, strengthens his osition in
interdepartmental conflict (p. 137)

Pettigrew (1975) reported a study emphasizing the roles of informa-
‘l‘itan gatekeeper throughout the supplier decision process. The study was
ii (:ase study of a British firm's purchase of a computer during the late
1 960's. The finn had purchased three computers previously and was selec-
1tfitig the supplier for a fourth. Key participants in the supplier selec-
1tfi<3n included the head of management services and two of his subordinates,
the systems department manager and the programing manager. Pettigrew
i nterpreted their behavior in the decision process as political activity.
A1 1 three of the principals had selected a favored manufacturer early
‘i'1 the decision process. Pettigrew showed how the management service head

"iici a distinct advantage over his subordinates in pushing for his choice

bSicause of being strategically located at an important juncture between

 

 

38

the subordinates and the board of directors. Analysis was made of
correspondence between the management head and the potential suppliers.
Bias toward the management head's choice was evidenced by more corres-
pondence with this firm than with other alternatives. The management
head also accepted more social invitations from his choice of supplier.
To further substantiate that each of the principals had a favorite,
Pettigrew quoted the systems department manager: "From the moment the
job was first mooted there was no doubt that (the management head) was
31 '1 for (supplier X)... There's no questions we were all biased, you've
got to make up your mind on something and look for information to support
‘5 t" (p. 9).

The management head was effective at performing the gatekeeping role
to his advantage. During the fifteen-month decision process there were
twelve meetings of the board of directors concerning the computer purchase.
The managment head attended all the meetings while his subordinates attended
Only two meetings. The managing director of the firm, a key board member,
Was absent both times the subordinates attended board meetings. The man-
agement head was also effective at keeping potential vendors away from
board members. Finally, cements by the management head to the board of
directors were content analysized over the fifteen-month decision process
period. Pettigrew broke the fifteen-month period into three time periods.
In each period the management head's ratio of favorable/unfavorable com-
ments about the leading two potential suppliers favored his choice. Fin-
al ly, the board approved the choice of the head of management services.

In this case, there appeared to be no attempt at conflict resolution
among the participants. The management head used his gatekeeper role to

neutralize his subordinates' efforts at having their choice of supplier

 

39

chosen. Pettigrew demonstrated that the gatekeeper is important through-
out the decision process and that biased information was not effectively
balanced with counter biasing.

Robey and Johnston (1977) developed eight hypotheses to guide re-
search on the prediction of two structural dimensions of organizational
buying behavior. The structural dimensions examined are: (l) the extent
of lateral influence on buying decisions, and (2) the distribution of
vertical authority for buying decisions. Concerning the lateral influ-
ences, Robey and Johnston stated: "While Strauss emphasized the agents'
attempts to build their own power, our analysis identifies the conditions
Luqder which such external influence is likely to exist" (p. 453). Based

CH1 studies of industrial buyer behavior, sociology and organization behav-
icar, the authors offered the following hypotheses:

H1: The larger the size of an organization, the
greater its internal differentiation, and the
greater the extent of lateral influence on
buying decisions.

H2: The more variety in an organization's environ-
ment, the greater its internal differentiation,
and the greater the extent of lateral influence
on buying decisions.

H3: The more uncertain the organization's buying
environment, the more differentiated the buying
function, and the greater the extent of lateral
influence on buying decisions.

H4: Size is not related to the vertical distribution
of influence on buying decisions. However, in-
creasing size is related to the way in which that
influence is exercised.

H5: Environmental uncertainty is related to greater
discretion of lower levels in buying decisions
and a smaller extent of vertical influence.

H6: The greater the scope of a purchase, the greater
the extent of lateral influence and the less the
discretion of lower levels in buying decisions.

H7: The greater the complexity of a purchase, the
greater the extent of lateral influence and the
greater the discretion of lower levels in buying
decisions.

40

H8: The newer a purchase, the greater the extent of

lateral influence and the greater the discretion
of lower levels in buying decisions (p. 453).

In their conclusion the authors were not conclusive about the marketing
implications of their findings. While the authors supported the logic of
their hypotheses with previous studies, the hypotheses will remain until
l tested. The value in Robey and Johnston's secondary research and the
hypotheses which followed is in the attempt to see how structure affects

process. The previous research in lateral influences has stressed individ-

ual behavior. If Robey and Johnston's hypotheses are correct, the inter-

 

personal conflict may be more related to reactions to organizational and

environmental factors .

Individual Influences
While environmental, organizational, and interpersonal influences
May greatly affect the industrial buying process, business decisions

can be made only by individuals:

In the final analysis, all organizational buying
behavior is individual behavior. The individual may
be acting on behalf of others, may be influenced by
purposes beyond his own, and may interact with others,
but organizational behavior is, after all, the behavior
of individuals in an organizational context. Only the
person can think, feel, and act although each aspect
of individual behavior may be significantly influenced
by the people, tasks, structure, and technology of the
organization (Webster and Wind, 1972a, p. 88).

In this section articles are reviewed under subheadings which indicate

Specific areas of research in individual behavior.

 

~EES§J“sonality

Reddy (1971) conducted research to determine whether, and to what

3”client, the self-concept influenced the purchasing of office machines.

 

41

Reddy hypothesized that industrial buyers would exhibit greater
congruence between their self and product concepts than between their
company and product conepts. The study population was a mail survey
of 141 industrial purchasers of office machinery. Osgood's 0 measure
was used to discover the congruency relationship between self and product,
and company and product concepts. Analysis of variance was used to test
whether or not company and product concepts were perceived differently by
the buyers on the semantic differential scales. Profiles were made to
indicate the direction and intensity of the perceptions. Finally, non-
parametric measures, including the Wilcoxon T and the Mann-Whitney U were

used in order to test differences among the congruences of large, medium,

and small firm buyers.

The data analysis indicated no significant differences between buyers'

Salf-product and company-product congruences. This was taken to mean that
the relationship between buyers' self and product concepts was not differ-

ent from that of their company and product concepts.

By size of firm, however, small firm buyers demonstrated a greater
company-product congruence then self-product congruence. Furthermore,
'iil inas found that as the size of firm increases, buyers tend to be more
Se] f-product oriented. Out of the semantic differential scales used,
seven showed significant differences among buyers' perceptions of self-
p"‘<>duct and company concepts.

The marketing implications of Reddy's study are not clear. While
89] 1’, product and company concepts were measured, no link between these
measures and actual purchases was established. It does not appear that

the research purpose of determining whether the self concept influences

pm"‘Czhasing was established.

 

42

Another study involving personality traits is Wilson (1970, 1971)

which is reviewed under the subheading Decision Style.

Role Set
Gorman (1970, 1971) studied role conception and purchasing behavior

in industrial organizations. The study population consisted of 76 PA's,

functional managers and top managers employed by fifteen machinery manu-

facturing firms in Columbus, Ohio. A sixty-item role conception inventory

was used to determine the normative specification defining appropriate
role behavior by the PA as interpreted or perceived by each person queried.

The responses were recorded on Li kert scales whose extremes were labeled

strongly agree and strongly disagree. Each respondent was asked to score

the items on (1) his willingness to endorse the statement as an ideal and

(2) his perception of the actual existence of the practice or belief with-

ln his company.
Drawing from sociological theory, Gorman established that conflict

WT thin organizations is a normal condition partially attributable to

managers having differing operational goals and differing concepts of

other managers' roles. The first research hypothesis was that PA's would

tend to disagree with both functional and top managers over the role

expectations with respect to a specific purchasing task or activity. Dis-

aglr‘eement was noted between the purchasing and functional manager groups

on 25 percent of the items. The strongest disagreements were in areas

Where functional managers apparently were concerned about the purchasing
department gaining control or usurping some degree of line authority. The
a"‘ea of highest consensus between the two groups was that the purchasing

cienartment is an information pipeline for the company and is a contributor

 

43

to profits rather than merely a service mechanism. Between PA's and top
managers there was agreement on 77% of the items. The areas of agreement
and disagreement were the same as with functional managers.

The seond study hypothesis was that PA's would perceive organizational
behavior as different from their ideal about what would constitute ideal
behavior in a specific purchasing task, PA's indicated that in 70% of
the items there was disagreement between their view of what their role
should be as opposed to their actual role within their respective firms.
The largest disagreement between ideal and actual occurred with respect
to work procedures.

The third study hypothesis was that in specifying the division
responsibility between PA's and the other two groups, each group would

Perceive more responsibility than other groups would assign to it. In
l"a'ting ten procurement activities, all three groups agreed to one group
haVing the greater responsibility in nine activities.

Kernan and Sommers (1966) wrote emphasizing the interaction of
perceived personal and institutional role commitment as motivation in
industrial buying. Purchasing agents were typified as being innovative,
a‘tlaptive, or unimaginative. Industrial firms were typified as being inno-
Vative, adaptive, or lethargic. Based on these typologies the following

l“atrix was developed to identify motivating forces in different situations.

 

44

TABLE 1
A BEHAVIOR ROLE MATRIX FOR ORGANIZATIONAL BUYING

 

 

 

 

 

 

Buyer's Commitment to Role
Institutional
Role Commitment
Weak Modernate Strong
(Innovative) (Adaptive) (Unimaginative)
Innovative Consonance Institutional Institutional
Dominance Dominance
Adaptive Buyer Consonance Institutional
-Dominance Dominance
Lethargic Buyer Buyer Consonance
Dominance Dominance

 

 

 

 

SOURCE: Jerome B. Kernan and Montrose S. Summers, "The Behavioral
Matrix," Business Horizons 9 (1966): 67 and 69.

 

As an example, consider the innovative buyer in an innovative firm,
The buyer's conmitment to traditional purchasing procedures is weak. He
is more interested in defining his job activities instead of being given
Si .job description. When placed in an innovative firm that is not afraid
13¢) take risks, the results will likely be an environment where his 'take

‘3'1arge' attitude is reinforced.

LOO ti vati on

Copeland (1925) is generally credited as being the first marketing
DeY‘son to study industrial buying motives in depth. Copeland distinguished
between buying motives and partonage motives. The study consisted of

e>'Kamining 756 advertisements from business periodicals and then classifying

ii;
7 ~I

Inger
IF U

an."

WVU'

1336

.1 ..
fix
"I

 

45

the motives suggested by the advertisements. Seventeen buying motives

and six patronage motives were classified. Copeland concluded that all

the buying and patronage motives for industrial goods were rational, in
contrast to the purchase of consumer goods which he terms instinctive and

emotional. Copeland admitted that emotional motives such as the desire

to have the same type machinery as an industry leader may influence pur-
chasing decisions, but he felt that rational motives predominate. While
Copeland recognized some limitations of the study, apparently he did not

consider whether advertisementthemes themselves were synonymous with

lbuyer motivations .
Duncan (1940) conducted a study of industrial purchasing motives by

questioning 400 members of the National Association of Purchasing Agents.
r:i"c1n1 the 87 responses he constructed a list of 25 product buying motives

and 19 patronage motives and classified them by three types of industrial

goods: heavy machinery, raw materials, and supplies. Duncan concluded

that many motives were present in an industrial purchase--some rational

and some emotional-~and that continued reliance on solely rational motives

'50 explain the purchase of industrial goods may cause some industrial pur-

chasing decisions to go unexplained.
Siebert (1955) stressed the PA's reassurance of adequacy as a pur-

He reported sunmary findings from several studies in which

Siebert observed that many

chasing motive.
motivational research techniques were used.
bu.yers sought authoritative sources for purchases advise and then, in the

post-purchase period, often sought to be reassured that the choice had been

a Correct one. This study supports the later developed concepts of per-

cei ved risk and cognitive dissonance.

Duncan (1966 studied the motivation of purchasing agents in 44

 

46

California businesses. The main finding reported here was that PA's were

eager to advance the standards of their profession, to bring about greater

recognition of purchasing's present and potential contributions to company
profits and to acquire the necessary space, facilities and equipment that
would permit more effective performance of the purchasing function. Duncan
interpreted this as status seeking behavior. These findings are supportive
of Strauss (1964) which revealed that PA's were active professionally
par-i tally to strengthen their bargaining position within the firm.

Lazo (1966) reported a study conducted by Dr. Robert Shoaf for _S_t_e_e_l_
magazine investigating buying motives of metal-working executives and PA's.
One hundred thirty-seven executives were interviewed using a modified open-
ended approach. Shoaf found PA's in this industry to be extreme risk
ad\nzerters. Suppliers were not switched frequently. Buying group support
was sought by the PA for when large sums of money were involved in the
puf‘chase. Leading reasons given for purchasing from currecnt suppliers
"are a good working relationship and dependability. Lazo concluded that
fear is a major influence in industrial buying. The behavior of the study
eXecutives indicated that they were other-oriented to a high degree. High
Value was attached to not displeasing the boss, to not making wrong deci-
8‘ions and to not losing personal status in the firm.

Robertson (1966) reported a study by the Industrial Advertising
Re=~Iearch Institute to compare direct questioning with motivational research
techniques in industrial buying. The study population was 58 buying in-
‘“ uencers, including PA's, production engineers and top executives in
24 companies. The study subjects were divided into two groups. In admin-
i s‘tering the research instrument, each person was asked half of the direct

questions and half of the indirect questions. The questions which were

 

47

asked directly of one group were asked indirectly of the second group. The
results of the study were not conclusive. When a conventional direct ques-
tion about source loyalty was compared to a motivational technique of agree-
ing with one of two opinions held by cartoon characters, the results were
conflicting. Using a motivational technique, a majority of the respondents
opted for changing suppliers. A majority of those questioned directly in-
dicated that staying with an old supplier was usually preferable. Although
each respondent answered both types of questions, the fact that the subject
was not asked the same question by both techniques suggests the study
aetually compared responses from two populations rather than comparing the
research tools.

Boone and Stevens (1970) reviewed the marketing literature on indus-
tri al buying motives. Early marketing studies emphasized rational motives,
w1"I‘ile more recent writers have stressed the importance of emotional fac-
tors in the industrial purchase decision process. The authors offer a
s.Vnthesis of these extremes by classifying the business motives into three
categories: product criteria, patronage criteria and personal criteria.
l)l'waduct criteria concern the various internal and external characteristics
of: products themselves. Patronage criteria are those that influence buy-
ing decisions in terms of the characteristics of prospective sellers--
thEi r reputations, size, services. Personal criteria are the human factors
b"‘Ought to the buying activity by the buyers themselves, such as liking a
par”ticular salesman or the desire for self-protection. All of these inter-

act with one another and this interaction brings about ultimate decisions.

W
Lambert, Dornoff, and Kernan (1977) reported findings of a simulated

ex Deriment concerning buyer post-choice evaluations of chosen and rejected

48

product/supplier alternatives. The methodology and other aspects of this
study have been reported previously in Lambert (1974, 1976).

When bogus feedback (critical or supportive) was suppled to treatment
groups composed of PA's and engineers, no significant attitude shift was
observed toward the selected supplier. However, criticism produced a more
positive attitude shift toward the rejected alternative for the criticised
group than for the supported group.

The application of this study is that models of industrial buyer
behavior should include evaluation and resultant feedback from individuals
other than the decision maker in the post-choice product/supplier evalua-
tion.

Webster and Wind (1972a) assert that the organizational buyer's per-
sonality, role set and basic psychological processes of motivation, cogni-
tion and learning interact to produce the buyer's predispositions, prefer-
ence structure. and decision models. Having discussed research findings
on the components of individual behavior, the following sections take up

the interactions of the components.

Predispositions and Preferences

 

Greer (1971) studied British PA's perception of general product qual-
ity and general engineering know-how for eight industrialized countries.
The study population consisted of sixty randomly chosen members of the
British Purchasing Officers Association. Ratings were made on a seven
scale Osgood semantic differential. An additional space was available for
respondents with "no opinion". An analysis of the data showed that British
PA's made some large and many small distinctions among the eight nations.
There were no significant differences on rankings between older and younger

PA's. Coefficients of rank correlations on the two were .76 for general

49

engineering know-how. Although not significant statistically, 48% of the
older PA's and 26% of the younger PA's did not rate any country higher than
the United Kingdom on general product quality. This is surprising consid-
ering that both West Germany and the United States were included in the
study.

Hakansson and Wootz (1975b) investigated the interaction of four buy-
ing decision variables with levels of need uncertainty. Distance of
supplier and firm size were chosen as supplier characteristics. Price
and quality were the bid characteristics studied. Need uncertainty was
not explicitly defined, but was discussed by the researchers:

A purchaser often has difficulty in interpreting the
precise nature of a need formed in the technical core of
his firm. The greater this difficulty is, the larger will
be his need uncertainty. Need uncertainty is then (per-
formance and dimension) of the item to be ordered can be
specified and measured at the time of the purchase. In
case of measurable characteristics, the purchaser will,
in an objective way, be able to demonstrate that the pro-
duct he bought fulfills its purpose. The need uncertainty
is of course negatively correlated with the degree of stan-
dardization of the ordered product. The need uncertainty
is reduced if the purchaser has previous experience with
the ordered product; he gradually learns how to cope with
those characteristics which cannot be measured (p. 47).

The study population was 43 PA's from 3 of Sweden's largest mechan-
ical firms. Products chosen for low uncertainty need were a standard
screw and a standard industrial paint. The high need uncertainty products
were a special screw and a pressing tool.

The selection of the supplier was divided into two steps. In the
first step the PA was asked to choose firms and solicit bids from supplied
lists of potential suppliers. The descriptions of these suppliers were
in the standard forms found in trade directories. PA's could choose among

suppliers in Sweden, England/Germany or France/Italy. The listed firms

50

included small, medium and large sizes. After this the PA's were asked
to rank the submitted bids. Each PA made one purchase for each of the
four products. In each need uncertainty category there was one bid with
a price difference and one with a quality difference. When the four pur-
chases were accomplished, the PA's were interviewed about their previous
experience in purchasing the four products.

Data analysis revealed that PA's preferred close suppliers to more
distant ones. This was found true for both low and high need uncertainty
situations. PA's preferred larger suppliers to small and medium size ones
in all the purchases except for the pressing tool, which was ranked as
the most difficult purchase. When interviewed later about this finding
the PA's indicated that when purchasing such a complicated product they
had often had communication problems with large firms and, therefore,
preferred small and medium size suppliers. Since PA's preferred a large
supplier for the special screw, it could not be established that PA's
preferred large suppliers more for high need uncertainty situations than
for low need situations.

Concerning the aspects of quality and price as bid characteristics.
the analysis indicated that PA's placed more emphasis on quality in high
need uncertainty situations than in low need situations. However, price
was indicated as the most important variable for low uncertainty situa-
tions. The researchers examined the price/quality relationship in more
detail by having the PA's choose between two suppliers. Both suppliers
met the minimum quality standards but one exceeded the standards greatly,
even though the price was only .4% higher. The lower quality product
was Swedish while the high quality was British/German. In only 12% of

the cases was the higher quality product chosen. Hakansson and Wootz

51

saw this as a problem in reward behavior. Since standards were met and
since purchasing was evaluated on its economy in purchasing, it appeared
that there was no incentive to the PA to purchase the higher quality pro-
duct, although production and other departments might benefit from the
higher quality purchase.

In the solicitation of bids, no difference was found in the number
solicited in the high and low need situations. The high need uncertainty
situations did take more time to come to a decision than the low need
uncertainty situation.

This study makes a valuable contribution to understanding industrial
buyer behavior by specifying need understanding as a dimension of uncer-
tainty in perceived risk. It is possible that Hakansson and Wootz have
mislabeled one of the supplier characteristics. PA's chose suppliers from
Sweden, England/Germany and France/Italy. This was labeled as the loca-
tion variable. It may well reflect nationality rather than location and
thus Green's (1971) findings would be applicable. In the high need uncer-
tainty situation some relevant dimension of the need is not directly mea-
sureable. In these situations perceptual bias of product quality among
nations may exist and may be reflected in the supplier chosen.

Wind (1966, 1970) studied the degree and determinant of source loyalty
in the purchase of industrial components by advanced electronics firms.
Wind hypothesized four sets of variables as determinants of source loyalty:

l. The traditional task variables of price, quality, de-

livery, quantity and service, commonly considered in
the purchasing literature to be the sole determinants
of decisions.

2. The buyer's past experience with the various sources,

assumed to be summarized in his attitudes toward the

various sources.
3. The organizational variables, reflecting the effect

52

of the specific organizational setting on the buyer's
decisions and behavior.

4. The factors perceived by the buyer to simplify his

work (Wind, 1970, p. 450).

The data for the study were derived from three sources. Over 1700
purchase history cards were analyzed in addition to weekly distributed
costs savings means and semantic differential measures of buyers' attitudes
towards various suppliers. Regression analysis was used to test the model.
The dependent variables tested were:

SL1 = Number of purchases from favorite source as

percentage of total number of purchases from
all sources.

SL2 - Number of purchases from the two most favorite

sources as a percentage of the total number of
_ purchases from all sources.

SL3 8 Number of source shifts as a percentage of the

total number of purchases.

SL4 a The relation between source decision at times

t+l and t (Wind, 1970, p. 450).

The regression analysis showed a significant relationship between the
various measures of source loyalty and the four sets of independent vari-
ables with an AZ ranging from .94 for the equation with SL1 as the depen-
dent variable to .73 for SL4. Substantial differences existed in the
relative explanatory importance of the various independent variables. Cost
savings, price and the dollar value of the order were the most important
single determinants of source loyalty. Attitude toward suppliers, recom-
mendation of a brand and previous purchase history were slightly less im-
portant.

A discriminant analysis was used to test the ability of the four sets
of variables to discriminate between cases of perfect source loyalty (SL = 1)
and some other degree of source loyalty (Sle) and between SL>.5. In both

cases the variables were able to discriminate effectively, although less

53

effectively between SL>.5 and SL§,5 than between SL = 1 and SL<1. The
discriminant function for SL 8 l and SL<1 exhibited a high degree of
predictive power, correctly classifying 85% of the cases.

Jarvis and Wilcox (1977) wrote concerning brand loyalty and repeated
purchase behavior. The basic theme of the article is that true vendor
loyalty has both a behavior and a psychological dimension. They argued
that merely allocating a disproportionate amount of purchase to one of
a few suppliers does not, of itself, indicate brand loyalty. Brand loy-
alty included a psychological attachement of commitment to vendors. Jarvis
and Wilcox believed that explanations for repeat purchase behavior in-
clude:

1. Time and/or Enerby Costs - To change suppliers the decision maker
must invest his time and energy to evaluate potential suppliers.

2. Perceived Risk - Unless current suppliers are unsatisfactory, it
is likely that decision makers perceive risks higher than those
perceived from purchases from current suppliers in changing suppliers.

3. Perceived Absense of Choice - It may be that there are no alternative
sources of supply. Alternative sources may exist but the buyer may
exist but the buyer may be unaware of them or may perceive them to
be unable to meet his needs.

4. Bias - Some purchases are made out of habit but with no psychological
commitment.

5. Other Factors - These include temporary seller incentives and recipro-
city.

The authors concluded that, unless vendors know whether their cus-
tomers are brand loyal or merely repeating behavior, they may become com-

placent and be led to believe that high repeat purchase rates are

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54

indicative of customer satisfaction and commitment.

Perceived Risk

The idea that buyer behavior might be better understood through the
concept of perceived risk was first proposed by Bauer (1960). He argued
that all buyer behavior and, in fact, all decision making involves risk
in the sense that any decision is followed by consequences which cannot
be predicted with certainty at the time the decision is made. The buyer,
consciously or unconsciously, selects a course of action which reduces,
or at least allows the decision maker to handle the risk that is perceived.
While Bauer did not define perceived risk, he did suggest the following
behaviors as attempts to reduce risk: (1) brand loyalty or repetitive
purchasing of the same brand, (2) consultation of authoritative sources
such as Consumer Reports, (3) consultation with trusted users of the pro-
duct, and (4) purchasing from well-known companies.

Based on Lazarsfeld's (1959) work which suggested that group influ-
ence will be stronger in those instances in which the wisdom of one's
decision is difficult to assess, Bauer suggested that when the primary
functions of a product are hard to assess, or when all the products in a
category work equally well, secondary attributes such as group approval
become dominate decision rules to reduce risk.

The development of the perceived risk concept was greatly aided by
a unified research project at Harvard University in the 1960's (Cox, 1967a).
Some of the major research findings of this project are presented below
since the Harvard research served as the basis for later applications of
the concept in industrial buyer behavior.

In his introduction to the research studies, Professor Donald Cox

55

explained the conception of perceived risk as it had evolved at the end
of the research project. Basic to the research studies was the belief
that consumers are problem solvers and have buying goals. A basic premise
of the research was that in every buying decision consumers attempt to
identify buying goals and to match these goals with product or brand
offerings. Professor Cox stated that risk may often be perceived by the
consumer as the result of one or more of the following factors:

1. The consumer may be uncertain as to what her buying

goals are.

2. The consumer may be uncertain as to which purchase
(product, brand, model, style, size, etc.) will best
match or satisfy acceptance levels of buying goals.

3. The consumer may perceive possible adverse conse-
quences if the purchase is made (or is not made) and
the result is a failure to satisfy her buying goals.
If one or more of these conditions are present in
the mind of the consumer (though not necessarily in
her conscious mind), we would define the situation
as one of perceived risk. In short, risk is a function
of two elements, uncertainty and consequences (Cox,
1967a, p. 56).

Cox clarified that uncertainty may be in regard to identifying buying
goals or in connection with matching goals with product offerings and that
the uncertainty" is subjective and perceived. The consequences were en-
visioned as being related to function or performance goals, psychosocial
goals, and to the means invested in the attainment of these goals.

The researchers felt that consumers "handle" risk in the sense that
in some way they appraise buying situations and assess the nature and the
degree of perceived risk. In efforts to reduce the risk perceived to
tolerable limits, the researchers felt that consumers either attempted to
reduce the uncertainty or the consequences or both. Information seeking
was interpreted as a principle method of reducing uncertainty and was

found to be more prevalent than attempting to reduct the consequences, or

56

the amount at stake in the decision. It was also concluded that there
was a perceived risk hierarchy in which some product categories were
perceived as more risky than others.

Cunningham (1967a) wrote concerning the major dimensions of perceived
risk. He surveyed 1200 housewives by phone concerning the perceived risk
involved in the purchase of headache remedies, fabric softeners, and dry
spaghetti. The operational definition of perceived risk used in this
study included questions designed to measure the perceived certainty of
a given event happening and the consequency (danger) involved if the event
should happen. The certainty of an event happening was measured by the
question: "Would you say that you are: very certain; usually certain;
sometimes certain; or almost never certain that a brand of headache remedy
(fabric softener, dry spaghetti) you haven't tried will work as well as
your present brand?" (p. 84). The consequences variable was measured by
the question: "We all know that not all products work as well as others.
Compared with other products, would you say there is a great deal of dan-
ger; some danger; not much danger; or no danger at all in trying a brand
of headache remedy (fabric softener, dry spaghetti) you never used before?"
(1:- 84)-

A perceived risk matrix was made by collapsing each of the perceived
risk questions into three point scales and a numeric value was assigned
to each point on the scale. The two questions were then multiplied to-
gether in a matrix and each cell was thus given a specific weight that
was used as a basis for ordering the combined index. This method of
indexing is based upon two assumptions: (1) that both consequences and
certainty are equally weighted and (2) that the gradations are spaced

equally on both scales with the distance between each gradation the same

57

on each scale.

Cunningham found that consumers could classify products on the basis
of perceived risk: among the headache remedy users, 24% perceived high
risk; for fabric softener users, the percentage was 6%; and 1% of the
dry spaghetti users perceived high risk.

In evaluating the relative importance of consequences vis-a-vis
certainty, Cunningham found that the consequences dimension rating was
higher than the certainty dimension for the three products used in the
survey. The relative value of each dimension varied by products and this
led Cunningham to hypothesize that the composition of perceived risk
varies by product both in terms of the relative weights of the conse-
quences and uncertainty variables and in terms of the variance for each
of these variables.

Concerning the consequences or dangers, the answers as to what type
of danger was present in the decision to purchase were specific which
suggests that experience sensitizes users to the dangers, and thus, for
those individuals, a higher risk is perceived.

About half the number of respondents could be classified as being
consistently either high, medium or low in perceived risk across all three
product types suggesting that high or low perceived risk may be a gener-
alized tendency.

Cunningham (1976b) extended the previous study to study the relation-
ship between perceived risk and brand loyalty. Perceived brand commitment
was derived from the response to two questions:

1. "Do you regularly switch around or buy the same brand

of headache remedy (fabric softener, dry speghetti)?"

2. “What would you do if your present brand of headache

remedy (fabric softener, dry speghetti) was out of

stock--buy another brand, go to another store, or wait
until the nest trip?" (p. 511).

58

Those classified as high in perceived brand commitment were those
claiming to buy regularly the same brand and who would also go to an-
other store or wait until the next trip if they were unable to obtain
their present brand. Those classified as low in perceived brand commit-
ment were those claiming to buy the same brand regularly, but who would
buy a substitute brand if their present brand were out of stock or those
claiming to switch around and who would buy another brand if their pre-
sent brand were unavailable. A third and small group (2% of respondents)
were classified as being ambiguous in perceived brand commitment. This
group consisted of those reSpondents who claimed they switch around but
would go to another store or wait if their favorite brand were out of
stock.

Cunningham used Chi-square test to examine the relationship between
perceived brand commitment and perceived risk. He hypothesized that con-
sumers who perceived high risks in products would also be rated high in
brand loyalty. The hypothesis was strongly supported for all three pro-
ducts with significant Chi-squares in the .02 - .001 range. Analysis
also supported the hypothesis that the nature of the perceived risk is
related to brand loyalty in that the more serious or dangerous the per-
ceived consequences, the higher the probability of brand commitment.
Analysis of perceived risk and the rationale for brand switching and per-
ceived satisfaction with present brand was inconclusive.

Cox (1967b) summarized the Harvard studies as they pertained to risk
taking and infbrmation handling. Cox identified three basic information
sources:

1. Marketer dominated communication channels (the product, pricing,
packaging, promotion, advertising, etc.)

59

2. Consumer dominated channels of communications (word-of-mouth)
3. Neutral)information sources (Consumer Reports, articles)
p. 605 .

 

After a discussion of the characteristics of these sources suggested
their relationship to perceived risk, Cox suggested that information pro-
vided by marketer dominated channels were adequate for consumer decision
making when either (1) perceived risk is moderate or slight, (2) per-
ceived risk is relatively low and is mainly the result of performance
uncertainty, or (3) the time and effort required to obtain information
from alternative sources is not felt to be justified. Conversely, Cox
reasoned that consumers would turn to consumer dominated channels when
either (1) performance risk has been aroused and is sufficiently high,
and/or when (2) psychosociai risk is sufficiently high to justify the
time and effort to obtain information from these informal channels; and
when (3) perceived risk is high and consumers are anxious to avoid mis-
takes and therefore want negative or unfavorable information if it exists.

Neutral sources must be considered on a case by case basis. Consumer
Reports may be consulted when performance risk is dominate. In some
cases, women's fashion magazines may provide both good performance and
psychosocial information.

Cox cited various findings of the Harvard studies to support these
hypotheses. Cox recognized that the various souces of information may
play differential roles according to the stages of the prucase decision
process. For example, Cox cites Katz (1961) which found that the closer
physicians came to the decision to adopt a new drug, the less important
became commercial sources of information relative to word-of—mouth com-

munication.

60

Concerning information transmission it was found that consumers who
rated as high perceived risk on specific products were more likely to be
self appointed opinion leaders than consumers in the low perceived risk
category for the same product. It was reasoned that high risk consumers
have a higher propensity to seek information than lower risk consumers
and were therefore more likely to be recognized by other consumers as
knowledgeable about the specific purchase.

Concerning information processing and perceived risk, Cox presented
synthesized "central tendencies." In summary, these prOpositions are
that: (l) The consumer will utilize infbrmation which is relevant to
the problem being confronted; (2) Within the realm of the relative type
of information, the consumer will evaluate favorably and utilize relevant‘
information with the highest information value; and (3) In the informa-
tion storage process it seems that memory loss occurs primarily with
regard to predictive value.

Sheth and Venkatesan (1968) studied risk-reduction processes in repeti-
tive consumer behavior. Although the study was of a consumer product
(hair spray), the repetitive nature of the purchase is characteristic of
much of industrial purchasing. The study population consisted of 104
volunteer students from several colleges at the University of New Hampshire.
The students were divided into two groups, the first receiving a choice
of three nationally known hair sprays while the second group received a
choice of three lesser known regional brands. For each of five weeks the
students returned to receive additional free cans chosen from the three
brands. The national brand group was termed low risk and the regional
brand group high risk. Each week the participants filled out short

questionnaires concerning conversations and/or other information received

61

about the hair spray brands. Several study hypotheses were supported.
First, risk reduction entailed three behavioral manifestations: active
information seeking, predecision deliveration, and development of brand
loyalty. Initially, active information seeking and prepurchase delib-
eration were most important but over time brand loyalty became dominant.
Secondly, the greater the uncertainty, the greater the active information
seeking and prepurchase deliberation. The high risk group sought more
information and deliberated longer than the low risk group. Third, as
the decision was repeated, information seeking and prepurchase delibera-
tion continued to diminish for both groups. However, in each decision
the information seeking and prepurchase deliberation for the high risk
group was greater than for the low risk group. Fourth, brand loyalty
increased for both groups over time. Analysis also indicated that per-
ceived risk increased slightly at the begining of the study. The authors
suggested that experience with a brand may sensitize the consumer to
adverse consequence inherent in the brand chosen.

Researchers of risk have not reached a consensus about the dimension-
ality of the concept. Most, but not all, researchers have used the uncer-
tainty and consequence (danger) dimensions of Cox (1967b) and Cunningham
(1967a). Schiffman (1972) and Arndt (1968a) use a variant two dimensional
definition of uncertainty and importance. Arndt (1968b) used only the
dimension of uncertainty.

Bettman (1973) conceptualized the dimensionality of perceived risk
as consisting of importance and uncertainty. "...the risk inherent in
a brand choice situation within a product class will depend upon the
degree to which a buyer believes he can construct a reasonable decision

rule for making a brand choice, and the importance to him of making a

 

 

 

62

satisfactory choice within that product class.“ (pp. 184-185).

Rather than rating the uncertainty directly, Bettman's procedure was
to compute the percentage quality to the consumer. The advantage of this
conceptualization of perceived risk is that when both importance and
uncertainty are measured as he proposes, both these components contribute
variance to the overall risk rating, whereas using Cunningham's (1967a)
uncertaintly and danger components, by far the most variance is explained
by the danger component alone.

Bettman (1972) made distinctions between "inherent risk" and "handled
risk":

Inherent risk is the latent risk a product class
holds for a consumer, the innate degree of conflict
the product class arouses in the consumer. Handled
risk is the amount of conflict a product class en-
genders when the buyer chooses a brand from that pro-
duct class in his usual buying situation. Thus,
handled risk includes the effects of information and
risk reduction processes as they have acted on inher-
ent risk (p. 394).

Ross (1975) noted that few research studies have explicitly noted the
type of risk they attempted to measure and therefore there is little com-
parabilty across studies.

Stern, Lamb and MacLachlan (1977) noted that a thorough review of
the pertinent literature revealed almost no managerial evidence of the
concept. Two possible reasons for this were suggested. First, one
reason why the literature fails to reflect managerial adoption of the
concept of perceived risk is that proprietary information is not often
released for publication. Secondly, the complex conceptual nature of

questionnaires dealing with perceived risk requires a fairly high level

of intelligence and education on the part of the respondents. Because

63

of this latter reason, the authors felt that application of the perceived
risk concpet in developing nations was limited.

Having presented major aspects of the perceived riak concept, the
rest of this section reviews studies of perceived risk in industrial
buyer behavior.

Copley and Callom (1971) examined how risk was perceived by purcha-
sing agents. Subjects were 101 purchasing agents belonging to two active
chapters of the National Association of Purchasing Management in the
northeastern United States. Research instruments were a main and secon-
dary questionnaire: the former was used for measuring risk and search
and the latter was used to determine the scale values of the search stra—
tegies.

The authors hypothesized that purchasing agents might respond to sti-
mulated purchasing situations in differential ways, depending upon their
perception of perceived risk. Respondents answered twelve role play
questions which were scaled to measure perceived risk on the dimension
of uncertainty and danger. On a basis of a factor analysis of the re-
sponses, the subjects were divided into five groups. For each of the
five groups, search was regressed onto risk by a polynomial regression
rountine. The resultant curves took three variations in shape.

The first curve, representative of groups 1 and 4 which were termed
"search simplifieds," are characteristically low risk perceivers. The
simplifier's search curves increased very gradually as the risk was in-
creased, and at the higher values of risk the amount of searching leveled
off and declined. This type of purchasing agent appears to seek more
information up to a certain level of risk. At the point of risk overload

the simplifiers reduce their information intake. An example of such a

64

type would be the purchasing agent who uses rules of thumb or what he
considers "tried and true“ decision rules regardless of how risky the
situations.

The term “search norms" was applied to the third group of purchasing
agents. As risk increased, the curve of this group at fist took a dip
and then climbed to a maximum after which it declined. About this group
it is thought that the initial dip is caused by what the authors call
the curiosity motive. That is, at levels of low risk purchasing agents
tend to be on the outlook for new or alternative sources of supply to
stimulate competition. Again, as with the search simplifiers, at a cer-
tain point the risk appears to be so great that the purchasing agent
reduces his information intake. This was the smallest group representing
only about 8% of the variance, indicating that most purchasing agents
are either search simplifiers or, as the final group was called, searchers.
The curve of the two groups in this category increases with risk up to
a point, declines after this maximum and later increases to a higher
maximum. The authors contend that these individuals initially begin to
search for more information as the risk increases, perhaps because their
purchasing goals are higher than those acutally attained. The resultant
attainment of goals diminishes to search for information until new higher
goals are set. When this happens, the individual again searches for ways
to bring his purchasing performance up to the level of his new goals.

McMillan (1973b) represents one of a few investigations of the impor—
tance of perceived risk in actual industrial purchase decisions. The
underlying premise of the study was that risks perceived by a buying firm
toward competing vendors would be instrumental in vendor selection deci-

sions. Three questionnaires were sent to purchasing agents who purchased

65

three intermediate products of a large U.S. chemical firm. The purchasing
agent was instructed to give the other questionnaires to the scientist

and manager most involved in the purchase of these products. Both buyer
and non-buyer firms were included in the study. Perceived risk was mea-
sured both on certainty and importance dimensions. Both the certainty and
importance sections of the questionnaire contained 17 variables which were
considered to be important in the vendor selection decision. An overall
rating was one of the questions with four combining to give a measure of
the product, four other combining to indicate the risk perceived toward
the salesman and the remaining eight giving a composite indication toward
the company. Five point additive scales were used for the rating.

Perceived risk measures for product, salesman, and company and for
overall company rating were compared between buying and non-buying firms
using the Mann-Whitney U test fbr comparisons. Except for the salesman,
significant differences existed between the two categories. The differ-
ence between the overall ratings was significant at the .01 level using
the uncertaintly perceived risk model. Using the multiplicative (impor-
tance X uncertainty) model a significant difference on the same measure
was found to exist at the .02 level.

When comparing the mean perceived risk for the product, company and
salesman, it was found that perceived risk toward salesmen was the high-
est. Concerning perceived risk toward product cost and product perfor-
mance by role position, some surprising results were found. It was
thought that purchasing agents would have been concerned primarily with
product cost while other participants (scientist and manager) would be
concerned most for product performance. No significant differences were
found to exist among roles for product performances. However, the pur-

chasing agent perceived significantly less risk toward the product price

66

than either the scientist or the manager.

Sweeney (1972) and Sweeney, Mathews, and Wilson (1974) investigated
the risk reducing behavior of industrial buyers faced with a choice
between two new sources of supply. Major hypotheses were (1) Industrial
buyers' risk reducing strategies can be delinated into patterns of behav-
ior and (2) Industrial buyers' risk reducing behavior is related to two
personality characteristics: need for congitive clarity and cognitive
style. Data for the study were gathered by means of a questionnarie
mailing to a nonprobability sample of 'members of the National Association
of Purchasing Managers. The initial mailing and phone follow-up yielded
130 responses.

The research instrument consisted of a hypothetical purchasing pro-
blem wherein the reSpondents were presented with a choice between two
suppliers of electronic components: (1) a supplier offering substantial
cost savings to the buyer but an uncertain delivery commitment, and
(2) a supplier offering no cost savings but a very certain delivery
commitment. Following the purchasing problem the respondents rated each
supplier on the perceived risk dimensions of uncertainty and consequences.
In addition, respondents were given ten strategies to evaluate, each of
which were designed to either increase the certainty of the first supplier's
delivery commitment, or to decrease the seriousness of the negative conse-
quences of the second supplier's possible late delivery date. Seven-
point scales were used in measuring buyers' reactions to these strategies.
The scales ranged from "less Likely to Employ" to "More Likely to Employ."

The cognitive clarity and style instruments were developed by Kelman
and Cohler (1959) and Budner (1962).

A factor analysis of respondents' risk reducing strategies revealed

67

four patterns. The patterns appear to reflect two types of uncertainty
reduction: internal (within the buyer's firm) and external (interacting
with the prospective supplier). Similarly, two consequences reduction
patterns, again internal and external, were found.

Some difference in strategy was found between simplifiers and clar-
ifiers (individuals who react to ambiguity by seeking clarification).
Clarifiers indicated that they were more likely than simplifiers to employ
external uncertainty reduction, while simplifiers were more likely to
employ internal uncertainty reduction. Clarifiers preferred external
consequence reduction while simplifiers preferred internal consequence
reduction.

Haksansson and Wootz (1975) examined the effect of several indepen—
dent variables in the selection of vendors who differed in riskiness.
Study participants were 43 purchasing agents from three of Sweden's lar-
gest mechanical firms. Participants were supplied with a list of possible
suppliers and told to choose one. The descriptions of these suppliers
were in the form found in Swedish trade directories. TWO of these dis-
cription variables-~1ocation and size--were changed systematically accor-
ding to scales on three levels. The location variable was either Sweden,
England/Germany or France/Italy and size of firms were small, medium and
large. Each participant was presented with four purchasing situations,
two of which were characterized by low risk and two by high risk. These
different risk situations were generated by using products with differ-
ences in their degree of complexity.

The second part of the experiment was a ranking procedure, where the
participant compared the solicited bids which differed in either price or

quality. In the low risk category there was one bid with a price difference

68

This was also true for the high risk category. Measures on the following
independent variables were made: (1) general experience, (2) experience
in purchasing from foreign countries, (3) experience in purchasing products
used in the study, (4) education, (5) knowledge of foreign languages and
(6) a dummy variable to indicate at which firm the participant worked.

Dependent variables included in the study were (1) the number of bids
solicited (a) the location of these suppliers and (b) the size of the
suppliers; (2) the working time of the purchase and (3) the degree of
risk in the final decision. The riskiness was related in the following
manner: (1) Low risk - choosing the original supplier of a Swedish firm;
(2) Moderate risk - choosing a new supplier from England or Germany; and
(3) High risk - choosing a new supplier from France or Italy or choosing
a suppler whose price was not within the specified limits.

Canonical correlation was utilized to examine the relationhip between
the independent and dependent variables.

Analysis indicated that education was the most important of the
independent variables in understanding industrial buyer behavior. The
authors concluded:

Higher education forms a decision making style
implying that the purchaser works more on the pur-
chase, solicits bids from firms located in a wider
area, i.e., he is more international, and ends up
with higher risk decisions. He will work more and
solicit bids from firms located in a narrower area in
in high-risk compared with low risk situations. Fin-
ally, these highly educated pruchasers are not so
sensitive to price differences as purchasers with
lower education. In other words, they have an
ability to evaluate the price in relation to other
qualities of the supplier (pp. 49-50).

It should be noted that Haksansson and Wootz did not examine perceived

risk (risk subjectively perceived) but rather objective risk. The objective

69

risk was not justified--i.e., that purchasing from France is more risky
than purchasing from Germany. In light of this observation the study
results may be questionned as the their validity.

Newall (1977) performed extensive research in the association between
perceived risk and a number of aspects of industrial buyer behavior. Fifty-
five British companies who had recently purchased copying machinery were
represented in the study. Newall developed a model for risk handling and
tested parts of the model empirically. Discussed here are the findings
relating to source loyalty and perceived risk.

Two indices of source loyalty were computed. The first was an atti-
tudinal measure based on an expressed intention to select a particular
source of supply. The second measure was based on past purchase behavior.
The results of the two measures were said to be similar so only one of
the measures (not identified) was used in the analysis. Four factors:
source, loyalty, buyer risk, company risk and buyer expertise were studied.
A series of t tests were employed to examine the relationship between two
factors while controlling for the effects of the remaining two.

Buyer propensity of loyalty was found to be affected by professional
affiliation, purchase history and decision experience. A single index of
buying expertise was made by combining the buyer's raw score on these
attributes. The mean value was used to divide the buyers into two mutually
exclusive groups of buyer expertise.

Newall found that expertise in buying was not a factor in source
loyalty irregardless of high or low levels of company and/or buyer risk.
However, for medium levels of risk it was found that the degree of buyer
loyalty depends on both the degree of buying expertise and the level of

buyer risk:

70

At the medium company risk level, high expertise buyers
who perceived high levels of buyer risk were no more
nor no less likely to remain loyal than high expertise
buyers who perceived low levels of buyer risk (t =O.79
.90); at the medium company risk level, low expertise
buyers who percieve high levels of buyer risk were more
likely to remain loyal than low expertise buyers who
perceived low levels of buyer risk (t = 1.82 .94)
(p. 194).

Newall interpreted these findings to mean that source loyalty does
not appear to be an adequate risk handling mechanism since faced with
high levels of company risk and buyer risk, buyers reconsider other
available sources of supply irrespective of their degree of buying exper-
tise. Newall speculates that, when faced with high buyer risk, high ex-
pertise buyers consider other sources in a sense of obligation to thor-
oughly search the market. In the same situation, the low expertise buyer
also searches the market so that he will be able to justify his decision,
i.e., to reduce psychosocial risk.

It should be noted that Newalls finds may be dependent wpon his def-
inition and grouping of expertise buyers and that only one class of pro-
ducts, i.e., copying machinery, was studied.

In the early 1960's social psychologists began publishing research
findings concerning the effect of group influence on individual risk
taking. Because of increased recognition that many industrial purchase
decisions are made by buying centers, the relevance of these research
findings merits the attention of marketers.

Stoner (1961), using male graduate students of industrial management
as students, observed that a group consensus regarding degree of risk to

be taken in resolving a "life dilemma" situation deviated from the average

of prediscussion decisions in the direction of greater risk taking.

71

Wallach, Kogan and Bern (1962) extended the research initiated by
Stoner by repeating the study and including both male and female students
from several different major curriculums at the University of Colorado.

A total of 167 participants were grouped into 14 all-male and 14 all-
female groups. A total conservatism score was computed by adding the 12
"life dilemma" scored items. To measure post discussion scores, the
group score was the some of the 12 unanimous group decision scores minus
the average of the prediscussion total individual decision scores for all
group members. Analysis of t tests indicated a move in the risky direc-
tion significant beyond the .001 level for the 14 male groups and a simi-
lar move significant at the .005 level for the 14 female groups. An analy-
sis of each item revealed only two items either sex showing any indication
of not sharing in the general shift toward greater risk taking found in
both sexes. The authors conclude:
This is clear evidence therefore, that postdisucssion
individual decisions exhibit a strong move toward greater
risk taking when compared with prediscusion individual
decisions arrived at by the same persons and do for both
sexes. The group discussion process, in other words,
seems to have an effect on private attitudes (post dis-
cussion individual decisions) that is just as signi-
ficant as its effect on publicly expresses views (unani-
mous. group decisions)(pp. 81-82).
Reingen (1973) examined the "risk-shift" phenomena in a novel way
using a dimension termed normative risk.
Reingen explains the concept of normative risk in the follwoing
manner:
Consider a decision-making matrix with two alterna-
tive courses of action and two states of nature. One
of the courses of action is more conservative, in that
its expected cost is not affected by the states of

nature. The expected cost of the other course of ac-
tion is affected by the states of nature. Normative

72

risk refers to that lower lever of probability of
the desired state of nature for which the expected
cost of the conservative course of action exceeds
the expected cost of the riskier alternative course
of action (p. 340).

Study participants were 61 unpaid introductory business students at
the University of Cincinnati. The risk-taking instrument consisted of
three purchasing situations involving industrial goods. Each purchasing
situation represented either low-normative risk, LNR, medium-normative
risk, MNR, or high-normative risk, HNR. The respondents role played the
part of the central person in each decision situation. In each case
the person had to choose between two courses of action, one of which was
riskier than the other, but also more rewarding if successful. For each
situation, the subject had to indicate the lowest probability of the
more desirable state of nature he would accept before reconmending that
the potentially more rewarding alternative be chosen. The subjects were
allowed ten minutes to complete the process.. After the time elapsed, the
students received new copies of the questionnaire and were randomly as-
asigned to groups. Groups were allowed fifteen minutes to reach a con-
sensus decision.

Analysis revealed that individual prediscussion risk-taking positions
were significantly more conservative than normatively presented risk tak-
ing for the LNR situation and significantly riskier than the normative
risk-taking level for the HNR situation. The consensual group decisions
after discussion were not significantly different from the normative risk~
taking level for the LNR situation, but for the HNR situation, groups

were significantly more conservative than the normative risk-taking

level. Neither the individual prediscussion decisions nor group

73

decisions differed significantly from the normative risk-taking level
for the MNR situation.
About the results Reingen states:

If group discussion can produce risky shifts and
conservative shifts, as well as no shifts, and if
future experiments can be predicted as'a function
of normative and/or perceived risk levels, what
theory would best account for these results? It
is suggested here that at least two factors are
involved. First, there might be a bandwagon ef-
fect. When group members discover that most of
them are leaning in the same direction on an item,
this confirmation creates affective pressure for
perceiving that particular level of risk as appro-
priate. This bandwagon tendency can carry group
decisions to more extreme choices. Second, group
discussion can lead to cognitive change in that
it leads to a better understanding of such things
as the stimuli characteristics, the value of posi-
tive outcomes, and the costs of negative conse-
quences (p. 340).

The perceived risk literature indicates that one method of reducing
the perceived risk is to seek information. The way information is pro-
cessed and the credibility of information cources are discovered in the

following sections.

Information Processing

 

Stiles (1972) applied the Schrader-Driver Streufert (1967) (S-D-S)
model of human information processing in an industrial buying setting.
The model adopted by Stiles for business buyers follows the 5:0;5 model
which has related the level of information processing evidenced in the
accomplishment of a task to the complexity of the task, the individual's
conceptual capacity, and the environmental structure associated with the
task.

The data for the study was collected from sixty industrial buyers

74

processing actual purchases for their firms. Protocols were written

by each buyer describing his offer solicitation strategy, his evalua-
tions of the offers received, and his rationale for choice. The numbers
of offers under consideration and their relative spread in price from
lowest to highest-priced offer were used as indicators of the complexity
of the task facing the buyer. The buyer's conceptual capacity was mea-
sured by a paragraph completion exercise. Measures of the buyer's task
environment consisted of his ratings of communications with the users

he serves, measures of his work load, and his response to a comprehensive
inventory designed to measure job satisfaction. Demographic character-
istics of the buyers were also recorded.

The major findings indicated that industrial buyers in executing
"Modified Rebuys" or "New Task Buys": (1) respond positively to differ-
ences in specific task complexity (the number and diversity of offers
under consideration) by processing information at levels commensurate
with the level of the task; (2) exhibit individual differences in level
of information processing as predicted by the general test measuring
conceptual capacity; (3) process information at levels which are inversely
related to their total work load; (4) process information at levels pro-
portionate to their reported quality of communications with the users they
serve; (5) process information at levels proportionate to the number of
users who acutally participate in the decision process. Individually,
the five independent variables were found to correlate significantly with
level of information processing, and together, in a multiple linear repres-
sion model, they accounted for 52% of the variance in information proces-
sing.

One aspect of the S-D-S model was not supported by this study. The

75

S-D-S- model indicated that individuals can be overwhelmed by tasks of
high complexity and will revert to low levels of information processing
under such conditions.

Stiles found no such overloading condition to exist in his study;
the response to increasing task complexity was linear and positive over
the entire range of task complexity for the sixty buys. Stiles concluded
that this indicates that buyers can cope adequately with high task com-
plexity. Another interpretation might be that the threshold level of
overloading was not reached by any of the sixty purchases.

Luffman (1974a, 1974b) reported a study of the search process and
information processing. The study was based on interviews with British
buying executives in the valve and earth moving equipment, EE, industries.
Fourteen modified rebuy purchases of a processed raw material were stu-
died. Research objectives were:

to examine the factors which stimulated search behavior;

to identify the extent of market search by buyers; and

to study the relationship between the reasons for and

the extent of search, and other variables such as the

characteristics of buyers and their companies (Luffman,

1974a, p. 93).

Twp reasons, representing 90% of the responses, were given for search-
ing the market. In ten cases the introduction of a new component served
as the stimulus for search. None of the cases where this reason was given
resulted in selecting a new supplier. Eight respondents listed dissat-
isfaction with current supplier as the impetus for search. In every case
dissatisfaction with supplier led to the selection of new suppliers. Rea-
sons for dissatisfaction were divided evenly among price, quality and

delivery of currently supplied products.

Analysis revealed that those buyers who were dissatisfied with their

76

vendors saw more salesmen from non-suppliers and obtained more quotes
than either the buyers who changed suppliers for other reasons and the
buyers who did not change suppliers. A factor that may have limited
the extent of the search was that ten of the fourteen respondents per-
ceived certain foundries to be better for one type of work than for
others.

It was hypothesized that: (l) the industry, (2) the degree of per-
ceived risk, (3) the status of the buyers, (4) the experience of the buy-
er and (5) the nationality of the purchasing fimr would affect the search
process. Of these, only the industry variable was significant. The
sources used for infbrmation about new suppliers were the same for both
industries, but the ranking of source importance differed.

Luffman found that the modified rebuy buying process for this mater-
ial consisted of three sequential stages, each containing three activi-
ties: (l) the search for information, (2) the evaluation of information
and (3) the formation of an attitude towards the suppliers considered.
During the first or qualifying phase, buyers determined who were the
potential suppliers. In this phase the buyers were interested in infor-
mation concerning several physical aspects of the product. In the second
or determining phase, the buyers sought detailed information from a num-
ber of suppliers identified from the previous phase to be capable of pro-
ducing the needed product. During this phase the buyers were most con-
(cerned to learn of the capability of the potential supplier to meet
delivery dates. There was also an evaluation to determine if the quoted
price was lower than the price from existing suppliers. Valve buyers
were most concerned in learning if the quoted price was less than the

price from existing suppliers and in learning if the potential supplier

77

had test facilities. Phase three was not considered to be information
processing. During this phase an evaluation was made of the potential
supplier using specific but subjective criteria. During this phase
visits were made to the potential supplier's plant to confirm the quality
of production facilities, of suppler personnel and of production control
systems.

The findings of this study have important marketing implications.
First, the stimulus for information search originates inside the firm
in 90% of the cases. Second, dissatisfaction with current suppliers
was the overriding reason for changing suppliers. Both of these findings
suggest that a close monitoring of potential buyers' attitudes and pro-
duction processes may create market opportunities.

Crow (1975) studied the search and choice process of information
processing. The search and choice decision processes were examined
through the analysis of protocol of five hypothetical purchase decisions
for electronic components from fourteen industrial buyers.

The analysis of these purchase decisions consisted of identifying
and constructing, from the protocol, individual decision models of the
quotation selection and final vendor choice processes. The hypothetical
buying situation consisted of presenting the industrial buyer with a
purchase requisition and a vendor history file. From the vendor history
file, the industrial buyer selected those vendors from whom he wished to
request quotations for price and promised delivery. Upon the receipt of
the quotations, the industrial buyer then chose one vendor as the supplier.

The hypothetical buying situation varied in the number of potential
vendors and the time avaiable for supplying the required goods using a

2 x 2 factorial design. Also, the vendor history file contained ratings

78

of three vendor history attributes: delivery, quality, and technical
assistance. These attributes were so structured as to result in no one
vendor being the obvious best choice.

The analysis of the quotation-selection process indicated that there
were two general quotation-selection strategies. Each strategy was used
by seven of the subjects. The first strategy was to specify the number
of quotations to be selected and then vary the selection criteria as
necessary to meet the specified number of quotations. This approach is
basically a two-step process. There was initial screening of potential
vendors using a specified cut-off level for the vendor history attributes.
If the initial screening produced more potential quotations than required,
the acceptance level was tightened until the potential quotations equaled
the required number. Conversely, if the number of quotations was less
than the needed number after the initial screening, the criteria were re-
laxed until potential quotations equaled the required number.

The second quotation-selection strategy was to specify the accep-
tance level for the vendor history attributes and then request quotations
from each vendor meeting those requirements.

The final vendor-choice model was similar for all the subjects and
consisted of two steps. The first step was to review the quotations for
significant differences in price and delivery and to reject those quota-
tions which were significantly higher in either price and/or longer in
delivery time. If more than one vendor remained after this initial screen-
ing, the second step was used.

The remaining vendors were evaluated using the vendor-history attri-
butes. The vendor possessing the best vendor-history rating was the se-

lected as the supplier of the component.

79

This selection strategy suggests that as long as there were signifi-
cant differences in price and delivery, the past history of the firm was
not considered in the selection. Crow admits that this strategy may have
resulted from the subjects assuming that since there had been an initial
selection of vendors, all those quoted would be satisfactory suppliers.

The two factors controlled for in the experimental design, i.e.,
the number of potential vendors and the time availability for supplying
the required goods, did not have a significant effect upon the number of
quotations selected.

Sweitzer (1976) developed and tested an interpersonal information
processing model drawing heavily from research in psychology, communication
theory and consumer behavior. Sweitzer first modeled the buyer's filter-
ing process (Figure 1). To pass through the buyer's filter, purchase deci-
sion information must have two qualities: (1) the incoming information
must be perceived as being relevant and (2) incoming information must be
perceived as having originated from a "valuable" source. The buyer then
analyzes both the salesman and his message to determine which portions of
the incoming information will pass through the filter. If a message is to
have utility to the buyer, the information must relate to the buyer's pur-
chase decision criteria which serve as mediators for decision making.
Sweitzer sees the filtering process taking place "in degrees" rather than
on mechanistic dichotomous basis. Information must reach a threshold level
of importance to be useful in decision making. The output of the model
is how the message is actually perceived. A perfectly relevant message
would be one whose actual content corresponds exactly to the purchasing
criteria of the buyer. However, this output is also influenced by the

salesman's perceived traits. Principle among these for Sweitzer are

80

empathy, source credibility and planning. This filter process in in-
cluded in Sweitzer's interpersonal communication model (Figure 2). The
output of the filtering process, e.g., the perceived relevant message,
is considered jointly with an evaluation of the saleman's empathy, credi-
bility, and planning to yield a positive or negative intention to pur-
chase.

Sweitzer examined the principle personality traits aspect of his
model in a study of 31 sales calls to seven buyers for a large food and
dry goods retail chain. Likert-type items were drawn from previous
research studies for the source credibility measure. Other items were
created for measures of perceived empathy.and planning.

The buyer's purchasing criteria were determined through two inter-
views. The first was an open-ended interview while the second consisted
of the buyer ranking researcher supplied criteria.

Three concepts were used to provide the operational measure of the
message content: (1) the buyer's purchasing criteria, (2) the salesman's
actual message, and (3) a content analysis of the salesman's message in
terms of the buyer's criteria. The message content score was calculated
by content analyzing the frequency and importance value of the assertions
in the salesman's message. If a salesman mentioned something pertaining
to a purchasing criterion which the buyer indicated as having an importance
of seven on a scale of one to nine, then the salesman received seven points
for that particular assertion.

The research supported Sweitzer's information processing model. The
buyer's beliefs about the salesman's (l) role and task empathy, (2) expert-
ness minus dynamism, and (3) preparation showed significant positive

associations with the relevance of the salesman's message (.66:f§,77).

81

FIGURE 2
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SOURCE: (For Figures 2 and 3) Robert W. Sweitzer,
" In 1776-1976 and Beyond. 1976
Educators' Conference, Edited by Kenneth L. Bernhardt.T(Chicago: American

tion Processing of Industrial Buyers.

Marketing Association, 1976): 335.

"Interpersonal Informa-

 

82

The buyer's beliefs about the salesman's (1) task empathy, (2) ex-
pertness minus dynamism, (3) preparation, and (4) the relevance of the
salesman's message were also found to be signficantly, positively asso-
ciated with the buyer's evaluation of the salesman (73_r_.93). The buy-
er's evaluation of the salesman was also found to be significantly, posi-
tively associated with the buyer's intention to purchase the salesman's
product (r 8 .53). No intercorrelations among the variables were reported
in the research.

These findings indicated that the credibility of the individual
salesman can play an important role in the success of marketing communi-
cations. Specific studies of information source credibility are discussed

in the following section.

Information Source Credibility

Levitt (1965, 1967a, 1967b) reported a Harvard Business School study
of communication in industrial sellings. The study centered on the source
effect, e.g., how an audience's feelings about the credibility of a message
source influences the message's persuasive effectiveness.

The study population involved 131 business school graduate students.
These were divided into six separate subgroups and then exposed to a ten
minute filmed sales presentation for a new, but fictitious technical pro-
duct for use as an ingredient in making paint. Some groups were asked to
assume they were purchasing agents for a paint firm and some were asked
to assume they were chemists. A11 respondents saw basically the same
demonstration using the same actors. However, some participants were
shown a good presentation while others viewed a relatively poor one. Also
in some presentations, the selling company was identified as a highly-

credible company (Monsanto) while in others a less well-known firm (Denver

83

Chemical) was identified. In other presentations the sponsor's identity

was not revealed. These three sponsors were to represent a range from

high to low source credibility. Immediately after the film was run, and

then again five weeks later, each respondent filled out a detailed ques-

tionnaire.
Study conclusions are summarized below:

1. Generally speaking, the better a company's reputation, the better are
its chances of getting a favorable first hearing for a new product
among customer prospects and of getting early adoption of that product.

2. When the influence of source effect and presentation effect are combined,
the research suggests that when a relatively unknown or anonymous com-
pany makes a good direct sales presentation, it may be just as effective
in getting a favorable first hearing for its product as a well-known
company.

3. When it comes to the most important and most risky of customer actions--
actually deciding to buy or reject a new product--assuming the various
suppliers' products to be equal in all respects, source credibility
exerts a dominant influence over other considerations.

4. The research found that the power of the source effect varies by the
character and competence of the sales message recipient. There is
indication from the research that PA's, who are highly competent as
professional buyers, are less influenced by company reputation than
technical personnel who may be better judges of products' technical
aSpects.

5. The favorable influence of a company's generalized good reputation
(source effect) was found to erode with time, as does the unfavorable

influence of a company's ambiguous reputation or anonymity. In the

84

absence of callbacks or advertisements to reinformce the identity
of the source, a seller tends to lose the favorable impact of his

good reputation on the attitudes of his sales prospects.

‘ Capon, Holbrook and Hulbert (1972) reanalyzed the data used by
Levitt in the preceeding study. They noted several problems in the
methodology and research design employed by Levitt and his co-workers,
problems which greatly affect the study's reported findings. First, the
external validity of the study was questioned. The communication model
used by Levitt of source-message-receiver differs greatly from real world
sales presentations which typically consist of some dialogue. Second,
Levitt did not present any pretest evidence that the source credibility
of the three message sponsors varied as employed in the design. Indeed
post-test measures indicated that the anonymous company's credibility
exceeded Denver's credibility in 11 out of 12 cells. Further reserva-
tions of the study centered around the statistical techniques employed.
Levitt analysed his data using a binomial test of significance, a test
which deals with only the direction and not the magnitude of differences
and disregards sample sizes within cells. Capon, Holbrook and Hulbert
reanalyzed Levitt's data using the Chi-square test which utilizes both
magnitudes of difference and sample sizes. Using the Chi-square test the
authors found only one significant (P .10) test in the overall group of
24 test possible at various degrees of aggregation in measuring the source
effect between Mondsanto and Denver companies. Moreover, the direction
of these insignificant relationships contradicted the source effect in
five out of twelve cases. Concerning the audience effect or differential

perceptions of the sales presentations by chemists and purchasing agents,

85

the authors found only one significant (p .10) test of the fourteen
possible tests between these two groups. Levitt's finding concerning

the sleeper effect was also challenged. The authors note that more
audience members referred immediately after the presentation than after

a few weeks. This result directly contradicts the sleeper effect. Using
the McNemar test for significance of changes, the authors found a signifi-
cant negative sleeper effect at the p .05 level.

In summary, Capon, Holbrook and Hulbert concluded that their reanaly-
sis did not support Levitt's original findings of the source effect, the
audience effect between chemists and purchasing agents, nor the sleeper
effect. The authors do not question whether these effects actually exist
but rather state that Levitt's findings do not support the existence of
these effects.

Khera (1968) and Khera and Benson (1970) studied the effects of age
and education of communicators and audiences in a simulated industrial
buying situation. Participants in the study were 90 PA's and 62 engineers
from two large corporations. In addition, 135 business students and 93
engineering students from a large university also participated.

Each of the above groups was divided into four subgroups. The sub-
groups were exposed to a short film sales communication about a technical
ingredient used in paint manufacturing. The films were identical except
that the communicator appeared younger in one film and older in another.
In addition, the communicator was identified as a business graduate to
some audience groups and as an engineering graduate to others. Each sub-
group saw only one film. The product was fictitious but was identified
as being manufactured by Monsanto. The subjects filled out questionnaires

immediately after seeing the film and once again three weeks later.

86

The results indicate that the education of the audience and of the
communicator had no influence on the decision to adopt the new product.

Concerning the influence of the communicators' ages, it was observed
that the younger communicators received significantly higher adoptions of
their product from the younger subjects (under 30 years old) than did older
communicators. Older subjects (over 50) also adopted significantly more
from the younger communicator.

It was also observed that the persuasive influence of the older,
technical sales communicator was reinforced over time, while that of the
older, non-technical communicator tended to become diluted. Thus, an
older, technically educated sales communicator had an apparent sleeper
advantage over his non-technical counterparts.

Another finding was that trustworthy ratings were not related signi-
ficantly to adoption rates.

Kelly (1972, 1973) and Kelly and Hensel (1974) investigated the
value of 15 sources of information as determined by an assessment of
credibility and usefulness. Buyer expectations of the kinds of information
to be found for 8 of the 15 sources were also studied.

The organizational buying situation studied was the decision to pur-
chase an off-set press for in-house printing operations. In the 48 firms
studies, 48 individuals responsible for performing the buying functions
were interviewed. All 48 subjects were asked to rate 15 sources on the
dimensions of credibility and usefulness associated with information re-
ceived during the purchase of the off-set press. Each source was scored
on a seven-point scale from highly credible (highly useful) to not at all
credible (not at all useful). The most credible sources were scored as

outside sources, fellow employees, trade journals, manufacturers'

 

 

87

representatives, and catalogs. The least credible sources were unsoli-
cited direct mail, TV advertisements, radio advertisements, newspaper
advertisements and general interest magazines. The most useful sources
were the same as the most credible sources except that product brochures
displaced catalogs. The least useful sources were the same as the least
credible sources. Significant differences were found between the overall
rankings and the rankings of individuals who performed a specific func-
tion, e.g., searching for suppliers.

The rank order correlation for the dimensions of credibility and
usefulness was high, suggesting that the two dimensions overlap. Kelly
suggests the acceptance of a source as a valuable source may be based
more upon an acceptable range of credibility or usefulness rather than
a source having a high relative ranking.

The study subjects who utilized different sources of information
strongly expressed what types of information was expected from different
sources. For example, salesmen were consulted for information about pro-
duct availability, price, delivery, cost of operation and comparative
information on which models matched need requirements. Outside sources
were most often consulted about performance evaluation, reliability,

dependability and opinion statements.

Decision Style

 

Parket (1969, 1971, 1972) interviewed 29 industrial buyers to dis-
cover similarities in their decision making. He concluded that when
buyers perceived various brands of a product as being similar, the brand
became inconsequential and they purchased any brand based upon specifi-

cations, price and delivery. However, when buyers perceived dissimilarities

88

among brands, they purchased a particular brand and were influenced by
past and current advertising, previous performance, reputation, sales
literature, and other individual characteristics of the brand or supplier.
In other words, industrial buyers purchased in a manner consistent with
their perception of a product as generic or non-generic. This finding was
verified in a survey of 600 industrial buyers (182 respondents).

Parket also found that rational motives were involved in the purchase
of similar products. In cases where suppliers appeared comparable in
specifications, price, and delivery, buyers based their choice on the
following secondary motives: credit and terms, geographical proximity,
cooperation in order processing, possibility of purchasing a complete line,
spreading orders among several suppliers, accomodation on small orders
and salesmen. Deviations from this general scheme were found when other
departments specified the brand/supplier and in cases where the sole
criterion was price.

Wilson (1970, 1971) and Wilson and Blair (1971) reported a Candian
research study investigating personality traits and decision making styles
of purchasing managers. The 132 participating purchasing managers were
asked to solve five interlocking purchasing problems in which uncertainty
and outcome values were varied. Wilson found three decision making styles.
The first style was termed normative and was the most consistent with an
expentancy monetary value decision mode. About one-fourth of the partici-
pants were classified into this category. Half of the participants were
grouped under the title of conservative. This group tended to avoid un-
certainty and large negative outcomes. The third group made some deci-
sions like the normative and some like the conservatives and so were term-

ed switchers.

88

among brands, they purchased a particular brand and were influenced by
past and current advertising, previous perfbrmance, reputation, sales
literature, and other individual characteristics of the brand or supplier.
In other words, industrial buyers purchased in a manner consistent with
their perception of a product as generic or non-generic. This finding was
verified in a survey of 600 industrial buyers (182 respondents).

Parket also found that rational motives were involved in the purchase
of similar products. In cases where suppliers appeared comparable in
specifications, price, and delivery, buyers based their choice on the
following secondary motives: credit and terms, geographical proximity,
cooperation in order processing, possibility of purchasing a complete line,
spreading orders among several suppliers, accomodation on small orders
and salesmen. Deviations from this general scheme were found when other
departments specified the brand/supplier and in cases where the sole
criterion was price.

Wilson (1970, 1971) and Wilson and Blair (1971) reported a Candian
research study investigating personality traits and decision making styles
of purchasing managers. The 132 participating purchasing managers were
asked to solve five interlocking purchasing problems in which uncertainty
and outcome values were varied. Wilson found three decision making styles.
The first style was termed normative and was the most consistent with an
expentancy monetary value decision mode. About one-fourth of the partici-
pants were classified into this category. Half of the participants were
grouped under the title of conservative. This group tended to avoid un-
certainty and large negative outcomes. The third group made some deci-
sions like the normative and some like the conservatives and so were term-

ed switchers.

89

Wilson took measures on three personality traits. No significant
difference was found to exist between groups on the traits need to achieve
and generalized self-confidence. The need for certainty was the most
powerful predictor of the three traits, with each group's score being
significantly different from each other group. The normative group had
the lowest need for certainty followed by the switchers and the conser-
vatives. Wilson interpreted this to mean that a low need for certainty
may have facilitated acceptance of the uncertainty associated with the
normative model. Although not significant, normatives had the highest
need for achievement and the highest generalized self-confidence.

Cardozo and Cagley (1970, 1971) utilized university students and
PA's in a buying game to simulate aSpects of the supplier selection pro-
cess. The purpose of the research was to ascertain whether game partici-
pants follow describable patterns of decision making in choosing suppliers
and, if so, to specify the situations in which particular patterns may be
followed. The following independent variables were combined in a 2 x 2
design and were related to the eight purchases of the game:

Visibility: well-known or unfamiliar name

Prior relationship: had supplied buying firm or had not
Capability stressed: low prices or ability to meet product
specifications and delivery promptly

Amount of information provided in supplier directory: high
or low (1971, p. 390).

-b (JON-J

During the first part of the study, 64 undergraduate business students
participated. Each subject was presented with eight purchase requisitions,
one at a time. For each requisition, subjects requested bids from firms
listed in a directory of suppliers. The subject had two options by which

he might receive bids:

90

A) He could solicit bids one at a time (sequentially) After receiv-
ing each bid, he could either place an order with that supplier
or seek additional bids. The subject could solicit as many as
five bids before making his decision.

B) He could specif at the beginning of the sequence the total
number (up to 5 and the names of the suppliers from which he
wished to receive bids. He received only the number of bids
originally requested (l970, p. 69).

In all cases the five types of bids were varied so that none exactly

met all the specifications on the requisition forms.

The major dependent variables were, for each requisition, (l) the
number of bids solicited, (2) the manner in which bids were solicited
(sequentially or simultaneously), (3) the characteristics of the vendors
from which bids were solicited, and (4) the characteristics of the chosen
bid and supplier.

Results of the buying game indicated that students' behavior in
selecting bidders and in selecting suppliers varies across purchase sit-
uations and individuals. In this experiment subjects demonstrated pre-
ference for “array and review" purchasing patterns. As bidders, subjects
preferred "in" suppliers, firms about which a higher amount of information
was available, and firms which stressed the ability to need the product
and delivery specification over those which emphasized low price. By a
margin of almost two to one, subjects chose bids which met product spec-
ifications but sacrificed cost savings or prompt delivery over those which
differed from specifications but offered savings on time delivery. In
addition, the amount of risk present in the purchase situations influenced
subjects' purchasing behavior. Specifically, when risk was high, subjects:
(l) sought more bids, (2) preferred well-known firms as bidders, (3) were

more likely to use an "array and review" strategy and (4) preferred lower

priced bids. The type of risk also influenced the choise of bid. When

 

9]

the major risk was paying a premium price, subjects took more low-price
bids and fewer high-prive bids than when the major risk was accepting
late delivery or a product different from that specified. In the later
situation, participants accepted fewer bids which departed substantially
from the stated delivery requirements than in situations where the major
risk was paying a premium price.

The second part of the study utilized 64 PA's in the same buying
game. In comparison with the business students the results differed
substantially. The PA's requisitioned more bids (3.6 vs. 3.25 average)
and used the "array and review" strategy more often (92% vs. 68%). In
addition, the PA's solicited bids from the "in" supplier less often (62%
vs. 70%), solicited bids from the high information source less often
(55% vs. 67%), and less often solicited bids from firms with high product/
delivery capabilities (44% vs. 56%). Contrariwise, PA's solicited bids
from well-known firms more often (62% vs. 49.5%). Whereas the students
ranked the importance of bid characteristics as product, price, and
delivery, the PA's ranked these same characteristics as product, delivery,
and price.

In summary, the authors contend that their results extend the con-
cept or risk by indicating that the type of risk also influences buyers'
behavior. They note that the type of risk in this study reflects external
environmental pressures on the decision maker rather than the psychosocial
and problem solving risk identified in the Harvard studies. Finally,
Cardozo and Cagley noted that many participants displayed considerable
consistency in their behavior from one situation to the next. It was
concluded that the participants apparently developed fairly consistent
preferences for the number of bids, type of bidder, bid solicitation

Pattern, and the type of bid.

 

92

Interorganizational Influence
The interorganizational influences relate to buyer-seller interaction
in the market. First the literature concerning buyer-seller dyads is re-
viewed. Second, reciprocity is considered. Third, the influence tactics

in buyer-seller relationships are reviewed.

Buyer-Seller Dyads

Evans (l963) was one of the first authors to view selling as a
dyadic relationship. Evan's main hypothesis was that the interaction
between buyer and seller determines whether a purchase is made. Evans
gave data supporting this hypothesis from research involving characteristics
of salesmen and clients of insurance agencies. Evans took measures con-
cerning social, economic, physical, personality and communicative char-
acteristics of both parties. The conclusion was, the more alike the sales-
man and his prospect are, the greater the likelihood of a sale. Evans
found this true for physical characteristics (age, height), other objec-
tive factors (income, religion, education), and variables possibly related
to personality factors (politics, smoking).

Tosi (l966) attempted to determine the effect of expectations and
buyer-seller role consensus on the success of the salesman. Wholesale
drug salesmen and retail pharmacists who made buying decisions were
studied. Seventy original items were obtained by observing and inter-
viewing salesmen, sales managers, and customers concerning Specific
activities salesmen did or should do while performing the selling task.
A Likert-type role-conception inventory was developed using items varing
from always to never. Nine retail druggests completed the questionnaire

twice, once concerning the best salesman and once concerning the worst

93

salesman they knew. The items were reviewed and items having an average
of 1.75 difference were retained for the final questionnaire. The ques-
tionnaire was redistributed and returned by l03 retail pharmacists, 35
salesmen and 2 sales managers.

Based on the results of small-group research and buyer-seller inter-
action studies, the following hypotheses were tested:

I. Role consensus between the buyer and seller is related to:

l. The percentage of business obtained from a given
customer.
2. The number of suppliers of that customer.
11. Role consensus between the sales manager and the salesman
is related to the performance rating by the supervisor.
III. The expectation level of the buyer is related to:
l. The percentage of business obtained by the salesman.
2. The number of suppliers of that customer.
IV. The expectation level of the salesman is related to:
l. The percentage of business obtained from the customer.
2. The number of suppliers of the customer (p. 54).

Both expectation levels and consensus scores were grouped into high,
medium, and low classes and were analyzed by one-way analysis of variance.
No statistical significance was found to exist to support the hypotheses
except for the expectation level and the number of suppliers. Both hypo-
theses III-2 and IV-2 were significant at the .05 level. When the differ-
ence between the "ideal“ and "actual" responses of a retailer was large,
the number of suppliers was high. When the difference was small, the
number of suppliers was low.

Tosi concluded that behavior expectation levels of the buyer regard-
ing salesmen's behavior may determine whether further interaction will
occur.

Arora (l975) studied the buyer-seller relationship, buyer influence
and new product selection criteria in the adoption of new products by a

supermarket chain with a buyer-merchandiser committee.

94

Data was collected in three phases. In the first phase a conven-
ience sample of 52 salesmen handling new products was selected, and their
sales presentations to the buyers were taped. Each slaesman's qualities
were evaluated by the buyer and the researcher on a salesman's evaluation
form developed for this study. In the second phase the interactions bet-
ween buyer and merchandiser concerning new products involved in phase one
were taped. A total of 83 new products were discussed in the buyer-
merchandiser meetings attended by Arora. Both salesman-buyer and buyer-
merchandiser tapes were transcribed, and the dialogues were analyzed.
From the dialogues a list of decision-making criteria used in the selec-
tion of new products was prepared. In the third phase the buyers were
asked to rate each criterion on a nine-point differential scale ranging
form unimportant to very important. Finally, each criterion was pasted
on a separate piece of cardboard and the buyers were asked to rank them.

The Wilcoxon-Hatched-Pairs Signed-Ranks Tests revealed that there
was no difference between the ratings of the salesman's overall perfor-
mance by the buyer and the researcher.

Source credibility, empathy, and preparation and planning were
found to be the three most important salesman's qualities in selling to
the supermarket chain. A Chi-square test showed independence between
the salesman's performance and the buyer's recommendation. However,
analysis of dialogues for this study showed that the chances of the
buyer recommending the salesman's product are higher if the salesman's
performance is above average or better as opposed to average or below as
rated by the buyer. Further analysis of the dialogues showed that if
the new product handled by the salesman with above average or better per-
formance, was not recommended by the buyer, it was due to reaons beyond

the control of the salesman.

95

Alessandra (l976) examined the demographics similarity between
successful salesmen and purchasing agents of industrial firms. Two
questionnaires were developed based on a literature review and personal
discussions with sales managers and industrial buyers. A mail survey
was used to distribute 900 questionnaires to purchasing agents and 172
questionnaires to salesmen. Data was collected from 203 respondents;

87 purchasing agents and ll6 salesmen. The data included specific demo-
graphic, purchasing and sales information questions. Data was analyzed
by Chi-square analysis and stepwise regression analysis. Height, weight,
sex, hair length and beard similarities were the only demographic vari-
ables significantly related to sales success at the .05 level of signifi-
cance. It was also determined that observable demographic similarity

variables are much more important than the non-observable ones.

Reciprocity

 

Stocking and Mueller (1957) identified conditions conducive for
the existence of reciprocal buying. In summary fashion, those conditions
are the following. First, the suppliers or potential suppliers of a firm
must be its potential customers and for this reason reciprocal buying is
most likely to be practiced among business firms which make products for
sale to industry. Second, a sloping demand curve facing an individual
firm in an industry were marginal costs are constant over a wide range
of output invites the use of reciprocal buying. Third, the existance of
unused capacity in the short run, while not essential to reciprocity,
is conducive to it. A fourth condition conducive to the effective use of
reciprocal buying is some lack of symmetry in the market. This is the

case when one large firm of an industry purchases a substantial amount of

96

the total output of an essential product of another industry. A fifth
factor is diversification. The large diversified firm has better oppor-
tunities for using reciprocal buying than the single-line producer. Diver-
sity increases both the number of opportunities to practice reciprocity
and the magnitude of these purchases. In conclusion, the large diversified
firm producing for sale to other industries has an advantage in the stra-
tegy of reciprocal dealing.

Gouldner (l960) presented a sociological perspective on reciprocal
agreements. After examining several sociological studies on reciprocity,
he concluded that reciprocal agreements are a social norm and that it is
one of the principal components or moral codes for individuals. Speci-
fically, Goulder stated: "I suggest that a norm of reciprocity in its
universal form makes two interrelated, minimum demands: (l) people should
help those who have helped them, and (2) people should not injure those
who have helped them" (p. l7l).

Although Gouldner is speaking of physical persons, if his hypo-
thesis is correct, it could be easily seen how reciprocal agreements
develop between legal persons who obtain their value structure from those
in positions of direction.

Ammer (l966) considered the benefits and drawbacks to reciprocal
buying and argued that such agreements are not really in the best long
range interest of firms which engage in such practices. Ammer based many
of his conclusions on a survey of purchasing agents reported in Purchasing
by Leonard Sloane. In Sloane's survey about half of the respondents--5l%
of the purchaing agents and 49% of the sales managers-~agreed that recipro-
city was a factor in the buyer-seller relations in their companies.

Sloane‘s survey of 300 purchasing agents found lDO% of the firms in

97

petroleum, chemicals and iron and steel engaging in reciprocity. For
consumer goods only 36% reported reciprocal agreements.

The same survey showed a direct positive relationship between in-
creasing size of firms and engaging in reciprocity. Forty-six percent
of the companies with annual sales under $l0 million used reciprocity;
for those with annual sales of $l0 million to $50 million, the figure
was 62%, and 78% of those with sales over $50 million engaged in recipro-
city.

For most firms reciprocity accounted for a small part of total sales--
64% said less than 5% of total sales were attributed to reciprocity; it
accounted to more than 20% for only 9% of the companies.

Although reciprocity was practiced by their firms, and ethical
stigma of the practice was evidenced by the fact that not a single execu-
tive of the survey was willing to be quoted directly about reciprocity.

In fact, respondents criticized the term "reciprocity," preferring to call
it "trade relations."

Ammer enumerated four favoring conditions for the existence of
reciprocity. First, conditions are favorable when products are homogene-
ous. It is necessary that one producer's product be as good as anothers,
and that quality can be measured objectively with specifications.

Ammer noted that all basic materials such as metals, chemicals and fuels
meet this criterion. Secondly, reciprocity is likely to occur when costs
are fixed or nonvariable. This is especially true when operating at below
capacity where each additional dollar of sales (less the cost of selling)
brings in a greater than average profit. Ammer pointed out that recipro-
city is an especially tempting strategy since the cost of obtaining these

extra sales are much lower than by promotion. A third favorable condition

98

for reciprocity is when price competition is orderly. Ammer pointed out
that, while reciprocity can and does take place under conditions of
fluctuating prices, many firms engaging in the practice under these con-
ditions are never sure whether they would not be better off dealing with
some other comapny that is more willing to cut prices of the products it
sells or is less price-conscious of the products it buys. However, when
firms know they will pay exactly the same price everyone else pays, they
have no reason to doubt the benefits of buying from customers. A fourth
condition is that the buyer and seller use each other's products in
quantity volumes. This is why large firms have an advantage--they make
large volume purchases.

Nevertheless, Ammer argued against the use of reciprocal buying for
the following reasons. First, higher purchasing costs result because
(l) reciprocity weakens, and sometimes even destroys, supplier price
competition; (2) reciprocity permits lax supplier performance with higher
related costs of poor quality and higher inventories; (3) reciprocity
promotes laxness in purchasing because purchasing agents become sales
oriented rather than building good supplier relations. Secondly, recipro-
city results in a weaker sales because (1) salesmen become complacent and
(2) reciprocity may have a negative impact on other firms that cannot
benefit from a reciprocal relationship but who know that their competitors
are being favored by such an arrangement.

Dauner (l967) surveyed 72 purchasing agents in the St. Louis metro-
politan area about their attitudes toward reciprocity. Over half of the
respondents expressed a preference for a stated company policy on recipro-
city although many expressed the feeling that such a policy would not be

wise for the company until further clarification of which reciprocal

99

agreements are legal. The mean percent of sales resulting from recipro-
city was 8.5% while the mean percent of purchases was l2.6%. Two-thirds
of the survey respondents felt that the responsibility for approval of
reciprocity programs should be in the hands of top management.

Purchasing agents saw the advantages of reciprocal agreements as
(l) potential contribution to overall corporate sales and profits, (2) bet-
ter appreciation of mutual problems, requirements and capabilities and (3)
(3) better service. The most frequently mentioned disadvantages were:
(l) the tendency to decrease competition; (2) the tendency to produce
higher prices and (3) the tendency to restrict the purchasing function.

Gravereau and Kon0pa (1970) studied the attitudes of salesmen toward
industrial buyers and purchasing policies. Responses from 822 salesmen
calling on 48 manufacturing establishments in ten northern Dhio counties
formed the study data base. Concerning reciprocity, 8% of the salesmen
said that reciprocity was "mostly beneficial to them." In contrast, 36%
thought that reciprocity "mostly offers problems." While 40% said that
"benefits and problems tend to balance." The remaining l6% of the sales-
men did not respond to this question. A significantly larger number of
lubricating materials and parts salesmen felt that reciprocity “mostly
is beneficial" in the performance of their jobs. 0n the other hand, a
significant number of maintenance, repair, and operating salesmen saw
reciprocity as either neutral or harmful to them in their job performance.

Moyer (l970) explored the legal status of reciprocity in the U.S.
Most noticeable of the twelve legal cases discussed is the size of the
litigants--all were very large U.S. corporations. Also established was
that the mere existence of reciprocal power outside of the context of a

merger poses no legal threat to the parties involved. Moyer concluded

100

that it is likely that the practice of noncoercive reciprocity would remain
unchallenged if not pursued too aggressively or with the aid of elaborate
sales and purchase records.

Bird and Shepherd (l973) surveyed purchasing agents and sales mana-
gers in Virginia manufacturing firms concerning their opinions/used of
reciprocity. The survey respondents were l39 purchasing agents and 8l
sales managers. Slightly over 50% of both groups opposed the passing of
a law to prohibit or limit the use of reciprocity. This is inconsistent
with the following findings and was attributed to the belief that business-
men generally do not desire more government regulation of business.

A majority of purchasing agents (62.6%) and sales managers (65.4%)
did not believe that reciprocity should be legal when one party gains and ‘
the other party loses. If both parties stand to lose, 67% of the pur-
chasing managers and 64.2% of the sales managers felt that reciprocity
should be outlawed. Both groups, 57.6% of the purchasing agents and 67.9%
of the sales managers, felt that reciprocity should be illegal when a
third parts is forced out of the market because of two other firms' use
of reciprocity. Only when both buyer and seller benefit did both pur-
chasing agents (66.2%) and sales managers (63.0%) fell that reciprocity
should not be made illegal.

Concerning the use of reciprocity in the market place, l7.4% of
the purchasing agents and 23.5% of the sales managers admitted that their
firm used reciprocity.

Weigand (l973) wrote concerning the managerial problems associated
with reciprocity. Specifically, Weigand said incompatibility between the

profit center concept and reciprocity when the gains of one division must

101

be borne at the expense of purchasing. Also highlighted were the costs
of record keeping and analysis of multi-firm reciprocal agreements.
Reciprocal agreements may also hamper the morale of operational managers
since such agreement usually are controlled by higher management but
reflect upon the sales and purchasing functions.

Finney (l978) wrote concerning the current reciprocity practices
in the U.S. The basis for his conclusions were interviews with personnel
in the Department of Justice, the Federal Trade Commission and private
corporations. In general, Finney found anticompetitive reciprocity greatly
reduced. He attributed this to increased knowledge of the economic dis-
advantages of reciprocity and the advice of corporate counsel based on
judicial decisions of the late 1970's. Conspicuously absent from organi-
zational charts were the trade relations departments which were created in
the l960's. Nevertheless, Finney was suspicious that some of the recipro-
cal agreements had "gone undergroud" via the computer and marketing infor-

mation systems.

Influence Tactics

 

Kotler and Levy (l970 examined two special marketing situations and
four compliance techniques which are used by sellers trying to influence
buyers. First, the limited supply situation was examined. In periods of
product shortage marketers must find ways to ration or demarket their
product. The objective of this demarketing strategy must be to reduce
short-run demand without reducing demand in the long run. Second, cases
exist where marketers wish to sell to a certain set of customers without
angering unwanted buyers. This is usually accomplished by qualifying

strategies which set rules that potential clients must satisfy, such as

102

the establishment of minimum quantites.

Kotler and Levy mention four strategies for compliance gaining. The
first of these is a coercive strategy which attempts to produce compliance
through the use of force. Forced reciprocity is an example of this in
industrial marketing. The strategy of inducement attempts to produce com—
plaince through offering something of value to the seller. An extreme form
of inducement is bribery. A persuasion strategy is one that attempts to
produce a favorable response in the seller through identifying his natural
interest with the transaction. Basically, this involves on of three types
of arguments: logos, or appeals to logic; pathos, or appeals to emotions;
and ethos, or appeals to values. The final strategy is that of education
which attempts to produce a favorable response through changing the sel-
ler's beliefs or values.

Capon and Swassy (l977) examined the effectiveness of 23 compliance
gaining techniques in with selling situations. Using second year graduate
business students as judges, the authors had the participants rate the
effectiveness of the compliance gaining techniques in eight senarios.
Controlled for were buyer type (consumer, organizational), perceived risk
(high consumer, high organizational, low consumer, low organizational),
and relationship (continuing consumer, continuing organizational, one-
time consumer, one-time organizational). Although the study results were
not fully reported, the most effective overall techniques were: (l) stres-
sing company experience, (2) making competitive comparisons, and (3) pro-
viding basic product information.

Hakansson, Johanson and Wootz (l977) proposed that marketers could
be more effective by concentrating upon tactics to reduce perceived uncer-

tainty. Need uncertainty is related to the difficulties in interpreting

103

the exact nature of the needs for materials, machines, tools and other
goods and services utilized by the purchasing firm. Market uncertainty
is related to the supplier's perception of alternative sources. The
third type of uncertainty was termed transaction uncertainty and entails
the problems of getting the product from the producer to the customer.
Several examples were used to show how uncertainty levels may be
increased or decreased depending upon the tactic employed. By giving
the buyer new technical information, the seller may modify the buyer's
actual perception of the product and increase his perceived need uncer-
tainty. A seller can reduce the perceived need uncertainty of a buyer
by emphasing that the problems to be solved by the buyer are not as
complex as believed. By giving such information that the buying firm
perceives greater differences and/or greater changes in the market than
in previous occasions, the perceived market uncertainty is likely to
increase. The opposite effect of perceived market uncertainty can be
attempted by stressing uniformity of the market. The seller may also
stress the ability of his firm to carry through with its commitments. If
there is uncertainty about delivery and stockout, the authors suggested
building up buffer stocks for the customer or developing a joint transport-
ation and stock system. Quite clearly, tactics that are intended to in-
crease the buyer's perceived transaction uncertainty toward the seller are
not meaningful. However, if problems can be detected in the transaction
area of competitors, this can be used to increase the buyer's perceived

uncertainty toward that competitor.

104

The Search and Evaluation Process

The emphasis of the preceding sections has been on the different
influences present in industrial buying decisions. The emphasis of this
section focuses on two important aspects of the actual purchase decision:
the search for and the evaluation of potential vendors. The first group
of studies concern information sources utilized in the search process.
Included are studies of information sources used in the diffusion of
innovations, a special case of industrial buying. The next group of
studies concern the search of the market for acceptable supplies and rea-
sons why search activities are not always present in the buying process.
Finally, studies are reviewed which concern the evaluation of potential

vendors, especially the criteria used in such evaluations.

Information Sources

Ozanne and Churchill (l968) studied the relevance of the traditional
five-stage (awareness, interest, evaluation, trial, adoption) adoption of
innovation model to the industrial purchasing process. Focus was on the
function of information sources in the adoption stages. Ninety decision
makers in forthy midwestern industrial firms were interviewed concerning
the purchase of a new automatic machine tool. Despite problems in opera-
tionally defining and collecting data on the five adoption stages, the
authors found the five-stage model fits the industrial adoption process
well if the trial stage is left out. This stage is not applicable since
most machine tools are available to be used by a prospective buyer on a
limited, pre-sale basis.

The respondents were asked to specify the most important information

source at each stage of the adoption process. Personal selling accounted

105

for over half of the responses in each of the awareness, interest stages.
Personal selling was second to technical sources in the evaluation stage.

The data suggested that personal information sources reached their
pinnacle of importance at the interest stage. Honpersonal sources were
most important in the evaluation stage. The number of information sources
used in the adoption process was approximately the same for the awareness
and interest stages but increased in the evaluation stage as the final
decision became more imminent.

Webster (l968a) suggested that aspects of communication theory were
applicable to the study of industrial marketing and advocated further
research to determine which specific concepts are valuable for understan-
ding industrial buyer behavior.

Webster then related the amount and quality of information available
to the buyer the concepts of perceived risk and new product adoption. He
reasoned that the adoption of an innovation involves risk because the
outcome is uncertain and because firms differ in their ability to tolerate
risk. The ability to tolerate risk was hypothesized to be related to
such objective factors as firm size, liquidity and diversificaiton and
possibly to such subjective factors as managemnt's optimism and aggressive-
ness. Webster say these factors as dimensions of predispositions which
would likely influence response to industrial marketing communications.

Webster continues:

The amount of information available to a prospective
adopter is a function of the total promotional effort
allocated to the innovation by the selling firm, the
extent to which the selling firm has directed promotion
toward the adopter's market segment, and the length of
time since the innovation was introduced. The longer
the innovation has been on the market, the more infor-

mation is available from all sources including the
supplier, earlier adopters, and news media.

106

For a prospective adopter the quality of information
available can be defined by how well it reduces uncer-
taintly and provides convincing evidence of the innova-
tion's ability to meet his needs, i.e., provides rela-
tive advantage. The quality of information is thus re-
lated to its accuracy, its thoroughness, and the credi-
bility of its source (p. 427).

Webster perceived that certain types of information have differential
impacts on large and small firms. For example, information in the form
of technical assistance is probably more important for smaller firms.
Technical information offers more relative advantage to smaller firms
because it helps them to compete with the greater in-house technical
capabilities of larger competitors. Webster felt that this factor might
lead smaller firms to adopt earlier than larger girms. The smaller firms
may also make a quicker decision since, lacking some of the testing capa-
bilities of the larger competitors, it may have to accept the vendor's
claims rather than performing test itself.

Webster (l968b) formulated hypotheses and presented the results of
a small scale study of word-of-mouth communication and opion leadership
in industrial markets. Webster first summarized the literature on this
topic and presented reasoning why word-or-mouth communication might be
less prevalent in industrial markets than research has shown it to be in
consumer markets.

The following hypotheses were developed:

1. Product-related conversations among industrial buyers are likely

to occur less frequently than in consumer markets.

2. When they do occur, product-related conversations among indus-

trail buyers are likely to be initiated by the receiver.

3. Word-of—mouth communication in industrial markets is most likely

to occur between buyers in firms located near to one another
and between buyers who share membership in professional organi-

zations. It is less likely to occur among buyers in organizations
in the same or related industries.

107

4. Buyers in a given area or industry will agree as to which
firms in the area or industry are most likely to adopt new
products first. Early adopter firms will provide a source of
of information for buyers in firms adopting later. The
influence of the very first firms to adopt will not be
as great as those who adopt early but not first (p. 458).

Webster presented tentative conclusions about these hypotheses
based on ten interviews with PA's in New Hampshire and Vermont. The study
findings indicated that buyers in other companies were only rarly used
as a source of information. In these cases, the initiator in the communi-
cation process was being sought rather than being volunteered. This is
understandable since the only reason given for using a PA in another
company as a source of information was to identify a source of supply for
an item not previously purchased. When buyers conculted other PA's, the
firms were located near to each other. No conclusion could be drawn con-
cerning the role of professional organizations in this type of communica-
tions. When asked to identify innovative firms, most respondents were
able to name specific firms, although not all respondents accepted the
premise that opinion leaders acutally exist. The firms named as opinion
leaders were always large firms.

Webster concluded that the lesser importance of word-of-mouth com-
munication in industrial markets was due to two reasons. First, the need
is less than in consumer markets primarily because of the greater per-
ceived adequacy of marketer-provided information. Second, channels of
communication for interacting with other buyers are not as well established
in industrial markets. Therefore, both the need and the opportunity for
word-of—mouth communication are reduced.

Webster (l970) extended the word-of-mouth communication study

reviewed above (Webster l968b) by interviewing buying center members in

108

58 different New England industrial firms. Hypotheses tested were:

1. Word-of-mouth communication is a relatively infrequent occurence in
industrial markets.

2. Word-of-mouth comnunication in industrial markets is more often
initiated by the receiver than by the communicator.

3. Word-of—mouth communication is most likely to occur between firms
located geographically near to one another.

4. Word-Of-mouth communication with buyer and engineers in other companies
is most important at the evaluation stage of the purchase decision

process.

Respondents indicated that they checked with PA's in other firms
about once each month, although some respondents said they never did this.
Respondents gave several reasons for their limited use of word-of-mouth
communication. The most frequent explanation was the the seller's own
salesman was the best source of explanation and that there was little
need to search out the opinions of other buyers. Twenty-six of the
fifty respondents said that the manufacturer's salesman was the most
trusted source of information.

It was much more common for respondents to report receiving, rather
than initiating, a request for information.

The third hypothesis was also supported. The regional purchasing
agents association appeared to play an important role in providing con-
tacts for later reference.

Concerning respondents' preferences for various information sources
at each of the five stages in the buying decision process. Webster found

that the manufacturer's salesmen were the preferred source fOr all stages

109

except for awareness, where trade journals were rated slightly higher.
Consultation with engineers of other companies was more important during
the evaluation stage than in any other. This appears to conflict with the
study finding that word-of—mouth communications are usually about where

to buy and seldom abbut what to buy.

Only two out of fifty respondents indicated there were certain com-
panies they consistently looked to because those companies acceptance of
newly purchased products was important to them.

Harilla (l97l) studied both the interfirm and intrafirm dimensions
of word-of-mouth comnunications in the industrial adoption process.
Martilla investigated the paper buying practices of l06 converting firms
including envelope converters, business form converters and greeting card
publishers. Study methods included forty-seven field interviews and
analysis of l97 written questionnaires. Three stages in the paper adop-
tion process were studied: introduction, consideration, and post-purchase
evaluation. These were viewed as corresponding to the five-stage adoption
model in the following mannerL introduction (awareness, interest), con-
sideration (evaluation, trial), post-purchase evaluation (adoption).

Study findings indicated that while impersonal sources of information
were important in the early stages of the adoption process, personal
sources become progressively more important in later stages. Nearly 50%
of the sources mentioned in the introduction stage were impersonal, com-
pated with only 30% in consideration and 26% in post-purchase evaluation.
The findings are consistent with those of Ozanne and Churchill (l968) if
one accpets Marilla's argument that Ozanne and Churchill misclassified
some of their sources.

Over half of the respondents reported seeking the advice of associates

110

in the consideration of new products. Slightly over one-fourth of the
respondents reported consulting with members of competing firms in the
introduction stage. Almost half admitted conferring with members of com-
peting firms in the consideration decision. It is important to note that
variations among industries were found to exist. In the envelope indus-
try converters typically serve regional markets and offer standardized
products. Information on prices, quality and delivery is frequently shared
among competitors serving different geographical markets. In contrast,
little information was exchanges among greeting card coverters who served
national markets and competed heavily on design creativity. Martilla
concluded that it is probably unwise to generalize across all industrial
markets about the amount of information shared among firms since this

may be in part a function of the degree of product differentiation and
market isolation.

Other findings indicated that over 90% of those surveyed indicated
uncertainty after an order for a new grade of paper. Martilla hypothesized
that other designated opinion leaders would be exposed more frequently to
nonpersonal sources of information than other buying center members. This
was supported by the data analysis. Opinion leaders were also exposed in
more depth to nonpersonal sources than other buying influences.

Monoky (l973) and Monoky et al (l975) report a study relating the
concepts of perceived risk and ,buyclass with information source prefer-
ences. Preference for different sources of information in each of the
three buyclass situations e.g., new task, modified rebuy and straight
rebuy, was the focus of the study. An explanation of why sources of
information might be differentially preferred as a function of the buying

situation was attended by the use of Rosenberg's instrumentality-value

112

paradigm as modified by Howard and Sheth. This formulation defines
preference towards a given source of information as being a function of the
the ability of an information source to block or enhance the attainment

of a set of attributes (PI) and the valued importance (VI) of these
attributes in a given purchasing situation.

Data for the study were obtained from members of the National
Association of Purchasing Management in northwestern Ohio. The research
instrument consisted of a hypothetical purchasing situation formulated in
the buyclass framework. Each respondent was asked to read a purchasing
problem corresponding to one of the buyclasses. They were then asked to
fill out rating scales relating to preference towards ten sources of
information in that situation, the importance of desirability of fifteen
attributes of sources of information in that particular situation (VI)
and the ability of each source of information to enhance or provide these
attributes (PI). There were forty different industrial buyers in each
buyclass.

The findings of the study indicated that buyclass situations could
be construed as being on a continuum of perceived risk. Risk was perceived
as being greater in the new task, while the perceived risk was greater in
the modified rebuy than in the straight rebuy.

A differential information source preference was confirmed. Prefer-
ence for various sources of information was dependent upon the situation
in which the source would be utilized. A discriminant analysis correctly
classified 57% of the hypothetical purchases using the importance ratings
(VI) given to the fifteen information source attributes. By chance correct
classification could be expected 33% of the time.

Czepiel (l974) reported a study of word-of-mouth communication in

113

the adoption of a major technological innovation. Other aspects of
they study have been reported previously in Czepiel (1976).
The study population consisted of 31 buying center members in 18
firms which had adopted continuous steel casting. Respondents were
asked (l) if, in their initial search process, they had contacted any
other source for information concerning the innovation. If they indi-
cated they had contacted other competitive firms, they were handed a
list of industry firms and asked to specify those from which they had
sought information. Following that, respondents were asked (2) whether,
if following their deciison to adopt the innovation, any firms had con-
tacted them for information concerning the innovation and, again, to
specify these firms. Finally, the third question asked (3) whether the
respondents had regular opinion/advice relationships with any specific
firms. Following this series of questions they were also asked about the
frequency of the contacts, both inward and outward bound from the firm.
Data analysis revealed that the average firm in this industry main-
tained regular opinion/advice relationships with between two and three
other firms in the industry. Direct, informal contacts among decision
makers in different firms occured about five times per month. Czepiel
had hypothesized that early adopters would exhibit greater opinion leader-
ship with respect to the innovation. This was confirmed by the analysis.
Early adopting firms were each contacted by an average of 19.5 firms about
the innovation, 15.0 of which had not yet adopted the innovation. Later
adopters reported that an average of 10.7 firms had contacted them concern-
ing the innovation; however, most of these contacts were from earlier
adopters, and average of only 3.2 coming from finns which were to adopt

later.

114

Czepiel noted that the study concerned one specific innovation in
one specific industry and therefore is limited as to the generalizations
which might be drawn.

Baker and Parkinson (1977) reported information source preferences
and levels of perceived risk in the adoption of a new type of earthmoving
machinery for the British building and construction industry. Specifi-
cally, the study examined the following hypotheses:

1. The early adopters of an industrial innovation prefer different sources
of information than later adopters.
2. The early adopters of an industrial innovation perceive less risk in

adopting than later adopters.

Semi-structured interviews with buying center members in 22 adopting
organizations revealed that the actual pruchase decision was usually made
by the plant manager. After pretesting, a questionnaire was sent to the
219 plant managers of firms which had adopted the innovation. The following
data analysis is based on the 49 usable responses to that survey. Adapters
were classifed as being early, middle, or late adopters depending upon when
the contract was signed to purchase the machinery. Respondents rated the
following sources on usefulness: leaflets and brochures, trade shows,
trade journals, demonstrations, local distributors, and members of their
own firms. While differences between categories of adopters did occur,
the only significant difference occured for the usefulness of members of
the respondent's firm. On a nin-point scale, early adopters rated this
item 1.8, while middle adopters rated it 2.6 and late adopters gave the
item a 5.2 rating. The most important source across all categories was

trade journals.

115

The respondents of this survey were asked to indicate whether they
asked anyone else in the industry for advice before buying the new
machine, or if anyone asked them for advice. Thirty-six percent of the
sample indicated that they had approached someone else in the industry
for advice or opinion on the machine, and fifty-five percent of this
sample indicated that someone had asked them for advice. The average
number of weeks to adaption of the respondents who said they were approac-
hed by others for advice was significantly shorter at the 90% confidence
level than the average number of weeks to adoption of respondents who
were not approached for advice.

Five questions were asked to determine the perceived risk in adop-
ting the innovation. Nosignificant differences werefound across categories
of adopters. Although not significant, early adopters perceived more risk
in the adoption than either middle adopters or late adopters.

The authors interpreted the early adopters higher rating of firm
members for sources of information and the higher perceived risk of early
adopters in the following manner. Since a higher risk was perceived by
the decision makers they attempted to share the purchase dicision with
other buying center members. Such a conclusion would be consistent with
the findings of the 'risk-shift' tradition of research which suggest that
a group consensus on the level of risk which each of the individual group
members would tolerate without consultation with other members.

Dempsey (1975) reported the results of an exploratory study of the
relationship between a set of vendor attributes and a set of buyer infor-
mation sources in a vendor selection process. The study population con-
sisted of 208 chief PA's in electrical utilities. Each respondent was

randomly assigned to deal with one of two different buying problems. One

116

problem was stated in terms of a new-task problem involving the purchase
of capital equipment while the other problem was presented as a modified-
rebuy of a component material. In connection with the assigned problem,
the respondents were asked to rate the importance of twenty vendor per-
formance attributes and fifteen information sources on a seven-point
Likert-like scale. Canonical analyses were performed on the data from
the subsample that received the new-task buying problem and on the sub-
sample that received the modified rebuy problems. Variables receiving
loadings equal to or grater than an absolute value of .30 were discussed.
Dempsey found four underlying constructs relevant to the new-task situa-
tion. These are summarized by Dempsey:

l. The first canonical factor appears to be workmanship since the
vendor attributes of quality and labor relations history emer-
ged in connection with it.

2. The underlying construct for the second factor involves concern
for the product quality, safe transit (packaging). and assurance
that the buyer will be shown how to properly use the new mater-
ial.

3. The third canonical function may indicate that investigations of
vendors' facilities, credit and financial reports and local
purchasing chapters provide means for assessing vendors' produc-
tion facilities and capacities, vendors' attitudes toward the
buyer, and packaging.

4. The fourth canonical root involves concern with proper bidding
or negotiation with vendors (p. 270).

Concerning the modify rebuy problem, Dempsey reasons:

1. The first canonical function indicates that credit and financial
reports regarding a vendor are used in conncection with the
vendor's labor relations record. It is possible that interest
in a vendor's labor relations record actually reflects a concern
for long-term dependability or uninterrupted availability of
the material from the supplier.

2. From the second significant canonical relationship one may
assume that buyers would use information from purchasing direc-
tories and other departments within the firm as means for initi-
ally screening vendors based upon their labor relation records,
management and organizational and technical capabilities.

3. The third canonical relationship seems to reflect an underlying
need for assurance on the part of the buyers regarding the

117

suppliers' dependability in delivering the specified
component material (p. 271).

Dempsey recognized the limited scope of the study and moderate
magnitude of the canonical relationships. The significant canonical
correlation coefficients ranged from .69 to .88 across the two subsamples.

Cunningham and White (l974a) examined the role of exhibitions in
industrial marketing. Exhibitions fulfill a role which may be considered
unique in the industrial communication process. At exhibitions prospective
buyers may examine the technical and performance characteristics of pro-
ducts in reality rather than by catalogues or through the verbal presen-
tation of a sales representative. They can also make on-the-spot compari—
sons between manufacturer's products and therebuy resolve some doubts and
uncertainties.

The authors present the results of their research to determine the
effectiveness of an industrial exhibition. The exhibition studies was
an international exhibition of machine tool manufacturers held every four
years in London. Exhibitors listed five objectives of participating in
the exhibition. No mention was made of the generation of immediate
inquires and orders because it was argued that if a substantial amount
of unknown business arose at the exhibition this would indicate a dificiency
in other marketing communications.

Attendance at the exhibition was officially calculated to be 145,000
persons. Exhibitors reportedly made 6,260 contacts resulting in 1,386
_ inquiries and leading to 310 bids. The authors calculated the cost/con-
tact of the exhibition to be 21 compared to an average cost of 4.0 per

contact for personal selling. It is argued that these two figures are

not directly comparable since one-third of the contacts made at the

118

exhibition were at the direction and senior management level which is
higher than would be expected by personal selling although not necessarily
higher than contacts made by the manufacturers' sales managers.

The authors did not contact the actual purchasers and therefore did
not explore the role of exhibitions vis-a-vis other marketing communica-
tions from the industrial consumer's veiwpoint.

Ozanne and Churchill (1971) studied the adoption process of a new
automatic machine tool by 39 midwestern industrial firms. The authors
adopted and created ad hoc measures of buying group size, age, education,
cosmopoliteness, commitment to status quo, technical orientation, profes-
sional affiliation, and level in executive hierarchy. The explanatory
variables were cross classified with five dimensions: (1) factors which
activate the purchase process, (2) purchase directing factors, (3) the
duration of the adaption process, (4) the alternative purchases considered
and (5) the use of infonnation. This last dimension was previously dis-
cussed in Ozanne and Churchill (1968).

A Kruskal-Wallis Analysis of variance produced no statistically
significant relationships between the explanatory variables and either
activating factors or purchase directing factors. Spearman rank correla-
tion produced only one statistically significant result between process
duration and the explanatory variables: groups with fewer participants
reached a decision sooner supporting a commonly held notion. No statis-
tically significant relationships were found for the cross classification
of the explanatory variables and the number of alternatives considered.
Concerning information use, only two statistically significnat results
were found: Decision groups with members who traveled widely employed

many more information sources and a wider range of information sources.

119

Perhaps the most significant finding of this study was analysis of
the activiating factors and purchase-decision factors in the process. 0f
the 38 firms which gave reasons why they began looking for this particular
product, 16 listed capacity problems, 9 listed equipment obsolescence,

5 listed decisions to being making parts hitherfore contracted out, 5
listed customer orders requiring new capabilities, and 3 listed the neces-
sity of acquisition of more easily operated machinery due to a shortage of
skilled labor. The purchasing directing factors were supplied by 35 of
the firms: quick delivery, 12 firms; cost benefit comparisons, 9 firms;
special product attributes, 6 firms; personal selling or close personal
relationship with salesman, 4 firms; and satisfactory past experience with

other company products, 4 firms.

Search Behavior

 

Cunningham and White (l974b) studied the search behavior of British
firms who purchased machine tools over a period of eighteen months. The
sample of purchase situations was obtained from a large manufacturer of
machine tools. Ultimately, fifty-one purchases in five geographical
regions of Great Britain were studied. ‘In-company personal interviews
were conducted with the principle decision makers. The average number of
bids considered was 2.9, but interviews revealed that this was somewhat
misleading. It was a common practice for many companies to require a
minimum of three bids. A typical response to this organizational direc-
tive was, "We obtain three quotations, two for evaluation and one other
to conform with company policy" (p. 124).

Interestingly, fifteen out of the fifty—one purchases were made with

no competitive bidding. Three reasons were given by respondents as to

120

why so little search activity was undertaken. First, many buyers were
conscious of standardizing their tooling machinery to reduce problems
of maintainance and operator flexibility. Second, many buyers felt that
they possessed inadequate technical resources to evaluate competitive
machinery. Third, satisfactory experience with past purchases was
stated as a strong inducement for purchasing an indentical machine from
the previous supplier.

For each type of machine studied it was found that 50% of the
radial drills, 30% of the milling machines, 18% of chucking lathes and 0%
of the grinders were bought without competitive quotations being consi-
dered. This tends to substantiate the view that as the technical sophis-
tication and price of the machine increases, more competitive offers will
be evaluated. Cunningham and White suggested that this direct relation
between price/sophistication and the number of bids evaluated reflects
an increased perception of risk and unfamiliarity on the part of buyer
decision makers.

A greater number of quotations were obtained for the replacement of
a machine than for the expansion of existing product facilities. Cunningham
and White offer that this is most likely related to the fact that foresee-
able replacement purchases are subject to regular annual capital budgets
with greater conformity to formalized sanctioning procedures.

There was no evidence to support the view that buyers of larger com-
panies undertake a greater market search than their smaller company counter-
parts. In 60% of all cases, winning bids went to suppliers which had
supplied identical or other equipment previously. This varied by size of
purchasing company. Large companies purchased 80% of their machine tools

from previous suppliers. In small companies this rebuy figure dropped to

121

only 17% of the cases.

Grnhaug (l975b) studied the search behavior of buyers in 30 retail
stores in Bergen, Norway. Search activities were expected to correlate
positively with (l) the buying of production goods as contrasted with
the buying of industrial goods, that is, goods not for resale, (2) the
size of the purchase, (3) the novelty of the buying problem, (4) organi-
zational size, (5) education of top managers and negatively with (6) time
pressure.

In each store four purchases were mapped: the first and most recent
purchases of a production good and of an institutional good. A tatal of
120 purchases perceived as "important to the store" were studied. Search
behavior was defined as either contact with alternative suppliers or the
reading of brochures.

Correlations of both types of search behavior were performed on each
variable, giving a total of twelve measures. Brnhaug's hypotheses were
in the direction hypothesized for both types of search behavior for the
type of product, the size of the purchase (value), and the size of the
organization. The directions were mixed for the frequency of purchase
and opposite for the education of managers and time pressure. Of all the
12 measures only in two cases did the correlation coefficient exceed
r = .30. The two expections were the reading of brochures which correlated
with the size of the organization (r = .49) and with the size of the
purchase (r = .53).

Grnhaug interpreted the negative correlation which was found bet-
ween education of top managers and search behavior to be due to variations
in the type of industry studied. Another interpretation might be that

the more educated buyer did not perceive as much risk as their lesser

122

educated colleagues or that education may increase self-confidence and
thus reduce the perceived need to search for information.

Concerning the positive relationship between time pressure and
search behavior, Grnhaug notes that the operational measure was taken on
the perceived time constraint of the last purchase of the item. Grnhaug
suggests that through repeat buying the buyer had learned how much time
ought to be allotted to the purchase. Such time budgeting therefore
makes the questions Grnhaug used inappropriate measures of this variable.

Bubb and Van Rest (1973) identified eight factors distinct from
but often interpreted as source loyalty. The first of these factors was
administrative inertia or laziness on the part of buying firms to search
for alternatives. Second was familiarity, especially with ordering pro-
cedures of speciality products. Such familiarity may be interpreted as
risk reducing behavior. Third was persistence which is long term
economic commitment to suppliers but without emotional comnitment. The
fourth factor was identified as xenophobia Or the recognition on the part
of buying firms that they do not possess adequate resources to evaluate
sources and thus resort to the Specifications of restrictive standards
or membership of a specific association. Nationalism was the fith factor,
and is especially visable on purchasing products related to national
defense. The sixth factor of neighborliness was basically purchasing
because adequate suppliers exist locally and purchases will help the
local economy. The seventh factor was company relationships or recipro-
city. The last factor was termed respect for the supplying firm's
technical, managerial or financial resources.

The authors also reported their findings of a study concerning the

purchase of one of the newer metals in Europe. Seventy purchases were

123

flow-charted and a generalized flow chart for the vendor selection process
was made. The generalized is reproduced as Figure 3. Bubb and Van Rest
state that the model was validated by incorporating it into a simulation
of the entire market for a period of five years and comparing the results
to actual market behavior over that time. Agreement was said to be "good."

The model is constructed from the point of view of the customer. It
was five market factors to decided which supplier to order from for each
order. Model factors included price, delivery time, loyalty, quality, and
pressure form eand users. The model is a list processing system: it starts
off with a list of suppliers which might be acceptable and eliminates
suppliers from this list until only one is left. Each customer was ex-
pected to rank the five market factors somewhat differently.

In model validation loyalty was entered as the first factor in 30%
of the cases and was therefore the most importance of the five factors.
Bubb and Van Best stated that source loyalty should be considered an

evaluation criterion and not just a result of the purchasing process.

Evaluation Criteria

 

Klass (1961) interviewed 300 executives in 208 industrial firms to
determine the importance of several product/supplier characteristics in
the supplier selection decision. Klass first recognized the importance
of various influences in the buying decisions:

Industrial purchasing decisions are influenced by many
people who can be "typed" or characterized as follows:
- The contributors-~foreman, supervisors, sales
managers, advertings and promotion personnel
- The participants--engineers, research and develop-
ment personnel, product advisors, chemists
- The responsibles--members of purchasing departments,
purchasing agents, etc.
- The directors-~directors of purchasing, plant mana-
gers, company executives (p. 33).

124
FIGURE 4
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SOURCE: Peter Lawrence Bubb and David John van Rest, "Loyalty as a

Component of the Industrial Buying Decision," Industrial Marketing
Management 3 (1973): 30.

 

125

Klass felt that rarely is there one person who is the key person influencing
the selection of a supplier. In spite of this, Klass does not differentiate
the responses-of these buying influencers, but groups their responses to-
gether. Respondents were supplied with a list of 24 factors related to the
purchase decision. The method of attribute rating was not revealed in the
article. Most important attributes overall were:

maintaining quality consistent with specifications

on time delivery performance

'an honest and sincere attitude on the part of salesman

price

keeping the buyer informed about new products and product
developments

effective handling of requests for samples and information.

The reasons most often given for thinking of a company first among
all potential supplier companies were: (1) past performance history,

(2) personal contact, (3) high caliber of management, and (4) being a
current supplier. Also mentioned often as a reason was the “large size
of the company."

When buyers decreased or discontinued purchasing from a supplier
the most often reason stated was changes in product needs and specifications,
followed by high prices and quality deficiencies.

Dickson (1966) studied vendor selection factors and vendor ratings
in a survey of 170 members of the National Association of Purchasing
Agents. Three factors were identified as being most frequently employed
by the PA's in their actual work situation: (1) Quality of Product - 97%
of the respondents, and both (2) Price and (3) Delivery, dependability of

promises - each used by 94% of the survey participants.

126

Over one-third of the responding PA's stated that they kept no formal
records of vendor performance for subsequent vendor selection decisions.

Of the firms which did keep such records only two factors, delivery exper-
ience and defective material experience, were kept by more than 40% of
the firms.

In response to a question about the obligation to place an order with
the lowest bidder, only 12% of the PA's felt such an obligation. Ten fac-
tors were mentioned which buyers felt would justify not taking the lowest
bid. By far the most important of these factors were quality and price.

In the next part of the study the PA's were asked to role play the
PA for four purchasing cases and to select from a list of 23 factors those
felt to be the most important in the final vendor selection. These factors
were rated on a 0-4 no importance to extremely important scale. 0f the
aggregate factor ratings, only two received ratings of over 3.0--quality
(3.5) and delivery (3.4). The four cases progressed from a simple case
(desks) to complex (computer). None of the top three factors were the
same in any case. Assigning points to ranks and inverse scoring indi-
cated that only quality and delivery were important overall.

This study indirectly callaborated research finding of perceived
risk in that many more factors were used to evaluate suppliers as the

purchase became more difficult. In the most straight forward purchase (desks)

no factors were considered to be of extreme importance and only five to

be of considerable importance. On the other extreme, three factors were
considered of extreme importance and thirteen of considerable importance
in the most complex case (computer). This indicated that PA's attempt to

reduce risk by information seeking.

127

Dickson concluded that there appeared to be three factors crucial
in the vendor selection decision: (1) meeting quality standards, (2) on
time delivery, and (3) performance history. Dickson further points out
that the lack of any uniformity among factor rankings for the four cases
may well indicate that each product has its own unique set of determining
product/supplier attributes.

Cunningham and White (1973) examined the determinants of vendor
selection in a British study of fifty-one purchases of four types of stan-
dard machine tools. Partial study results have been previously reported
(Cunningham and White, 1974a). Twelve variables were empirically tested
as determinants of the success or failure of bids. It was concluded that
several of the hypothesized variables were really insignificant in success-
ful bidding. Factors such as credit and trading-in facilities believed
by supplier to be significant in enhancing the prospects of gaining an
order were of little interest to British buyers. Other factors, such as
the reputation of potential suppliers for delivery reliability, before
and after sales service and product performance and reliability reputation
were of second importance in that they were qualifying but not decision
variables.

The principle finding to emerge from this study was that the stron-
gest patronage decision was the buyer's past experiences with the product/
supplier. In one-third of the cases no competitive bids were taken. In
those situations which were negotiated and open to competitive bidding,
price and quality appeared to be equally weighted as the most important
decision variables. 0f the 35 negotiated purchases in 18 cases the suc-
cessful bid was the lowest price. In 17 cases the winning bid was the

shortest delivery time. In 12 cases the shortest delivery time was

128

coincidental with the lowest price.

Cunningham and White undertook further research in order to achieve
some validation of the importance of price, delivery, and successful past
experience as key determinants of purchase patronage for standard machine
tools. This consisted of personal interviews with 139 directors, works
managers and production engineers attending the International Machine
Tool Exhibition. Those interviewed were asked to rank the three factors
of price, delivery and successful experience in the vendor selection deci-
sion. Of the 139 respondents, 83 rated successful past experience as the
most important factor. Price was rated most important by 21 participants,
delivery received 20 first place ratings and 15 participants abstained
from the ranking procedure.

Kelly and Coaker (l976a, 1976b) studied the importance of price as
a choice criterion for vendor selection. The study purpose was twofold:
(l) to determine the importance of price as a choice criterion in the
industrial purchasing process and (2) to determine the degree to which
price and other choice criteria might differ by organization.

The choice criteria utilized in the study were those actually
used to make decisions and were obtained from bid tabulation forms of
five large Virginia manufacturing firms. The authors noted that the
main advantage of this post-choice technique is that actual rather
than hypothetical criterai can be studied. They also noted that this
method has the weakness of not including emotional motives but rather
only concrete economic factors.

0f the 112 purchase decisions evaluated, a total of 46 were made
at prices higher than the lowest bid submitted. A total of 70 bids

of the 360 submitted for consideration were lower than the successful

129

bid and were rejected as unacceptable for the following reasons:

18 - did not meet specifications

l8 - not interchangeable with or duplication of existing equipment
9 - longer delivery time

7 - unsuccessful past experience with vendor

6 - spare parts not available in house

6 - more costly to operate

6 - other reasons (l976b, p. 230).

Each of the successful vendors had met the requirements stated in
the specifications. This suggested that the most important choice cri-
terion was that of meeting specifications. Next in importance was price.
The lowest price was purchased in 59% of the decisions.

The importance of the price criteria varied across organizations.
Two companies placed emphasis on interchangeability and spare parts avail-
ability for rejecting lower priced bids. Other companies used delivery
time and poor past experience with vendors as their justification for
rejecting lower priced bids.

In the ranking of attributes, five of the seven differed significantly
across the five purchasing organizations. The authors noted that this
study was limited to only five firms and, therefore, care must be taken
not to over generalize the results. Nevertheless, the study conclusions
did show that the importance of product/supplier attributes varied for
the firms studies and suggested that firms should tailor their marketing
programs to client needs for best results.

Banville and Dornoff (1973) studied the importance of economic and
non-economic patronage motives of 150 private residential builders across
eight product classes. The study participants were asked to rank, in
decreasing order of importance, reasons influencing their purchases of

eight different building material product groups. The builders ranked

130

only the researcher supplied motives they considered significant in their
source selection process. Therefore, the frequently with which a motive
was considered important provided a basis for determining the level of
importance of each factor when compared with the other factors under
consideration. A relative weighted value method was used which took
both the frequency of the rankings and the magnitude of the rankings into
consideration.

Host importance overall patronage motives by order of ranking were:
(1) service, (2) quality of product, (3) supplier stands behind product,
(4) low price, (5) supplier's reputation for fair dealing. Buyers were
divided into two groups. small builders were defined as those which con-
structed up to 20 houses annually, large builders constructed over 20
houses annually. Rank correlation between the two groups was high--
.94 using the Pearson Rank Correlation (rho) test. The first five motives
mentioned above were ranked the same for both groups. When ranked separ-
ately the eight economic patronage motives were also highly correlated
between the larger and smaller builder (significant at the .05 level).
The ranking of four noneconomic motives differed greatly. Banville and
Donoff also compared the rankings of economic and noneconomic motives
between two product classes: concrete and major-kitchen appliances. The
degree of association between the rankings of motives of both product
classes was statistically significant at the .05 level of significant:
rS for all factors = .94 and rS for the economic factors was .88. The
rankings of the noneconomic factors was not significant (rS = -.33).

It was concluded that the findings did not support a purely economic
orientation of industrial purchasers nor did it support a purely non-eco-

nomic orientation. The results indicated an identifiable hierarchy of

131

patronage motives within which the economic factors are of greater impor-
tance than the noneconomic factors in the vendor selection decision.
However, for certain products the noneconomic factors were influenctial.
Concerning credit, one of the economic motives, the rankings do not support
what the authors termed "the long established industry belief" that the
smaller the bidder, the more important it is for the supplier to provide
credit. Both the larger and smaller builders gave this factor a ranking
between seventh and ninth across all eight product classes.

Lehmann and O'Shaughnessy (1974) used 17 attributes to determine if
attributes varied over four product types and between purchasing agents
in the U.S. and Great Britain. Purchasing agents in 19 major U.S. com-
panies and 26 major British companies, representing various industries,
completed a study questionnaire. Each purchasing agent was asked to relate
each of seventeen attributes to each of four scenarios corresponding to
four categories of adoption: (1) no procedural or performance problems,
(2) procedural problems, (3) performance prOblems, and (4) political prob-
lems.

Study results revealed that if a product was frequently ordered
and posed no significant problems in use that reliability of delivery,
price, flexibility and reputation were the four most important attributes.
If a product required training for use, i.g., a procedural problem pro-
duct, technical service, ease of use, training offered and reliability
of delivery were the most important attributes. If there were doubts
about a product's ability to perform satisfactory in an application, the
four most important attributes were reliability of delivery, flexibility,
technical service and data on product reliability. When political prob-

lems (difficulty in agreement among all concerned) arose, the four most

132

important attributes were price, reputation, data on product reliability
and reliability of delivery. These results suggest that generalizations
about important choice criteria depend heavily upon and vary by product
type.

In comparing U.S. to British buyers the analysis indicated:

1. The U.K. buyers rated higher than their U.S. counter-

parts the importance of:

a) Reliability of delivery data for all products
except products likely to give rise to political
problems

b) Convenience of placing an order for no-problem
products or those products giving rise to
procedural problens

c) Financial terms offered for products likely to
lead to procedural or political problems.

2. The U.S. buyers rated higher than U.K. buyers the

importance of the overall reputation of the supplier

in choosing no-problem products (p. 241).

Sayed-Saleh (1970) studied the motor carrier selection process by
traffic executives in 48 Ohio industrial firms. A validation sample
contained the responses of 406 traffic executives located throughout
the United States. Sayed-Saleh found that an inverse and moderate
correlation existed between intensity of external search and the length
of experience of the carrier selection executive. In the selection pro-
cess, past experience with carriers was of primary importance in that
traffic executives normally first considered carriers with whom they
had maintained a long and satisfactory relationship. Of the specific
decision variables considered in the selection process "good consistent
service" was the most significant. Sayed—Saleh classified most carrier
selection decisions as straight rebuys since this decision occupied
a relatively low position among shippers' hierarchy of traffic decision-

making activities.

 

133

Dempsey (1978) studied the relatinship between product/supplier
attributes and information sources in the supplier selection process.
The two sets of variables were analyzed from three perspectives. First,
analyses of variance and regression analyses were used on the data in
an attempt to determine the influence of certain independent variables
on the importance of the product/supplier attributes and information
sources. Second, on each separate set of variables, factor analysis was
used to study interrelationships among the variables and to explore for
the number andnature of underlying factors in the two sets of variables.
Third, canonical analysis was used as a means to study relationships
between the two sets of data.

The study population consisted of randomly chosen purchasing
executives from the electric utilities industry and the electronics
manufacturing industry. A total of 379 usable mail questionnaires made
up the data base.

Each respondent was randomly assigned to deal with one of two
different buying tasks. One task was stated in terms of a new-task
problem involving the purchase of capital equipment while the other was
presented as a modified-rebuy of a component material. Distinctions were
made between the buying tasks through described differences in: the
newness of the task, the importance of the task, present information
state, and the implied number of alternatives to be considered. The
respondents were asked to rate the importance of twenty vendor perfor-
mance attributes and fifteen information sources in connection to the
assigned problem. Ratings were made on a seven-point Likert-like scale

ranging from "of no importance" to "of extreme importance."

134

The study results concerning the ranking of vendor attributes
was as expected in that explicit economically oriented criteria pre-
dominated. Across purchase situations the most important criteria
were delivery capability, quality and price. Dempsey ran multiple
range tests to examine the significance in vendor attribute rankings
and found no significant difference among several of the ranked cri-
teria. In other words, importance ranking by electrical utility
executives were, in order of importance: delivery capability (mean of
6.16), repair service (6.16), quality (6.14), technical capability
(5.83), and aid and advice (5.57). While these six attributes were
the most important, no statistical significance was found to exist using
the "Tukey b" test.

Dempsey found that the attribute rating differed by type of pur-
chase. The relative importance of nine of the twenty vendor attributes
were significantly different between the new task buying problem and the
modified rebuy problem. The purchasing agents in this study generally
perceived repair service and warranties, technical capability, financial
position, aid and advice, and training to be significantly more important
in a captial equipment/new task buying situation than in a component
material/modified rebuy situation. On the other hand, the buyers were
more sensitive to prices and assured delivery (delivery capability, per-
formance history, control systems, attitude toward buyer, and geographic
location) in the component material/modified rebuy situation as compared
to the capital equipment/new task buying situation.

The relative importance of four vendor attributes differed when the
ratings of the purchaing agents in the electrical utilities companies

were compared with the ratings of purchasing agents in the electronics

135

manufacturing companies. For the two buying problems combined, buyers

in the electric utilities companies were significantly more sensitive

to a vendor's repair service and warranties, bidding compliance, and
training aids than were buyers in the electronics manufacturing companies.
Meanwhile, the buyers in electronic manufacturing firms gave significantly
greater weight to the vendor's production facilities and prices than did
their counterparts in the utilities companies.

A factor analysis of the twenty vendor attributes resulted in five
identifiable factors accounting for 57% of the total variation of all the:
variables. The constructs represented by the factor, in order of impor-
tance or variance explained, were: (1) Basic Economic Criteria, (2) At-
tendant Services, (3) Geographic Affinity, (4) Assurance Mechanisms, and,
(5) Vendor Stability.

Concerning the rating of information sources, highest over all
importance scores were given to purchasing records, personal calls of
salesmen, other departments, visiting vendor's plant, and catalogs. As
with the vendor attribute ratings, it was noted that multiple-range tests
showed that most infonnation sources were not significantly more important
than certain other information sources. For example, for the electronics
manufacuring/component material-modified rebuy subsample, purchasing
records were rated the most important source of information while the
second order of important included visiting vendor's plants, purchasing
directories, other departments, personal calls of salesmen and catalogs,
all of which were found to be statistically equal in importance.

The relative importance of seven information sources were significantly
influenced by the type of purchase involved. Credit and financial reports

and visiting vendor's facilities were relatively more important for the

136

capital equipment/new task purchasing situation as compared to the com-
ponent material/modified rebuy situation. On the other hand, telephone
class from salesmen, catalogs purchasing directories, purchasing records,
and telephone directories were relatively more important in the component
material rebuy situation and less important in the capital equipment/new
task case.

The importance of six buyer information sources differed signifi-
cantly when the ratings of the respondents in the electric utilities
companies were compared with the ratings of the responddents in the
electronic manufacturing firms. Buyers in the electric utilities organi-
zations perceived that information from vendor's salesmen and vendor's
catalogs were significantly more important than their counterparts in the
electronics manufacturing firms. On the other hand, buyers in the elec-
tronics manufacturing organizations gave significantly higher ratings to
information from credit and financial reports, purchasing directories,
visiting vendor's plants, and telephone directories than did buyers in
the electric utilities industry.

A factor analysis of the fifteen information sources resulted in
four factors identified by Dempsey as constructs representing, in order
of importance: (1) buyer oriented-internal information, (2) salesmen,
(3) buyer oriented-external information, and seller oriented-external
information.

The canonical analysis resulted in four significant canonical
correlations at the 5-7% level. Dempsey admitted that the results were
difficult to interpret and concluded that the results and interpretation
seemed to conform with conventional wisdom regarding the design of com-

munications programs in connection with the buyers-vendor evaluation

137

criteria and evaluation process.

Cunningham and Roberts (1974) examined the role of customer service
in the marketing of valves and pumps in Great Britain. The authors first
divided services into the two categories of convenience and reliability
services. Convenience service were defined as those which lessen the
work of the industrial buyer and ensure that the supplier's offering is
tailored to the buyer's requirements. Under this category were placed
such services as technical advice and‘order status information. Reliability
services were defined as those aspects of service which reduce the uncer-
tainty of the purchase decision and provide for greater usefulness and
reliability of the product once purchased. Examples of these services
included repair and maintenance service and operator training or assis-
tance in application of the purchased product.

The study population consisted of 25 industrial buyers whose firms
collectively accounted for between 75% and 90% of total annual sales of
pumps and between 75% and 85% of total annual valve sales in Great Britain.
Respondents were supplied with thirteen vendor services and asked to indi-
cate and rank the five most important. Nine of the thirteen factors re-
ceived a consistent recognition by respondents and four were seldom men-
tioned. The responses were anlayzed three ways to determine their overall
importance: times mentioned, times ranked in the top five, and times
ranked first. From this analysis delivery reliability emerged as the
most important service attribute. This was followed in second place by
test facilities and thirdly by a cluster of attributes including technical
advice, replacement guarantee, willingness to manufacture a wide range
of products, ease of contact, and prompt quotations. Two factors, sales

representation and after sales service, were less important. Finally,

138

four factors were found to be of very minor importance: credit, pattern
design service, machining facilities and discount structure.

Evidence was obtained to demonstrate that the service required by
the pump industry was significantly different from that by the valve
industry as judged by the relative importance ranking of the service
attributes. The researchers felt that the explanation for this was that
the pump industry tends to purchase its lower annual usage Volume in smaller
batches in items of greater unit weight, whereas the valuve industry has
a greater usage volume purchased in larger batches with a smaller unit
weight. Therefore, it was concluded that these differences affect the
optimum mix of service required to satisfy the two market segments.

Buyers were asked to assess the sort of service which they were
receiving on each of the thirteen service attributes from their main
supplier, second supplier and from a known supplier with whom they did
not place orders. A five-point bipolar semantic differential scale was
used to classify the replies. Using a weighted scale, differences
were observed in the three types of suppliers with the main supplier
rating highest, the second supplier second and the nonsupplier lowest.
The authors interpreted this test as an indication that buyers could
perceive differences in services received or expected. At least one
other interpretation is possible; that is, that the buyers felt that they
should order the ratings from best to worst from main supplier to non-
supplier in order to justify their purchase pattern. No check was made
to verify if the perceived perceptions of service were close to reality.
when analyzed individually, except for test facilities, the main supplier
lvas perceived to outperform the nonsupplier by a wide margin (0.5 average)

or: the semantic differential scale. This difference was not found to

139

exist between the main and second supplier which were separated by only
(.1) on the five-point scale.

Several research studies have examined the difference in impor-
tance of product/supplier attributes as rated either by different members
of the buying center of by vendors and buyers.

Kiser, Rao, and Rao (l974a, 1974b, 1975) studied how 65 product/
supplier attributes were rated by purchasing and nonpurchasing members
of buying centers in 42 medium size Cleveland manufacturing firms. In
each company the head of the purchasing department was asked to identify
all of the individuals who usually participated in the procurement pro-
cess. The resultant list contained 420 potential respondents of whom
318 returned questionnaires. A total of 279 questionnaires were con-
sidered usable: 131 from purchasing executives and 148 from non purchasing
executives.

The sixty-five vendor attributes were grouped under six categoris:
convenience-related, economic-financial, caliber-capability, image-
dependability, intercorporate relations and service related. Participants
were randomly sent questionnaires asking them to rate the sixty-five attri-
butes of either a standard or special product. A rank correlation analy-
sis of mean importance ratings revealed a high degree of congruence across
roles and products. The coefficient of rank correlation between ratings
of the two types of executives was r - .88 for special products and

rank 7

r = .86 for standard products. Between ratings of standard and special

rank

products by purchasing executives the rrank was .80. Between rating of

standard and special products by nonpurchasing executives the rrank was

.82. In the ranking of category of attribute by mean score, no differ-

ence was found between standard and special products when the ratings

140

were performed by nonpurchasing executives. While purchasing executives.
While purchasing executives ranked image-dependability attributes first
for both special and standard products, differences were noted in subse-
quent rankings. For standard products purchasing executives ranked ser-
vice-related attributes, caliber-capacity attributes and convenience
related attributes second through fourth in level of importance. For
special products, however, the purchasing executives rated caliber-capa-
city attributes, convenience-related attributes, and service related
attributes in the second through fourth positions. For both types of
purchaser, purchasing agents rated economic-financila attributes fifth
and inter-corporate relations attributes sixth in level of importance.

A tow-tailed t test was used to test for perceived differences in
attributes between purchasing and non-purchasing executives. A signifi-
cant difference at the .05 level was considered a difference in attribute
perception. The similarity or difference in perception was not influ-
enced by type of product in 47 cases. Themost significant difference
in rating occurred for the economic-financial attributes. For both
special and standard products purchasing executives gave significantly
higher ratings to these attributes than non-purchasing executives. The
authors contend that higher ratings on this group of attributes may
make conflict resolution especially difficult in the buying center. This
interpretation does not appear appr0priate when it is remembered that the
mean ratings on this attribute group ranked fifth, or next to last, for
both purchasing and non-purchasing executives.

Pingry (1972) examined the purchasing process for fluid power com-
ponents. Emphasis was placed on differential roles and perceptions by

engineers and purchasing agents involved in the purchasing process. How

141

the purchasing process varied by size of buyer firm was also studied.
Primary data was collected by mail questionnaires sent to producers
and non-producers in the fields of industrial tools and equipment,
mobile equipment, marine systems and aer05pace systems.

The ranked importance of several supplier characteristics was
examined. Product reliability, reliability of manufacturer, and relia-
bility of delivery were ranked highest by respondents. Depth and breadth
of product line were ranked lowest of the eleven product/supplier attri-
butes. The ranked importance of the eleven factors included in the
study did not show the degree of variation between engineers and purcha-
sing agents that had been expected. Engineers dominated the newbuy
situation process and purchasing agents dominated the rebuy process.

More sources of supply were utilized by larger firms as measured
by both annual sales purchase level of fluid power components. Contrary
to the study hypotheses, the supplier technical services were also used
more often by larger firms and by firms with larger engineering staffs.

The testing of components was required more often by the buying
firms when the supplier had not been used previously as a procurement
source. Laboratory testing was more frequently employed than was field
testing in the total sample.

NcAleer (1971, 1974) studied differences in product/supplier attri-
butes as rated by advertisers, influencers and users in four industrial
sectors. NcAleer's basic hypothesis was that advertisers and product
influencers and users differ in the importance placed upon the vendor
variables. The four market segments selected for the study were (1)
consulting engineers, (2) electrical contractors, (3) architects, and

(4) nonresidential building contractors. Advertisers were selected from

142

lists of current advertisers in industrial magazines widely circulated in
these four segments.

Each survey participant was given a list of 48 advertising appeals
on product/supplier attributes and asked to rate each item on a -5 to +5
scale, the extremes of which indicated the appeal was either very influ-
ential or not influential at all. The statistical test utilized to test
the difference in ratings was the “t" test. Using the 5% confidence level,
2.4 comparisons would be expected to be different due to chance. More
difference than this would indicate differences in perception between the
two groups being tested

Analysis revealed significant differences between all groups of
advertisers and influences/users. Between advertisers and consulting
engineers there were 30 significant differences. Advertisers and arch-
itects disagreed in their evaluations of 37 appeals. Between advertisers
and electrical contractors 24 of the appeals were rated significantly
different. Finally, between advertisers and nonresidential building
contractors there were 25 significant disagreements.

NcAleer also tested the degree of agreement between the two "speci-
fiers," the consulting engineers and the architects. The comparison of
the evaluations of appeals resulted in agreement on 41 or the 48 items.

A linear correlation coefficient of +.854 between the scale means of each
group indicated a strong relationship between the groups. Similarly,
tests were made between the electrical contractors and the nonresidential
building contractors. They agreed on 45 of the 48 items and the linear
correlation coefficient between the scale means of the two groups was
highly significant +.872.

King (1977) compared the purchasing criteria importance of two

143

categories of buying influences for two industrial products. The impor~
tance of purchase criteria of 90 design engineering personnel of original
equipment manufacturers and of 109 user maintenance personnel for limit
switches and magnetic starters was analyzed. Exploratory research
identified seventeen limit switch and fourteen magnetic starter brand pur-
chasing criteria. Based upon different product related problems faced by
each buying influence category, it was hypothesized that user buying in-
fluences would place greater importance upon three limit switch criteria
and one magnetic starter criterion. Similarly, it was hypothesized that
the original equipment manufacturing design personnel would place greater
importance upon three limit switch criteria and four magnetic starter
criteria.

Analysis of specific criteria mean importance ratings reveald that
seven of seventeen limit switch criteria and four of the fourteen magnetic
starter criteria significantly differed at the .01 level. Further, these
significant differences were largely predicted a priori on the basis of
the different problems facing each category of influence.

In recent years researchers have investigated the impact of physical
distribution and logistics in industrial purchasing. Stephenson and
Willett (1968) and Willett and Stephenson (1969) were both inconclusive
in their findings, however, the latter of these studies found that buyers
could discriminate among even small differences in physical distribution
service times and that their ratings of satisfaction with service received
were a linear function of service time.

Perreault (1973) and Perreault and Russ (1976) report a study in
which 216 purchasing agents responded to product specific questions about

physical distribution service. After the purchasing agent had specified

144

one of six products, he was then asked three sets of questions. The first
set of questions gathered information on the general purchasing environment
in which the purchase decisions for the chosen product were made. The
second set of questions used a seven-point scale to measure the respondents'
satisfaction with nine different elements of the service mix and with the
overall service provided by their suppliers. The final set of questions
was included to determine the importance of physical distribution service
relative to other factors in the purchase decision.

Out of seven economic supplier characteristics, distribution ser-
vice ranked second to product quality in importance. Cancerning the
importance of physical distribution service in patronage decisions,
Perreault and Russ found that the greater the number of deliveries, the
greater the importance of physical distribution service. Contrary to
their hypothesis, the authors found that the fewer the number of supplier,
the lower the importance of physical distribution service. Also con-
tradicting a research hypothesis was the finding that when physical dis-
tribution service was rated important, the percentage of back orders that
were cancelled was low. It was hypothesized that the greater the average
delivery time, the greater the importance of physical distribution service.
However, no apparent relationship was observed between these variables.

A final research hypothesis was confirmed by the study: the greater the
satisfaction with physical distribution service, the greater the importance
of this attribute. This last finding is consistent with findings that

over time purchasers switch from suppliers who do not provide adquate
service.

Nathisen (1977) studied the importance of logistics service in

different market segments. The survey sample consisted of 175 building

145

contractors and engineers in 15 major metropolitan areas. Nineteen re-
searcher supplied product/supplier attributes were rated on a five-point
scale. A factor analysis of these ratings resulted in four factors:

(1) operating lifetime of equipment, (2) sales service, (3) distribution
service, and (4) miscellaneous. Discriminiant analysis was utilized to
test the significance of the factor importance profiles across segments.
Those dimensions found to be significantly different were (1) contractors
versus engineers, (2) job type (contractors only) and (3) product type
application (contractors only). The logistics or distribution service
factor was found to be most important in differentiating on the contrac-
tor-engineer dimension, second most important for job type, and third

for the product application group. In further analysis, supplier distri-
bution service ratings were shown to be important components of overall
supplier perference and non-preference. The conclusion was drawn that
the determinance of the logistical factor in supplier preference varied
by market segment and supplier.

The following studies report research emphasizing modeling of the
supplier selection process and the weighing of different product/supplier
attributes in the final vendor selection decision.

Dickson (1965, 1969) reports the development of a simulation model
for vendor selection. In developing the model Dickson sent a mail ques-
tionnaire to a sample of members of the National Association of Purchasing
Agents which provided a basis for the ultimate information requirements
of the simulation. Four diversified purchasing cases (reported in Dickson,
1966) and a list of 23 product/supplier attributes were utilized by the
161 respondents to determine the relative importance of different attri-

butes. The most important factors in the vendor evaluation process were:

146

(l) the ability to meet quality standards, (2) the ability to meet delivery
schedules, and (3) performance history. The purchasing agents also repor-
ted that to be generally applicable, a model of the vendor selection pro-
cess must account for variability by purchase—purchaser combinations be-
cause both the item to be purchased and the individual decision maker have
significant influence in determing which product/supplier attributes are
considered important in any specific buying decision.

The model developed was based upon the assumption that the purchase
decision is a riskless decision and that the various factors involved in
selecting supplier can be given a "worth" value. The model was tested
using five members of the Purchasing Agents Association of Washington
as subjects and utilizing the same four cases used in the questionnaire.
Each subject took part in an experimental and decision-making session. Us-
ing the experimental data, a computer program based upon the model simulated
each subject's decision process and correctly predicted his preference
pattern among four potential vendors for each of the four cases. Using a
random process, the chances of predicting as well as the model were less
than 1 in 102.

Moore (1969) developed a model of the supplier selection process
from a variety of information sources. Most of the data used in developing
the model came from a total of seven, three-day "sit-in" observation ses-
sions with industrial buyers from different companies. During these 168
hours of observation, Moore recorded a total of 495 different incidents
in the daily activities of the buyers. The incidents included such acti-
vities as telephone calls, visits from other organization members as well
as from salesmen, and activities performed by buyers at their desks. Also

included as incidents were descriptions of certain past events that the

147

buyers brought up in illustrating points and the various explanations
given by the buyers as their general policy/approch to different prob-
lem situations. After consolidating events representing different
episodes of the same problem and eliminating trivial matters, a total

of 297 incidents were written up and classified by substantive content.
In addition, Moore utilized: (1) 28 interviews of different buyers

by University of Pittsburgh graduate business students, (2) 108 abstract
descriptions of different purchasing decisions investigated by graduate
business students at the University of Western Ontario, (3) several

case studies of actual purchasing situations cited in college purchasing

textbooks, and (4) various articles in the trade journal Purchasing

 

describing certain problem situations in the profession.

Moore's outline of his general model is presented in Figure 5.
The first half of the model is concerned with the maintenance of a
vendor list which consists of three processes of evaluation routines
influenced by explicit product-oriented criteria. The explicit-pro-
duct criteria will generally be furnished by the person initiating the
requisition. The buyer generally reviews these criteria which are
usually quality, quantity and delivery time, to insure that they are
reasonable according to what he knows is generally available in the
market and what he knows to be the real needs of the organization. After
this initial screening and adjustment the criteria become the company's
official specifications as presented to vendors. A potential vendor's
offer is also evaluated with his past performance of keeping his commit-
ments with the company. A fourth criterion, price, is not explicityly
considered until the suppliers offers are considered. The relative

importance of the product criteria Can vary appreciably from one

148

purchasing situation to the next.

In addition to the four eXplicit criteria common to all purchasing
transactions, Moore also included implicit or more subjective criteria
which relate to the supplier itself as a company. These normally come
into play in evaluating a potentially new firm's eligibility for the
company's vendor list. The exact number and nature of these criteria
are felt by Moore to vary by company and buying situation. The most
frequently mentioned implicit criteria mentioned in the model data base
were geographical location, general reputation, past and current relation-
ships (with the buying company), size and type of firm, and operating

policies.

FIGURE 5

OUTLINE OF THE GENERAL MODEL ON THE
INDUSTRIAL PURCHASING PROCESS

 

 

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SOURCE: C.G. Moore, "A Descriptive Model of the Industrial Purchasing
Process: The Supplier Selection Routine," in Management Action: Models
of Administrative Decisions, C.E. Weber and G. Peters, eds., (Scranton,
PA‘ International Textbook Company, 1969): 82.

 

149

The first evaluation routine is for the consideration of new
suppliers. Marre perceives this process as consisting of four stages
which the potential new supplier must pass through to be added to the
vendor list. In the first stage the salesman who calls must come across
as competent in order for his company to be considered. Secondly, the
potential vendor must make some kind of special inducement, such as a
lower price than current suppliers. If the inducement is sufficiently
interesting, then the buyer will investigate the eligibility of the I
company according to a list of implicit criteria that the buying com-
pany has laid doen for dealing with other firms. Specific examples
cited by buyers were reputation or being an accredited member of the
appropriate trade association; location which includes geographic dis-
tance and nationality; relation to buying company such as client or
not competitor; and operating policies such as maintaining in-plant
inventory of its products. These rules are not applied automatically
to each new supplier but only where they appear reasonable according
to the particular structure and character of the supplier's industry as
well as the particular features of the buying situation. In the final
stage the buyer will attempt to verify the claims of the potential vendor.
The extent of testing and the number of types of criteria checked upon
will depend on the relative importance of the particular material in
the company's operations. Besides testing, the vendor's financial sit-
uation may be evaluated and a vist may be made to the plant.

The initiating of a new supplier process in diagrammed in Figure 5.

The second evaluation routine is designed to evaluation feedback
on current suppliers. Moore found that most buyers considered performance

to be satisfactory until an exception was brought to their attention.

150

In these cases the user or the receiving/inspection department may

notify the buyer with regards to such deficiencies as substandard quality
and late or incomplete deliveries. When brought to the buyer's attention,
usually a notivication/warning and a chance for adjustment are allowed.
Serious disruptions to company operations result in the supplier being
dropped from the vendor list as do perceived acts of desception on the
part of vendors. The feedback on current suppliers process is diagramned

in Figure 6.

FIGURE 6
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SOURCE: C.G. Moore, "A Descriptive Model of the Industrial Purchasing
Process: The Supplier Selection Routine,“ in Management Action: Models
of Administrative Decisions, C.E. Weber and G. Peters, eds., (Scrantion,
PA: International Textbook Company, 1969): 89.

 

151

FIGURE 7
FEEDBACK ON CURRENT SUPPLIERS PROCESS

 

 

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SOURCE:C.G. Moore, "A Descriptive Model of the Industrial Purchasing
Process: The Supplier Selection Routine," in Management Action: Models
of Administrative Decisions, C.E. Weber and G. Peters, eds., (Scranton,
PA: InternatiOnal Textbook Company, 1969): 92.

The third process evaluates the size of the vendor list. Buyers
perceive problems of not only being dependent upon too feW’suppliers
but also in having too many suppliers so that the total amount of
business done with any one supplier is not enough to receive adequate
performance. This perceived state of dilution or having the lack of
responsiveness to inquiries, prolonged delivery dates and a lack of

promptness in acknowledging orders, among other factors. This process

is diagrammed in Figure 8.

152

FIGURE 8
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SOURCE: C.G. Moore, "A Descriptive Model of the Industrial Purchasing
Process: The Supplier Selection Routine," in Management Action: Models
of Administrative Decisions, C.E. Weber and G. Peters, eds., (Stranton,
PA: International Textbook Company, 1969): 94.

The second half of the model in concerned with the selection of
supplier(s) for individual orders. Included in this are several selection
methods which Moore grouped into six categories: (1) search response,

(2) emergency response, (3) automatic response, (4) programmed response,
(5) bidding response, and (6) bargaining response. Secondly, Moore
identified particular sets of circumstnaces consisting of certain values

of referent conditions under which these responses were evoked. These

conditions are presented in Figure 9.

153

FIGURE 9
CONDITIONS FOR BUYER RESPONSES

 

 

 

Referent Conditions Low(LO) High(HI)
Past experience in purchasing product (EXP) None Extensive
Expected frequency in product's use (FREQ) Ad hoc Continuous
Specialized nature of product (SPEC) Standard Unique
Complexity of product's design (COMP) Simple Intricate
Fluctuation of product's market (FLUC Stable Unstable
Value of product/order (VAL Cheap Expensive
Importance of product's end-use (IMP) Minor Major

 

SOURCE: C.G. Moore, "A Descriptive Model of the Industrial Model of the
Industrial Purchasing Process: The Supplier Selection Routine,: in
Management Action: Models of Administrative Decisions, C. E. Weber and G.
Peters, eds., (Scranton, PA: International Textbook Company, 1969): 95.

Consider, for example, the search response. One of the first things
the buyer does after checking the requisition requirements is to determine
whether he has any known sources. Moore states:

If it is a case of HI-EXP, the stimulus of the product name
will automatically evoke the set of suppliers' names. If
it is a case of LO-EXP, no such association exists and he
must undertake a search for suppliers. If it is LO-FREQ
and LO-VAL, he usually will follow a sequential search
approach whereby he discovers and examines possible alter-
natives one by one. The first one that is able to meet
the specifications will be given the order. If it is LO-
FREQ but expected HI-VAL, he generally will attempt to
develop a new vendor list. In these latter cases, the
process them will go on and he will use one of the other
methods in making the final selection decision (p. 96).

In a similar manner Moore defined situations in which the other
responses are most likely to occur.

This research by Moore is one of the most integrative and best
documented studies in industrial buyer behavior. Surprisingly, it has

received slight attention from marketing theorists and model builders

in industrial buying.

154

Wind, Green, and Robinson (1968) used an evaluation function approach
to determine the importance coefficients which purchasing agents use in
comparing vendors in multiattribution buying situations. The twenty pur-
chasing agents involved in the study first used configuration scoring in
sets of three and later six attributes in the importance determination of
ten research supplied product/supplier attributes. The results were com-
pared to a simple rating of importance for these same ten attributes which
were converted to pair comparisons and then analyzed by Thurstonian scaling
techniques.

The results of the Thurstonian scaling revealed large scale values
for quality/price ratio and secondly for delivery reliability. Six attri-
butes were grouped in the lower-middle range of the scale: (1) technical
ability and knowledge, (2) information and market services, (3) general
reputation, (4) geographical location, (5) technical innovativeness and
(6) extent of previous contact with buyer. The remaining two attributes.
importance as client (reciprocity) and extent of "personal benefits"
supplied to biyer, received very low importance ratings.

A comparison was made to see if the interaction terms from the
configured scoring procedure added anything beyond simple main effects
models. In the three-attribute configuration significant differences were
found at the .05 level between the eta-squared value of configuration
scoring and the R2 value of the regression model, indicating the interac-
tion model is better. However, no significant differences were observed
between the eta-squared value and the R2 value for the six-attribute scoring
situation. This suggests that as the number of attributes increase, the
main effects model (without interactive terms) may be a good approximation

to how buyers combine importance weights of induvidual attributes.

155

Scott and Wright (1976) report an experiment in which subjective
weight which respondents gave to different cues were estimated by a regres-
sion function based on data supplied buyers to salesmen/interviewers. The
subjects were 26 purchasing agents and 27 consulting engineers whose respon-
sibility included evaluating electrical resistors. Profiles containt two,
three, and six attributes were created and administered as separate treat-
ment. The basis for identifying.clues to be included was based on cue
importance rating of 21 attributes in the purchase of electrical resistors
by another group of consulting engineers. A factor analysis of the 21
attributes resulted in the following identifiable factors: (1) lead life
stability (LIFE), (2) delivery lead times (DELIVERY), (3) flexibility
in specifications (SPECS), (4) reliability (RELIABILITY), (5) current
noise (NOISE), and (6) salesmen's knowledge (SALESMAN). Respondents rated
the attributes on a seven-point scale which varied from a very low appeal
to a very high appeal. As more attributes were introduced into the pro-
files (from two to three to six) the self-reported means of these attri-
butes changed. The attributes LIFE and DELIVERY were included in all
configurations. As the configurations changed from two to three to six,
the LIFE rating changed from 4.37 to 3.62 to 4.00 (engineers). The DELI-
VERY attribute maintained its 2.88 rating on both the two and three attri-
bute configurations but was elevated to 3.64 when considered with all six
attributes (engineers). Highest of all ratings was RELIABILITY with a 4.81
from engineers.

In the eleven comparisons between purchasing agents and engineers,
significant differences were found at the .20 level in four comparisons
and at the .05 level in three other comparisons.

Scott and Wrightfs a priori model correctly predicted both the

156

direction and significance of the self-reported results in the purchaser-
engineer comparison. In the three variable configuration the significance
between purchasing agents and engineers was correctly predicted for all
attributes, but the direction of the relationship was correct for only two
attributes. In the six attribute configuration both the direction and the
significance was predicted for all six attributes.

The most explainable variance was associated with fewer than three
cues. This strongly suggests that buyers use a very few decision attri-

butes in the vendor selection decision.

Models and Theoretical Essays
In this section nine models of industrial buying behavior are pre-
sented in the chronological order in which they were published. Because
models of industrial buying behavior have differed greatly in scope and
content, Wind (1973) developed a model classification system which classi-
fies the substantive content of models into eight model types according
to:

(1) the unit of analysis (the organization vs. the individual)

(2) the primary focus (the determinants of organizational buying
behavior vs. the organizational buying decision process)

(3) the specific type of determinant correlates (general vs.
situation specific characteristics)

(4) the specific aspects of the decision process which are being
emphasized (criteria for evaluating alternative sources of
action vs. the evaluation of various vendors on these criteria)
(p. 203).

All the models presented here, with the exception of the Hobbesian

model, use the organization as the unit of analysis. These models are
of general characteristics and not all model decision processes. For
these reasons the primary focus categorization is the most useful for dis-

tinguishing among these models.

157

The Hobbesian model presented by Kotler (1965) deals exclusively
with the motivation of individual buying decision makers in an organiza-
tional context. It reflects a continued interest by writers in this
area of marketing concerning the role that exonomic and noneconomic fac-
tors play in the vendor choice decision.

The other models take the organization as the decision making unit.
Before 1970, the models tended to focus on the decision making process.
This can be seen in Webster's (1965) four-step approach to vendor selec-
tion, in Robinson and Faris's (l967) buyphase model, and in Cardozo's (1969)
model, although the latter two models did include some major sets of
variables felt to influence buying behavior. The one block or determinants
model of the 1960's was Wind's (l967a) model which served as the basis for
Webster and Wind's later conceptualization of organizational buying.

Since 1970, the models have tended to focus on the set of variables
perceived as influencing buyer behavior rather than focusing on the deci-
sion process per se. Webster and Wind (1972a, 1972b) and Hill and Hillier
(1977) are of this nature, although a decision process is included in the
model. Sheth (1972) and the more recently developed exchange model (1978)

do not include specified decision processes.

The Hobbesian Model

 

Kotler (1965) discussed four behavioral models of consumer behavior;
the Marshallian economic model, the Pavlovian learning model, the Veblenian
social-psychological model, and the Hobbesian organizational-factors model.
Kotler contended that of the four, the Hobbesian model best described pur-
chasing in an organizational setting. Kotler noted that two competing views

were commonly held with respect to organizational buyer motivation. The

158

first view presents the buyer as emphasizing the predominance of rational
motives such as cost, quality, dependability, and service factors. As a
loyal servant of the organization, the buyer rationally chooses the pro-
duct/supplier best qualified to supply the organization.

Other writers have emphasized the personal motives of the organiza-
tional buyer. According to this view, the purchaser may be tempted to
choose among salesmen according to the extent to which they entertain or
offer gifts.

Kotler stated that both rational and personal goals guide organiza-
tional buyers and that the political model of Thomas Kobbes (Hobbs, 1951)
comes closest of any model to suggesting the relationship between the two
goals. Hobbes held that man is instinctively oriented toward preserving and
enhancing his own well-being. But, if this dominated human interaction, it
would produce a war of every man against every man. Hobbes felt that this
fear leads men to unite with others in a corporate body. The corporate
man tries to steer a careful course between satisfying his own needs and
those of the organization.

In applying the Hobbesian model to organizational buying, Kotler
concluded that the purchaser must be appealed to on both personal and organi-
zational grounds. The best mix of rational and personal arguments was felt
by Kotler to vary with the nature of the product, the type of organization.
and the relative strength of the two drives in the particular buyer. When
there is substantial similarity in what suppliers offer in the way of pro-
ducts, price, and service, the purchasing agent has less basis for rational
choice. Since he can staisfy his organizational obligations with any of
a number of suppliers, Kotler felt that personal motives may sway the pur-

chaser. On the other hand, Kotler noted that where there are pronounced

159

differences among competing vendors' product/services, the purchasing
executive is held more accountable for his choice and probably pays more
attention to rational factors. For effective marketing, the supplier must
properly appreciate these goal conflicts of the organizational buyer.
Empirical evidence to support this model can be found in Pettigrew

(1975) previously discussed.

The Webster Model

Webster (1965) developed a conceptual structure to provide direction
to research and analysis of industrial buyer behavior. Webster conceived
the industrial buying process to consist of four subprocesses: (l) prob-
lem recognition or need awareness, (2) assignment of buying authority,

(3) the search process, and (4) the choice process.

The initial problem recognition or need awareness might be the result
of actions either internal or external to the organization. Internal ac-
tions leading to problem recognition included such activities as reviews
of vendor performances, value analysis programs, reaching reorder points,
among others. External actions creating buying situations centered around
the marketing activities of potential suppliers. Using the behavioral
theory of the firm context, Webster stated that a problem could generally
be defined as the perception of a difference between the desired and actual
level of goal attainment and could result from either a change in goals or
a change in performance.

On the assignment of buying authority, Webster interpreted the exis-
ting research evidence as indicating that an individual's responsibility
in a given buying situation would be a function of the technical complexity

of the product, the product's importance to the firm either in dollar terms

160

or in terms of its relationship with the firm's production process, the

product-specific technical knowledge which the individual possesses, and
the individual's centrality in the production process. An individual's

influence on the purchase deciaion was stated to be directly determined

by his organizationally defined responsibility.

Webster noted that the assignment of responsibility for the purchase
decision to a central purchasing department reflected a basic change in
the purchasing philosophy in that such as assignment was based.upon the
assumption that market knowledge was more relevant than product knowledge
in the particular buying situation. Since industrial buyers typically are
market oriented while product users are typically product oriented, Webster
noted that conflitts often resulted because of disagreement concerning the
relative importance of product variables vs. market variables. Based on
preliminary studies, Webster developed a series of propositions concerning
the relative importance of: (1) product variables vs. market variables,
and (2) the influence of the purchasing department, user department and
top management in buying decisions.

The search process was conceived of as being a two-step process.
First, the criteria against which to evaluate potential vendors must be
developed. Second, alternative product offerings must be identified in
the market. Time pressure acts as a constraint upon the amount of search
and, consequently, upon the number of alternatives identified and consi-
dered. Although several sources of information are available to identify
potential suppliers in the market, Webster felt that the search process is
largely routinized for the individual buyer in that he follows habitual
patterns of search. Therefore, some buyers tend to utilize catalogs while

others tend to request visits from salespersons. Webster felt that these

161

tendencies changed over time because of organizational learning or the
expectation that unsuccessful search would result in a change of search
rules such as the consideration of new information sources. It was hypo-
thesized that the search process continues until a sufficient number of
potential vendors have been identified. Webster felt that this sufficient
number is determined by the particular buying situation and the particular
search rules involved. To support this aspect of the model, Webster cited
Moore's (1969) work which suggested that buyers have rigorous definitions
of the size of vendor lists. Webster hypothesized that the search process
would move from consideration of familiar alternatives, expecially present
vendors, toward the consideration of new and unfamiliar alternatives.

Webster noted that the search process was closely related to the
choice process and, although conceptually different, these steps may be
hard to distinguish in practice. For example, Webster noted that a deci-
sion rule may be embodied in a search rule: Continue searching until a
feasible alternative is found, then stop.

The last element in the decision process, the choice process, was
described by Webster as consisting of three stages: (1) vendor qualifi-
cation, (2) comparing offerings with specifications, and (3) comparing
offerings with each other.

Webster envisioned this preliminary model as a framework for research
and analysis and felt it could serve as a start toward the rationalization
of the industrial buying process. Webster called for researchers to
achieve greater specificity and measurement of variables and causal rela-

tionships.

162

The Robinson-Faris Model

 

The Robinson-Faris (1967) model of the industrial buying process was
developed from research conducted under the sponsorship of the Marketing
Science Institute. The research on which the model was based consisted of
a series of unstructured depth interviews in three different companies.
The model which resulted from the study is actually a framework for the
classification and analysis of industrial buying situations. Three types
of buying situations or 'Buyclasses' were identified. The defining char-
acteristics of each buyclass are listed in Table 2. The authors concluded
that opportunities for the supplier who is not furnishing purchased items
to the buyer firm will occur almost exclusively in the modified rebuy
or straight rebuy situations. This is a truism based on the definition
of the straight rebuy situation. Eight 'buyphases' were also identified
and are presented with the buyclasses in the buygrid model in Table 3.

The buyphases were defined to be the eight fundamental activities which
comprise the procurement process. While some of the phases may occur~
simultaneously, the authors felt that they do tend to follow in the num-
bered sequence.

Because it is empirically based, the Robinson-Faris model provides
a useful set of categories for classifying buying behaviors and organiza-
tional buying responses to marketing efforts. The buygrid framework has
been utilized in severl studies of industrial buyingupreviously reviewed.
In addition, Wind and Robinson (1968) used the buygrid framework in a
computer simulation of the industrial buying process. The model has been
criticized as being "virtually devoid of predictive ability and offers

little insight into the nature of the complex interplay between task and

163

TABLE 2

TYPES or BUYING SITUATIONS
BUYCLASSES

 

I. NEH TASK

A requirement of problem that has not arisen before

Little or no relevant past buying experience to draw upon

A great deal of information is needed

Must seek out alternative ways of solving the problem and
alternative suppliers

Occurs infrequently - but very important to marketers because
it sets the pattern for the more routine purchases that
will follow

May be anticipated and developed by creative marketing

II. STRAIGHT REBUY

Continuing or recurring requirement, handled on a routine basis

Usually the decision on each separate transaction is made in
the purchasing department

Formally or informally, a "list" of acceptable suppliers exists

No supplier not on the "list" is considered

Buyers have much relevant buying experience, and hence little
new information is needed

Appears to represent the bulk of the individual purchases
within companies

Item purchases, price paid, delivery time, etc., may vary-
from transaction to transaction, so long as these varia-
tions do not casue a new source of supply to be consi-
dered

III. MODIFIED REBUY

May develop from either new task or straight rebuy Situations
The requirement is continuing or recurring or it may be expanded
to a significantly larger level of operations
The buying alternatives are known, but they are CHANGED
Some additional information is needed before the decisions are made
May arise because of outside events, such as an emergency or by
the actions of a marketer
May arise internally because of new buying influences, or for
potential cost reductions, potential quality imporivements
or potential service benefits
Marketers who are not active suppliers try to convert the customer's
straight rebuys into modified rebuys

 

SOURCE: Patrick J. Robinson and Charles W. Faris, Industrial Bu in
and Creative Marketing, (Boston: Allyn and Bacon, Inc., 1967): 28.

 

164

TABLE 3

THE BUYGRID ANALYSTICAL FRAMEWORK FOR
INDUSTRIAL BUYING SITUATIONS

 

BUYCLASSES

 

New Modified Straight
Task Rebuy Rebuy

 

“Wmlbzl'dfil

7

 

Anticipation or Recognition of
a problem (Need) and a
General Solution

Determination of Character-
istics and Quantity of Needed
Item

Description of Characteris-
tics and Quantity of Needed
Item

Search for and Qualification
of Potential Sources

Acquisition and Analysis of
Proposals

Evaluation of Proposals and
Selection of Supplier(s)

Selection of an Order Routine

Performance Feedback and
Evaluation

 

 

 

 

SOURCE:

The most complex buying situations occur in the upper left
portion of the BUYGRID matrix, when the largest number of
decision makers and buying influences are involved. Thus, a
New Task in its initial phase of problem recognition gener-
ally represents the greatest difficulty for management.

Clearly, a New Task may entail policy questions and special
studies, whereas a Modified Rebuy may be more routine, and
a Straight Rebuy essentially automatic.

As Buyphases are completed, moving from phase 1 through

phase 8, the process of "creeping commitment" occurs,and
there is diminishing likelihood of new vendors gaining access

to the buying situation.

Patrick J. Robinson and Charles W. Faris, Industrial Bu in
Inc., 1967): 14.

and Creative Marketingg_ (Boston: Allyn and Bacon,

165

and non-task variables" (Webster and Wind, 1972a, pp. 24-25). In a recent
study conducted to test aspects of the Robinson-Faris model, Doyle, Wood-
Side and Mitchell (1979) concluded that their study did not support these
criticisms of this model. These authors studied differences in new task/
modified rebuys and straight rebuys in fourteen British industrial firms.
The firms representing a cross section of industry were classified as mar-
keting Specific products purchased as new task, modified rebuy, or straight
rebuy Situations. The classification was based on interviews with senior
marketing managers who responded concerning the frequency of purchases by
customers and the frequency of product modification requested by customers.
Five products were classified as new task purchases, two as modified rebuy
purchases and seven as straight rebuy purchases. For analysis the new

task and modified rebuy purchases were grouped together. Straight rebuys
took Significantly less time to accomplish and involved Significantly

fewer persons in the rebuying center (p<.05) than the new task/modified
rebuy situations. Concerning who initiated the need to purchase, in 72%
of the straight rebuy situations the user of the purchasing agent was the
modified rebuy/new task Situations these positions were responsible for
initiating the purchase in only 36% of the cases or half as often. In
these situations the most frequent initiators were the other category
(marketing manager engineers, and suppliers of other products) 41% of

the cases and the supplier sales force 23% of the cases. These percentages
may tend to over emphasize the importance of the various initiators Since
the sample for each type of purchase consisted of only seven responses.
Differences between buying center composition and the attributes negotiated
in the purchases varied by purchase situation but were not statistically

Significant. Depletion of stock and dissatisfaction with current supplier

166

were mentioned by most managers as reasons for customer contact in
straight rebuys. Product modifications, dissatisfaction with current
suppliers and the belief that existing suppliers were incapable of meeting
project demands were mentioned by most managers as reasons for customer
contact in the modified rebuy and new task buying situations. Five of the
seven new task/modified rebuy firms reported written post purchase evalua-
tions by firms purchasing from them. Three of the straight rebuy firms
also reported these written evaluations. A majority of all purchasers
reported evaluated the suppliers verbally through communication with
other buying center members. In conclusion, this study partially verifies
the buyclass differences as stated by Robinson and Faris.

Although not integrated into the buygrid framework, Robinson and
Faris also discussed several determinants of industrial buying behavior.
As presented by the authors, these factors are not determinants per se
but rather inferences which may have a significant impact on the purchase

decision in specific circumstances.

Environmental Factors. Robinson and Faris stated," Each buying

 

Situation occurs, is modified, and is resolved within a unique combination
of environmental factors" (Robinson and FariS 1967, p. 121).

Internal environmental factors were felt to be essentially under
the control of the buying organization. The first of these factors are
the personal attributes of the buying center members. The authors recog-
nized that the worries, fears, frustrations, conservatism, inertia, as
well as other aspects of the buying center member's personality and psy-
chological make up will influence buying decisions.

Second, organizational factors such as the degree of centralization,

167

purchasing policies and methods of problem solving were discussed as
influencing factors. Third, the authors stated that the bases for com-
petition in the buying company's industry influence a company's buying
activities. Emphasis was placed on the point that the relative influence
of a buying center member is positively related to how important the
individual's functional specialization iS to the firm's basis for competi-
tion. For example, Robinson and Faris stated that in a company which I
stresses its technical excellence and engineering Skills, the engineers
and technical specialists will tend to be the dominant buying influencers.
It was also recognized that the different functional areas place emphasis
on different aspects of potential vendors' offerings. Fourth, the type

of operation and the end product produced were felt to influence purcha-
sing practices. Differences in the purchasing practices and policies of
job shop, assembly, and continuous process opertions were discussed.

The three external environmental factors discussed were (1) the
characteristics of the supply industry, (2) socio-politico-economic
conditions and (3) Significant events. The most important influences
relating to the characteristics of the supply industry were (1) the
content and quality of the salesman's presentation, (2) the number of
potential suppliers and (3) tradition of custom.such as traditional terms
of sale. The socio-politico-economic conditions were recognized to expe-
cially influence the levels of inventoyr carried by the purchasers. The
significant event, such as a technological break through or a major fire
were perceived as occurring sporadically and yet might create market oppor-

tunities for aggressive firms.

Roles of Buying Influencers. Robinson and Paris gave two reasons

 

why individuals become involved in buying Situations. First, organizational

168

position can give an individual a formal stake in the outcome of the
buying decision by virtue of either responsibility or authority. Other
individuals become involved because they are sources of information cri-
tical to the decision making process. The viewpoints and positions likely
to be held by the functional areas of marketing, development/design
engineering, manufacturing, research and development, supporting staff

groups, general management, and purchasing were discussed.

User-Supplier Relationships. In this section Robinson and FariS

 

stressed the interaciton and outcomes of the buyer-seller relationships.
The authors discussed how buying company policies and practices concer-
ning computerized ordering, supplier inventorying, make or buy decisions,
trade relations (reciprocity), cost reduction programs, and purchasing
contracts affect both the roles played by buying center members and the
outcomes of buying decisions. For example, two patterns emerged from

the empirical research with respect to reciprocity. In some instances,

it was found that the person handling the trade relations agreements felt
thathis only obligation to the customer was to get him on the active list
of qualified potential suppliers. In other situations, the trade relations
officer reentered the buying process at the evaluation and souce selection
decision phases and, in these cases, his recommendations were usually

respected.

The Wind Model

 

Wind (l967a) presented a comprehensive model of industrial buyer
behavior in the same volume as Robinson and Faris's (1967) Marketing
Science Institute Study. In contrast to process models that attempt to

specify a decision process which determines buyer behavior, the Wind model

169

is a block model that attempts to identify the major sets of variables
affecting organization buying.

Wind hypothesized that a buyer's behavior is a function of five
sets of variables.

1. The buyer's own characteristics, espcially his psycho-
logical mechanisms and behavioral characteristics,
which serve as the major mediating processors between
the inputs to which he is subject and his outputs
(responses).

. Interpersonal influences of other organizational members.

. Organizational variables.

. Inputs from the various sources of supply. These inputs are
generally of two types: those supporting source X and those
contradicting inputs which attempt to negate the influence
of the supporting inputs for source X.

5. Environmental variables, which are of three types.

a. general variables affecting the value system of the
people of a given society.

b. general business conditions

c. regular business constraints (p. 52).

huh)

The model of these five sets of variables and some of their inter-
actions is presented in Figure 10. In the following section these five

sets of variables are briefly discussed.

Buyers' Characteristics. In discussing buyer motivation, Wind
suggested a task/nontask dichotomy as a better method of motive classifi-
cation that the traditional economic/noneconomic and rational/emotional
dichotomies. TWo major generic nontask motives were felt to be operative
in industrial buying decisions: risk reduction and achievement motives.
Other psychological determinants discussed were learning, perception or
awareness of the various sources of supply, and the buyer's cognitive
processes. The cognitive process or attitude toward the source of
supply which was felt to be of most importance was perceived credibility.

Behavioral factors included in the model were the buyer's previous buy

170

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decisions and relevant feedback and his information habits. Positive
previous experience was felt to increase the buyer's information banks
toward that particular supplier and result in less exposure and access

to countervailing information.

Interpersonal Variables. Wind conceived of the purchasing agent
as being a part of two groups composing the buying center--buyers and
users. Wind defined the relations within the buying center as negotia-
tive and felt that three types of negotiation were frequently employed
to resolve conflicts. The discussion presented in this part of the
model draws heavily from Walton and McKenzie's (1965) work on negotiation.
Distributive bargaining, the function of which is to resolve pure con-
flicts of interests, was believed to exist in solving problems between
the buyer and user groups in the buying center. For problems where pure
conflicts are not present, it was believed that integrative bargaining,
the function of which is to find common or complementary interests and to
solve problems confronting both parties, is frequently employed. Concen-
suS within the buyer group and within the user group was believed to be
achieved through intraorganizational bargaining.

Purchasing agents were envisioned as being in a key position in
the buying center because they often perform an informational gatekeeping

role.

Organizational Variables. Seven organizational variables were
thought to be determinants of buyers decisions. First the goal and task
system, or the specific purchasing objectives and policies, were considered
to be important determinants since they influence company purchasing needs

with what is available on the market. In addition, Wind presented evidence

172

from the industrial buying literature that the reward system, the status
system, the authority system, the communcication and information system
are determinants of buyer behavior. In addition, Wind stated that the
technological state of the organization, especially the availability of
electronic data processing systems, appear to have an indirect effect on
the buyer's decisions through its effects on the purchasing procedures
and the organizational structure. Finally, the degree of centralization
was viewed as a determinant. In centralized organizations, the buyer
may feel that he is part of top management team and therefore may make
more decisions based on economics/efficiency. In the decentralized case,
he may regard himself as part of the factory team and may make choices

which might be preferred by the purchase users.

Source Characteristics. Wind divided the source inputs into three

 

types: (1) the product/service mix, (2) the communication/information
mix, and (3) the distribution mix. The product/service mix includes
product characterisitcs and service factors such as delivery, technical
advice, repair services and other services important to the consumer.

The communication/information mix included advertising, personal selling
and sales promotions as well as all information on the source that origi-
nates from the source's past or present activities or lack of activities.
The distribution mix consists of the channels of distribution and the
physical distribution system used by the source. According to Wind, the
buyer is subject to multiple inputs Since every source uses some mix of
these three sets of inputs. Wind hypothesized that the buyer's decision
is not affected by a specific input but by the relation between the inputs

from a specific source and the countervailing inputs from his competitors.

173

Environmental Variables. Wind recognized that being a part of

 

the general social-cultural-economic-technological-political environ-
ment, a business firm has to adjust its policies in general and buying
decisions in particular to the general business conditions and environ-
mental constraints. General business conditions are especially impor-
tant inasmuch as the buyer's demand for parts and other productive ser-
vices is derived from the demand for the product which a firm produces.
Of particular importance in international marketing are the general
social-cultural-economic-political environment which affects the value
system of organizational members. In addition to these general comments,
Wind gave two examples of how environmental variables affect the buying
decision. First, Wind stated that a buyer's decision as to whether to
buy or not to buy at a particular time is affected to a large degree

by his expectations with respect to the stability of price levels. Second,
a buyer's decisions on how much and from whom to buy were stated to be
affected by the current availability of the item in the market and his
expectations as to the future availability with respect to future needs

of his and other firms.

The Cardozo Model

 

Based on a review of pertinent studies of industrial buying, Car-
dozo (1969) presented a model of industrial buyer behavior which empha-
sized variables influencing the selection of vendors in a decision based

framework. Cardozo's conceptual scheme is presented in Figure 10.

174

FIGURE 11
CARDOZO'S CONCEPTUAL SCHEME OF VENDOR CHOICE FACTORS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External 2.
End Product r_.____N PURCHASE REQUISITIUI
End ""*GP 1 P‘ Buying Criteria
Value Added
Profit Margin
Competitive
Advantage
T. I 2 <2 ‘ '——-—‘ Specific Risks
ENVIRONMENTAL 3.
FORCES PROBLEMS AND PERCEIVED
RISKS
BUYCLASS
ntirnal
Institutional
Role Type
Working
Relationship
Workload v Simultaneous
- 4. 1 " "—‘ SCIIIIIIIIQ
INFORMATION PROCESSING a
I PURCHASING STRATEGIES
_ , Sequential
:Evaluation
5. .
INDIVIDUAL CHARACTERISTICS PROBABLE
0F BUYER SUPPLIER
CHOICE
F m
If I 1 _
Risk Tolerance Role Cognitive
and Preference Type Style
67 ’
SUPPLIER PROFILES
1 ;.
F F 1 _
Tens of Offering Vendor Perfomnce Perception of
Vendor Couunications

 

 

SOURCE: Based on Richard N. Cardozo, "Segmenting the Industrial Market."
In Marketing and the New Science of Planning, Edited by Robert L. King.
(Chicago: American Marketing Association,11969): 433-440.

175

In this conceptualization, supplier choice is directly related to
(l) the profiles of suppliers available and (2) the strategies used to
choose among those suppliers. These strategies, in turn, depend on
(1) individual characteristics of buyers and (2) the problems and risks
which the buyer perceives. These problems and risks are influenced by
both (1) purchase requisitions and (2) environmental forces, which
also affect the purchase requisitions themselves. Following is a brief

discussion of each of these variables.

Purchasing Strategy. The profile of a particular supplier includes
the terms of his offering, such as delivery dates, prices, quality control
Specifications, product Specifications, any services to be supplied, the
prospective buyer's estimate of the supplier's capabilities, and supplier
development costs, if any. The profile for suppliers from which the
company has previously purchases also includes vendor histories, either
recorded in a formal vendor analysis system of retained as the buyer's
recollections of past successes or failures. It may also include the
buyer's perception of the supplier's advertising and salesmen.

Previous research (Cardozo and Cagley, 1970, 1971) indicated that
industrial purchasers develop Specific strategies to process information
and select suppliers. About these Cardozo stated: "These strategies
are regular patterns of decisions and actions for defining and coping with
purchasing problems, within acceptable limits of risk and resource expen-
diture" (Cardozo, 1969, p. 434).

Two basic strategies were identified, a sequential evaluation stra-
tegy and a Simultaneous scanning strategy. The sequential strategy was

described as a process of contacting present suppliers until one was

176

found who could solve the buyer's problems within the limits described
above. The risks of paying a higher than competitive price and/or recei—
ving marginal quality would be perceived by those using this strategy
as secondary to the necessary expenditure of resources to use the scan-
ning Strategy. (A.Scanning strategy was described as the simultaneious
inquiry of both present and potential suppliers and the subsequent award
of the order to a supplier based on the analysis of their responses to
the inquiry.

Cardozo suggested that some buyers use both strategies and choose

between them on the basis of the factors listed in Table 4.

TABLE 4
VENDOR SELECTION STRATEGIES

 

 

Simultaneous Scanning Strategy Sequential Strategy

 

Employed When: Employed When:

* Total dollar expenditure * Total dollar expenditure
is high is low

* Probability of suppliers * Probability of suppliers
not meeting specifications failing to meet specifi-
iS moderate to high cations is low

* Major risk perceived iS * Major risk perceived is
paying a premium price interruption of supply

* More management resources * Management resources
are available available to choose

supplier are restricted

 

SOURCE: Richard N. Cardozo, "Segmenting the Industrial Market," In
Marketing and the New Science of Planning, Edited by Robert L. King
(Chicago: American MarketTng Association, 1969): 435.

 

177

Individual Characteristics. The individual characteristics which

 

Cardozo considered to be important include (1) individual risk tolerance
and preference, (2) individual role type and (3) individual cognitive
style. The first aspect of risk tolerance and preferences considered
was buyers' tolerance for uncertainty. It was stated that buyers with

a low tolerance for uncertainty would be both more likely to rely on
suppliers who had served him well in the past and more likely to employ
a sequential evaluation strategy than buyers with higher tolerances for
risk: Second, buyers were thought to differ in their perceptions of
risks due to differences in education, experiences and role changes
within the organization. Third, among buyers who perceive a particular
risk as high or low, differences in the ability to manage the particular
risk were thought to occur. Cardozo related these differences to differ-
ing levels of Specific self-confidence among the buyers. Levels of
self-confidence were also related to individual role types. Buyers with
greater self-confidence were believed to be more'likely to conceive of
their jobs more broadly and to innovate. Finally, Cardozo related indi-
vidual differences in cognitive style to strategy preferences. Buyers
who tend to prefer Simultaneous scanning strategies were believed to
handle fewer problems in depth, rather than many problems, each with
less intensive analysis. Scanner, however, appear to have a greater
tolerance for work and, therefore, were thought to spend more time on
individual supplier selection decisions than sequential evaluators.
Preliminary research results indicated to Cardozo that sequential eval-
uators may be less likely than scanners to switch suppliers, and more

likely to maintain smaller vendor lists.

177a

Problems and Perceived Risks. The problems facing industrial buyers

 

were categorized to be the same as in the Robinson and Paris model: straight
rebuys, modified rebuys and new tasks. The type of information sought

and the type of congitive effort invested in a particular purchase deci-
sion with each of the three buying situations will influence the type of
purchasing strategy utilized. Inherent in each buying situation iS a
degree of risk. The type of risk perceived as important was held to influ-
ence the supplier characteristics on which the buyer will write the tightest
specifications, and about which he will seek the most information. Risk

was said to be generally perceived as high when (l) the dollar amount to

be committed is large (2) the item to be purchases is complex, (3) the
percentage of the total value added by the purchasing firm attributable to
that item is substantial, (4) the probability of the buyer's making an
unsatisfactory choice appears high to him, (5) the consequences of making
an unsatisfactory choice is highly visible, and (6) the purchase may exert
substantial influence on the market for the particular item. In high risk
Situations more effort will be Spent in seeking information andin evaluating

alternative suppliers.

Purchase Requisitions. The purchase requisition lists the dimensions

 

along which alternative offerings are to be evaluated and the limits along
each of those dimensions of acceptable performance. Price, delivery date,
allowed tolerance from Specified dimensions and allowable defects per 100

parts are examples of dimensions found in purchase requisitions.

Environmental Forces. Cardozo perceived that both factors internal

 

and external to the firm influence the problems and risks the buyer

178

considers important. Internal factors include (1) the institutional
role type, (2) the working relationships between purchasing and other
departments, and (3) the individual buyer's workload.

The institutional role type factor draws on Kernan and Sommer's
(1966) previously discussed research. They found that institutions
strongly committed to an established role may be lethargic and non-inno-
vative, while those whose commitments are less strong may be adaptive
or innovative in purchasing practices. Concerning working relationships,
Cardozo illustrated differing degrees of autonomy and reporting relation—
ships in firms as influences in problem and risk perception. For example,
Cardozo noted that in firms where purchasing reports directly to the pro-
duction department Specifications may be written so tightly by production
engineers that the purchasing department may have little or no freedom
in choosing suppliers. In reviewing literature relating to purchasing
agents and workloads, Cardozo found indications that heavy workloads lead
to (l) reluctance to try new suppliers, (2) loyalty to existing suppliers,
(3) greater reliance on rountineS and less attention paid to each purchase,
(4) grater emphasis on avoiding mistakes, less on capitalizing on new
opportunities, and (5) fewer bids sought, and leSS fear of paying more
than the lowest possible price.

Although not explained in any depth, five external factors were
considered which were felt to influence a firm's purchasing profile,
which in turn would affect the probability that a supplier with a parti-
cular profile would be chosen. It was also felt that these five factors
affect the amount and type of risk perceived in particular purchase Sit-
uations. These factors were listed as (l) the type of business in which

the buying firm is engaged as defined by end product(s), (2) the end

179

market served by the company (e.g., consumer perishables, industrial
goods, government research facilities), (3) the value added by the
firm's activities, (4) the firm's profit margin and changes in it,
and (5) the competitive advantage of the firm.

It was felt that in low value added industries the price variable
was rightly controlled in purchases. Downward trends in profit margins
were seen as another impetus for focusing on low price as a means of
cost savings. Firms whose competitive advantage in their end product
market lies in marketing Skill were discussed as having tight limits
for delivery and consistency of quality of purchased items, but fairly
broad limits for purchase price. This was contrasted with firms whose
competitive market advantage is price where purchase price is the pri-
mary purchase dimension and a broad range of acceptable delivery dates

and quality are secondary in the purchase decision.

The Webster and Wind Model

Webster and Wind (1972a, 1972b) developed one of the most compre-
hensive and complex models of organizational buying behavior every pub-
lished. The model was based on much of the existing research findings
in organization buying available at the time of writing. The authors
described their intentions in these words:

The model to be presented here is a general model.
It can be applied to all organizational buying and suffers
from all the weaknesses of general models. It does not
describe a Specific buying situation in the richness of
detail required to make a model operational, and it can-
not be quantified. However, generality offers a compen-
sating set of benefits. The model presents a compre-
hensive view of organizational buying that enables one
to evaluate the relevance of specific variables and there-
by permits greater insight into the basic processes of
industrial buying behavior. It identifies the classes
of variables that must be examined by any student of

180

organizationla buying-~practitioner or academician
(1972b, p. 12).

The model treats organizational buying as a decision-making process
carried out by individuals in interaction with other people in the con-
text of a formal organization. Four broad classes of variables were de-
fined as affecting organizational buying behavior. These were environ-
mental, organizational, social and individual. Within each of these
classifications, task and nontask variables were discussed. Task varia-
bles were rather loosely defined as those that relate directly to the
buying problem. Those variables that extend beyond the buying problem
were defined to the 'nontask. AS an example, at the individual level,
the desire to obtain the lowest price was classed as a task variable;
the personal values and needs of the individual were classed as nontask.
This rather indifinite categorization was discussed by the authors:

It is seldom possible to identify a given set of

variables as exclusively task or nontask; rather, any

given set of variables will have both task and nontask

dimensions although one dimension may be predominant.

For example, motives will inevitably have both dimen-

sions--those relating to the buying problem to be sol-

ved and those primarily conveived with personal goals
(1972b, p. 13).

The model defines a "buying Situation" as occurring when someone
in the organization percieves that there is a descrepancy between a
desired outcome and the present situation that can be remedied through
some buying action. The "buying center" of the model includes all
members of the organization who are involved in a Specific buying pro-

cess. The roles of the buying center members are that of user, influencer,

181

decider, buyer, and gatekeeper. It was noted that these roles do not
necessarily follow organizational lines and are not constant from one
buying Situation to another.

A schematic drawing of the model is presented in Figure 11. A

discussion of the major components of the model now follows.

Environmental Influences. The authors discussed four ways in
which environmental variables affect buyer behavior. First, these
variables define the availability of goods and services. Second, they
define the general business conditions facing the buying organization
including the rate of economic growth, the level of national income,
interest rates and employment. Third, they determine the values and
norms guiding interorganizational and interpersonal relationships
between buyers and sellers as well as among competitors, and between
buying organizations and other institutions as governments and trade
associations. Finally, environmental forces influence the information
flow into the buying organization, especially the flow of marketing
communication from potential suppliers, through the mass media and through
other personal and impersonal channels.

The environmental influences specifically delineated in the Webster
and Wind model included: physical (geographic, climatic, or ecological),
technological, economic, political, legal and cultural. The vehicles
through which these influences are felt included suppliers, competitors,
customers, government agencies, trade unions, political parties, educa-
tional and medical institutions, trade associations, and professional

groups.

182

FIGURE 12
A MODEL OF ORGANIZATIONAL BUYING BEHAVIOR

I THE ENVIRONMENT (Envuonmenlal determinants cl buying behawovl

phVHICdI Env Economm Eiw Lena! Env

Ti'clinuluipcal Env Political Env Cullu'al E'W

           

         
  

  

Other Social
Institutions

Suppliers Customers Government Labor Unions Professional

     

      

   

          
  

 

Business Firms

 

Associations

   
 

Information about Suppliers Availability of General Business Values and Norms
(Marketing Communications) Goods and Services Conditions

    
     

   

II. THE ORGANIZATION (Organizational determinants 01 buying behavior)

THE ORGANIZATIONAL'CLIMATE: PHYSICAL, TECHNOLOGICAL, ECONOMIC. CULTURAL

     

    

ORGANIZATIONAL
GOALS GI TASKS

ORGANIZATIONAL
TECHNOLOGY

  
  
 

    

ORGANIZATIONAL ORGANIZATIONAL
STRUCTURE ACTORS

 
 

       

MEMBERS OF THE
BUYING CENTER

aaoeeoneaaa-eooaaoeoaeealeelooolooaooooo

ORGANIZATION OF
THE BUYING CEN-

TER AND THE PUR.

CHASING FUNCTION

 

eeeeeeeeaaeeeeeaeeaae
TECHNOLOGY

RELEVANT FOR
PURCHASING

   
  
    

   
  

  
 
 
 
   
 
  

    
 
    
  
 
 

 
 
  
 

BUYING TASKS

  
 
  

 
  
   
   
 
       
 

 
 
 
  
 
 

   
 
 

  
 
 
 
 

Technological Member
III. THE BUYING
Constraint”. Group Characteristics
CENTER Tecnnowgv Struclule &G on.

   
 

Available to
(Interpersonal the Group
detevrmnants of

buying behawov)

Leaderoship

         

TASK ACTIVITIES INTERACTIONS SENTIMENTS

 

ACTIVlTlES INTERACTIONS SENTIMENTS

       
  
 
 

GROUP PROCESSES

IV. THE INDIVIDUAL PARTICIPANTS

Moiivalion, Cognitive structure, Personality, Learning process, Perceived roles

  

BUYING
DECISIONS

   

l. Indwidual 2 Grow
BUYING DECISION PROCESS Deri5ion~ DeCISion
Mali ing Unit Making Unit

 

snIIRCE: Frederick E. Webster and Yemen Wind, Jr., "A Genera to .or
standing Organizational Buying Behavior." Journal of Marketing 36 (Am-ilkY 1972): 15.

183

Organizational Influences. The discussion of organizational

 

influences is based on the assertion that organizational buying behavior
is directed and motivated by the organization's goals and is constrained
by its financial, technological, and human resources. This portion of
the model is based largely on Leavitt's (I964) classification of organi-
zational variables as task, structure, technology and people. Tasks are
the work to be performed in accomplishing the organization. Structure
is the subsystem of communication, authority, status, rewards and work
flow. Technology consists of the problem-solving investions used by the
organization including plant and equipment and programs for organizing
and managing work. People are the actors in the system. The relationship
of these four classes of factors is briefly summarized by the authors in
the following statement: "Together, these four interacting sets of fac-
tors define the information, expectations, goals, attitudes, and assump-
tions used by each of the individual actors in their decision making"
(Webster and Wind, l972b, p. l0).

The authors discussed the buying tasks separately as a subset of
organizational tasks which evolve from the definition of a buying situa-
tion. The buying tasks were broken down into five phases: (1) identi-
fication of need, (2) establishment of specifications, (3) identifica-
tion of alternatives, (4) evaluation of alternatives, and
(5) selection of suppliers. These stages are an acknowledged modifica-
tion of the Robinson-Paris (l967) buyphase model previously discussed.
Webster and Wind emphasized that there is little reason to believe that
a universal decision process exists and that because of differences in
organizations, decision makers and the varying importance of the deci-

sions made, logic suggests that every organization might have an

184

idiosyncratic set of buying decision processes which might vary from one
purchasing situation to another.

The Webster-Wind model offers four additional dimensions for defining
the buying task: the organization purpose served--e.g., production or
resale; the nature of demand-~e.g., whether generated internally or exteru
nally to the buying organization; the extent of programming-~e.g., the
degree of routinization in each of the five stage; and lastly, the degree
of decentralization which was considered to be synonymous with the extent
to which buying authority has been delegated to operating levels within
the organization. Each of these was held to influence the buying process
and, therefore, requires consideration in the appraisal of a potential
selling opportunity and the development of a marketing strategy.

The communications subsystem was treated as a collection of subsystems
of communication, authority, status, rewards, and work flow with each
subsystem having task and nontask dimensions.

The communication subsystem was said to perform four essential
functions: (1) information, (2) command and instruction, (3) influence
and persuasion, and (4) integration. Each of these functions was felt
to influence the buying process in terms of: (l) defining roles and
responsibilities in the buying center; (2) definition, evaluation, and
selection of alternatives; and (3) the postpurchase evaluation of supplier
performance.

The authority subsystem defines the power of the actors to influence
the behavior of others in the buying center along both the task and non-
task dimensions. The status subsystem defines the hierarchical structure
of the formal organization and also finds expression in the informal organi-

zation. In addition, the status subsystem will also affect the influence

185

of one actor over others in the buying center. The rewards subsystem
defines payoff to the individual decision maker and is the mechanism
which relates organizational task accomplishment to individual nontask
objectives. The key point made by the authors is that people join organ-
izations in order to earn rewards related to personal goals, both economic
and noneconomic. The work flow subsystem defines the mechanism of the
buying process as well as the path of nonverbal information and samples.
Buying technology defines the management and information systems
that are involved in the buying decision process, such as computers and
management science approaches to decision analysis. It also defines the
plant and equipment of the buying organization which place significant
constraints on the buying alternatives available to the buying firms,

especially in the new product areas.

The Behavioral Theory of the Firm. Webster and Wind argued that

 

“the behavioral theory of the firm" provides an important conceptual

link between the formal organization and the individuals who act in it .
This theory or conceptual approach was developed in the late l950's and
early 1960's by members of the Graduate Faculty of Industrial Administra-
tion at what is now Carnegie-Mellon University. The distinctive contri-
bution of this theory has been the replacement of traditional concepts of
how organizations are supposed to operate based on the classical econo-
mic theory of the firm by explanations of how organizations actually do
operate, based on empirical studies of decision making within the organi-
zation. The basic premise of the theory is that an organization decision
is the execution of a choice, made for the purpose of achieving certain
objectives, from among a set of alternatives on the basis of available

information.

Isa-A

In order to understand these decisions, the developers of this
approach constructed three major subtheories: (l) a theory of organiza-
tional goals, to explain how organizational objectives are formed, (2) a
theory of exceptions that explains the search procedure and information-
gathering behavior, and (3) a theory of choice to treat the organizational
selection of alternatives and the decisions made among them. Cyert and
March (1963) made the most comprehensive statement of this theory. Given
the three subtheories mentioned above, these authors developed a theory
of business decision making which is based on four major propositions.
These propositions are:

l. Quasi-resolution of conflict--the latent conflict
among goals within an organization must be resolved
through finding some kind of consensus among organi-
zational members. Goal conflict is reduced by the
use of the mechanisms of local rationality, accep-
table level decision rules, and sequential attention
to rules.

2. Uncertainty avoidance--organizational actors are
motivated by a desire to reduce uncertainty. This
produces a negotiated environment and contributes
to a tendency to devote attention to short-term
problems, permitting faster feedback of results.

3. Problemistic search-~the search for information is
caused by definition of a problem and is directed
at solving that problem. The direction of search
is from the familiar to the less familiar until an
acceptable course of action is found.

4. Organizational learning--like individuals, organi-
zations exhibit adaptive behavior over time. This
includes adaptation of goals, of attention rules, and
of search rules (Wind and Webster, l972a, p. 10).

Cyert, Simon, and Trow (1956) and Wind (1968a) provide strong research
evidence that the propositions proposed by the behavioral theory of the
firm do apply to the specific case of industrial buyers' behavior. 0f the

many models of organizational behavior, Wind and Webster (1972a) argued

that this theory is the most relevant in explaining industrial buying behavior.

186*3

Social Influences. Three classes of variables were discussed in

 

the social or interpersonal influences section of the Webster and Wind
Model. The were (1) the roles within the buying center, (2) the variables
relating to the dyadic interaciton between persons in the buying center
and between members of the buying center and outsiders such as vendors'
salesmen, and (3) the dimensions of the functioning of the group as a
whole.

The interpersonal interactions section treated three different
aspects of role performance: (1) role expectations, (2) role behavior,
and (3) role relationships. These were said to comprise the individual's
role set. An understanding of the role sets of the individuals in the
buying center was held to be necessary for the salesman desiring to sell
to the organization. The behavior of the purchaisng agent was treated
in terms of the Strauss (1962) study of lateral relationships which has
previously been discussed. The Walton and McKenzie (1965) model of social
negotiations (distributive bargaining, integrative bargaining, attitudinal
structuring, and intra-organizational bargaining) was discussed as a
useful way of thinking about the purchasing agent or buyer as the key

decision maker in the organizational buying process.

Individual Influences. The individual was treated as the center of

 

the buying process since only the individual can, in the final analysis,
define a buying situation, evaluate, decide, and act. This portion of the
model draws heavily on previously developed theory and knowledge in the
consumer behavior field. Discussed in this section of the model were the
individual's personality, role set, motivation, cognition, and learning.

These individual characteristics and mental processes were presented as

187

interacting to produce the buyer's predispositions, preference structure,
and decision models. These three constructs were described as intervening
variables through which all other determinants of organizational buying
behavior influence the individual's decision making. In the discussion

of decision models, emphasis was placed upon the perceived risk model and

upon strategies for reducing risk.

The Shethi Model
Sheth (1973) published a general model of industrial buyer behavior

which consisted of five major elements and their interactions. A schematic

diagram of the Sheth model is presented in Figure 13.
FIGURE 13

AN INTEGRATIVE MODEL OF INDUSTRIAL BUYER BEHAVIOR

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Time Perceived Type of Orgeniutlon Or a ' of n D of
Pressure Risk Purchase Orienietiori 95?; m Centflgefion

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SOURCE: Jagdish N. Sheth, "A Model of Industrial Buyer Behavior,"
Journal of Marketing_(0ctober 1973): 51.

188

The first element of the model was concerned with the psychological
makeup, especially the expectations, of the buying decision makers. While
other departments may also participate as part of the buying decision
making unit, Sheth stated that personnel from purchasing, quality control,
and manufacturing are most commonly involved in the different phases of
the buying process. These individuals were identified in the model as
purchasing agents, engineers, and users, respectively. These individuals
were thought to vary with regard to their expectiations about suppliers
and brands. Expectiations, as used in the model, refere to the perceived
potential of alternative suppliers and brands to satisfy a number of
explicit and implicit objectives in any particular buying decision. The
most common explicit objectives were stated to include, in order of
relative importance, product quality, delivery time, quanitity of supply,
after sale service where appropriate, and price. In addition to these,
Sheth cited a number of studies which pointed out the critical role of
several implicit criteria such as reputation, size, location, and reci-
procity relationship with the supplier, and the personality, technical
expertise, salesmanship, and even the life style of the sales representa-
tive.

A major thrust of the Sheth model is that differences in objectives
and in the relative importance of criteria result in differences in expec-
tations among the buying center members. These differences in expectations
were to Sheth often the root causes for constant conflict among the
buying decision makers. Sheth stated:

In general, it is found that product users look for
prompt delivery, proper installation, and efficient ser-

viceeability; purchasing agents look for maximum price
advantage and economy in shipment and forwarding, and

189

engineers look for excellence in quality, standardi-

zation of the product, and engineering pretesting

of the product (p. 51).

Sheth gave five reasons why buying center members have different
expectations for suppliers and brands. First,,and most important, Sheth
noted that the different backgrounds, especially the educational back-
grounds of purchasing agents, engineers, and plant managers often gener-
ate substantially different goals and values. In addition, the task ex-
pectations also are felt to generate conflicting perceptions of one
another's role in the organization. Sheth also held that the personal
life styles of the decision makers cause differential expectations.

The second and third factors in creating differential expectations
are the source and type of information each of the decision makers is
exposed to and his participation in the active search for information.
Sheth noted that purchasing agents receive disproportionately greater
exposure to commercial sources which often communcate partial or biased
information. This was contrasted with the type of information received
by engineering and production personnel which have less exposure to
information sources and are most likely to have such impersonal informa-
tion as contained in trade reports. In addition, it is frequently the
case that the active search for information is relegated to the purchasing
agent because it is presumed to be his job responsibility.

A fouth factor was the selective distortion and retention of avail-
able information. Sheth drew from cognitive theory to state that each
individual strives to make the objective information consistent with his
own prior knowledge and expectations by systematically distorting. The

fifth factor which creates differential expectations among the various

190

individuals involved in the purchase process was the satisfaction with
past buying experiences with a supplier or brand. The differential
satisfaction comes about because the organization typically rewards each
individual for excellent performance in his specialized task, so the pur-
chasing agent is rewarded for economy, the engineer for tight quality con-
trol, and the production personnel for efficient scheduling. The past
experiences with a supplier or brand directly influences the person's
expectations toward that supplier or brand.

The second major element in the Sheth model indicated factors which
tend to make the purchase decision either autonomously or joint decided.
Three primary product-specific factors were considered relevant by Sheth.
The lesser the perceived risk, the more important the decision, and the
greater the time pressure; the more‘likely the decision will be made by
one individual. Three company specifc factors were also considered
relevant. If a company has a dominant orientation, Sheth held that, in
essence, the decision will be made by persons central to the particular
orientation. For example, Sheth suggested that engineering personnel will
likely dominate the decision making in firms with a highly technical orien-
tation. Second, the larger the corporation, the more likely the decision
making will tend to be joint. Finally, the greater the degree of centrali-
zation, the less likely the decision will be joint.

The third major element of Sheth's model was the joint decision making
process. The inherent conflict between the various functional areas of
business were not seen as bad per se. What is important is how these
conflicts are resolved; if resolved rationally, it is to the organization's
good; but if resolved irrationally, it is detrimental to the organization.

Four types of conflict and conflict resolution methods were discussed.

191

First, if the inter-party conflict is largely due to disagreements on
expectations about the suppliers and their brands, it is likely that the
conflict will be resolved in a problem solving manner such as seeking
additional information. Sheth stated that when the additional information
is presented in a problem solving manner, the conflict is minimized.
Second, if the conflict among the parties is primarily due to disagreement
on some specific criteria with which to evaluate suppliers, although there
is an agreement on the buying goals or objectives at a more fundamental
level, Sheth held that resolution is most likely the result of persuasion.
Through the use of persuasion an attempt is made to change a dissenting
party's position by pointing out the importance of overall corporate objec-
tives and how his criterion is not likely to attain these objectives.
Sheth contended that both problem solving and persuation are useful and
rational methods of conflict resolution and so the resulting joint deci-
sions tend to be rational.

A thrid, and according to Sheth, common situation is one in which
conflict arises due to fundamental differences in buying goals or objec-
tives among the various buying center members. In many cases the conflict
is not resolved by changing the differences in the relative importance of
the buying goals or objectives of the individual involved, but by the
process of bargaining. In these situations Sheth stated that a common
outcome is to allow a single party to decide autonomously in a specific
situation in return for some favor or promise of reciprocity in future
decisions.

If the disagreement is met simply with respect to buying goals or
objectives but also with respect to style of decision making, Sheth said

that conflict tends to be grave and borders on the mutual dislike of

192

personalities among the individual decision makers. Sheth noted that the
resolution of this type of conflice is usually by politicking and by using
back-stabbing tactics. The previously discussed Strauss (1962) study was
cited in support of the assertion that such tactics are common in indus-
trial buying. Sheth concluded that both bargaining and politicking are
nonrational and inefficient methods of conflict resolution and therefore
the organization suffers when conditions arise where these methods are
used.

The fourth and final major element in the Sheth model discussed the
critical role of situational factors. About these factors Sheth stated:

The model described so far presumes that the choice
of a supplier or brand is the outcome of a systematic
decision-making process in the organization setting.
However, there is ample empirical evidence in the liter-
ature to suggest that at least some of the industrial
buying decisions are determined by ad hoc situational
factors and not by any systematic decision-making pro-
cess. In other words, similar to consumer behavior,
the industrial buyers often decide on factors other
than rational or ralistic criteria.

It is difficult to prepare a list of ad hoc condi-
tions which determine industrial buyer behavior with-
out decision making. However, a number of situational
factors which often intervene between the actual choice
and any prior decision-making process can be isolated.
These include: temporary economic conditions such as
price controls, recession, or foreign trade; internal
strikes, walkouts, machine breakdowns, and other pro-
duction-related events; organizational changes such
as merger and acquisition; and ad hoc changes in the
market place, such as, promotional efforts, new product
introduction, price changes, and so on in the supplier
industries (pp. 55-56).

Shethe concluded his model presentation by suggesting the implications,
especially areas of further research, which are needed in general and to

validate his model. With respect to the situational factors, Sheth stated:

193

There are some industrial buying decisions which are

based strictly on a set of situational factors for which

theorizing or model building will not be relevant or use-

ful. What is needed in these cases is a checklist of

empirical observations of the ad hoc events which vitiate

the neat relationship between the theory or the model and

a specific buying decision (p. 56).
The Hill and Hillier' Model

Hill and Hillier (1977) presented an approach to industrial buyer
behavior based on a general review of the industrial buying literature
and on their previous conceptualization or the process, especially Hill
(1972) and Hillier (1975).

The buying process was divided into three component parts:
1. The decision processes and the sequential buying stage in time
2. Factors likely to affect the behavior of individuals and groups of

individuals involved in the purchase decision.
3. Possible functional areas in a firm likely to be involved in the buying
center

The decision process discussion was based on Hillier's three-year
study of forty-six purchases in seventeen British organizations. Three
decision processes were identified. The first process was an individual
decision process which individuals undergo when purchasing products. This
process included such activities as problem recognition and the evaluation
and selection of alternatives. The second buying decision process was
interorganizational and included the give and take between buyer and seller
organizations. The third decision process took place inside the buying firm
and involved group decision making among the members of the buying center.

Several buying stages were presented, but one not previously present

was a ten-stage process based on Hill's synthesis of the literature in this

area. The ten stages were described as the following:

194

(l) Anticipation or recognition of a problem and a general
solution
(2) Determination of characteristic and quality or needed
items
(3) Description of characteristic and quality of needed
items
(4) Determination of whether to make or buy
(5) Search for and qualification of potential sources
(6 Acquisition and analysis of preposals
(7 Evaluation of proposals, negotiation, price, perfor-
mance parameters
(8; Selection of supplier, placing partonage
9 Selection of an order routine
(10) Performance feedback and evaluation payment for
goods (Hill, 1972, p. 52).
The length of time for going through these stages was considered to
be a function of three factors: (1) the complexity of the product, (2) the
complesity of the commercial negotiations, and (3) the behavioral complexity
of the human interactions.
The second part of the Hill-Hillier approach focused on the factors
affecting purchasing decisions. First of these factors was the reason
for purchase. This is in Swallow's (1969, 1970a, 1970b) work that indi-
cated that the following types of buying situations have different internal
and external pressures and exhibit different behavioral patterns: (1) buy-
ing for production, (2) buying for resale, (3) buying capital plant and
equipment, and (4) buying for maintenance and R&D. The second influence
factor was the novelty of purchase which was considered to be synonymous
with Robinson and Faris's buyclasses. The degree of perceived essentiality
was held to affect the purchase decision, with more essential products more
likely to undergo the full ten-step process. Organizational factors such
as (l) the type of ownership and objectives of the company, (2) the
methods of controlling expenditure, (3) policies on reciprocal trading
and (4) the techniques of buying employed were considered to be of key

importance but were not explained by the authors. Environmental trade

195

barriers such as the economic boycott against Rhodesia, international
tariff barriers, and governmentally imposed national product preference
policies, which are common not only in developing countries but which

have also been adopted by such developed countires as Canada and France.
Another important environmental factor identified was the general busi-
ness conditions. Based on Guillet de Monthoux's (1973) research with
manufacturing companies in Sweden, the authors concluded that there is
evidence to suggest that environmental factors can affect both the degree
of formalization of the buying process and the mix of individuals involved
in the buying center. The study by Monthoux's research indicated that

the degree offbrmalization of the buying process within the buying firm
seemed to increase in times of a recession. The research also indicated
that production department appeared to have more influence in an expanding
economy while the influence of the marketing department increased in times
of a recession. 0f the psychological and sociological factors considered,
personality and perception of suppliers were thought to be especially
important.

The third and last part of the Hill-Hillier model was concerned with
the buying center and the functional areas of the firm represented in it.
The buying center was thought to be most often composed of individuals
from purchasing, individuals from the user department and other individuals
who are considered to be important because of the technical information
they possess or because they exert some control function in that they regu-
late some relevant aspect of the purchase decision such as coordinating
reciprocal buying relationships.

An atomic approach to studying the buying center was presented. In

the nucleus of the decision model is the project team or central buying

196

unit. The primary shell surrounding the nucleus consists of those
individuals exerting the primary constraints on the nucleus by taking
broad outline and/or policy decisions with respect to the purchase.
This was said to consist of senior management and was seen as a control
unit. The secondary shell consists of those individuals consulted either
for the expertise they possess or because they must be informed of the
purchasing situation. Members of this shell exert a secondary constraint
and were termed the internal information unit. The third shell or exter-
nal information unit consists of those organizations whose opinions, in-
formation, and decisions might influence the decisions taken by the central
buying unit. This shell would include consultants, competitors, suppliers,
customers, distributors, and governmental agencies.
Recognition was made that certain departments may have a dominate role
in the decision process. Factors of product complexity and commercial
uncertainty were considered as they related to the dominance of one parti-
cular viewpoint in the buying decision.
The degree of prodUct complexity measures the relationship of the pro-
duct technology and the existing technical knowledge of the buying firm.
Commercial uncertainty refers to the degree of perceived business risk and
its impact on future company profits. The following pattern was suggested

as an outcome of the interactions of these two factors.

197

TABLE 5
PATTERN 0F BUYING DECISIONS

 

 

 

 

 

Product Complexity
Low High
Commercial Low Buyer Technologist
Uncertainty Emphasis Emphasis
High Policy Maker Total
Emphasis Involvement

 

 

 

 

SOURCE: R.W. Hill, ”The Nature of Industrial Buying Decisions," Industrial

 

Harketing Management 2 (1972): 53.

 

The Exchange Model

 

In the late 1970's a new conceptualization of industrial buyer beha-
vior emerged based on exchange theory as developed in social psychology.
The idea of exchange or transaction goes back, or course, to the founda-
tions of classical economics, and some of the earlier marketing scholars
approached marketing from not the seller's but rather the consumer's
point of view. Duddy and Revzan (1953), for example, took this approach.
Undoubtedly, however, renewed interest in the exchange approach was largely
generated by Kotler and Levy and their doctoral students at Northwestern
University through publications advocating that marketing be broadened to
include exchanges other than commercial products and services (Kotler
and Levy, 1969, 1973, Kotler, 1972a, l972b, 1975). Bagozzi (1974, 1975)
advocated including even indirect exchanges of intangible things of value.

Most of the applications of the exchange concept to industrial buying

198

have been made by Zaltman, Bonoma and Johnston of the University of Pitts-
burg. Specific publications using this approach include: Johnston and
Bonoma (1977, 1978), Bonoma and Johnston, (1978), Zaltman and Johnston
(1978), Bonoman, Bagozzi and Saltman (l978), Bagozzi (1978), and Hakansson
and Wootz (1979).

The most concise presentation of this new conceptualization is found
Bonoma and Johnston (1978). The authors began by challenging what they
considered to be assumptions of traditional research and management appro-
aches to industrial buyer behavior:

Assumption.l. Industrial buying behavior may be studied in

isolation from other industrial marketing (e.g., selling)_

behaviors as action taken by a separate individual or indi-

viduals in the firm.

Assumption 2. The "correct" approach to examination of

the buyer's behavior in inustrial purchasing is thorugh

a Stimulus-Response (S-R) model.

Assumption 3. The key theoretical processes occurring in

industrial buyer behavior are rational decision-making,

including decision Optimization, strategic choice processes,

and information processing.

Assumption 4. Industrial buying phenomena are distinctly

different from buying processes which occur in the end

consumer market (pp. 214-215).

Assumption No. 1, called the separation assumption, was said to be
the assumption, "most inhibiting to the advancement of industrial market-
ing knowledgw" (p. 215). This assumption was challenged on the grounds
that it is reductionistic, that is, it takes a rich and complex problem
and breaks it down into its component pieces. To the authors, separating
a transaction into reactive bits is often "unproductive and lead to
spurious conclusions." In addition, the authors offer two other challenges:

By using the single unit of analysis, many of the

relational parts of the processes are lost to description,
explanation, and management control.

199

Social behavior, by definition, is not performed in

isolation as a single unit. The most important variables

in social science are those of a transactional or inter-

dependent nature (p. 216).

Bonoma and Johnston contended that the second assumption, the stimulus-
response assumption, views industrial buyer behavior as reactional rather
than transactional. By using the S-R model, the authors felt that the
interactive-adaptive aspects of industrial buying were being ignored.

The authors challenged the third assumption on the grounds that there
is nothing inherent in the industrial purchasing process that demands the
assumption of buyer rationality or economic optimization in this market
any more than in consumer behavior. In addition, in discussions with
purchasing managers the authors stated that they had consistently found
that the major factors influencing the industrial purchasing decision were
social ones, especially friendship and reputational factors, rather than
economic factors.

Although noting some fundamental differences in consumer and indus-
trail marketing, such as promotional methods and reciprocity, the authors
contended that the differences between consumer buying and industrial
buying (assumption no. 4) might be very similar depending upon the inter-
active setting in which they take place.

The authors concluded from the above discussion that, if one accepts
the study of marketing as a social science or as a social problem area,
then the single unit of analysis model and the stimulus-response model are
inappropriate for the study of industrial buyer behavior.

Bonoma and Johnston offered two conceptual approaches as alternatives
to remedy the deficiencies of previous models. First they discussed a

dyadic approach which is diagrammed in Figure 13.

210

FIGURE 14

EXCHANGES IN INDUSTRIAL MARKETING
AND PURCHASING INTERACTIONS

 

 

 

 

 

 

 

 

    
      
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SOURCE: Thomad V. Bonoma and Wesley J. Johnston, "The Social Psychology

of Industrial Buying and Selling," Industrial Marketing Management 7
(1978): 216.

The dyadic model requires the smallest unit of analysis to be a
socially meaningful unit; two parties such as two persons, two firms or
two industries. The most important variables are the relational variables
of the two parties, e.g., trust and cooperation. The most meaningful

variables are the exchanges which take place between members of the dyad.

211

While only relational variables are explicitly included in the model in
Figure 14, Bonoma and Johnston would allow the inclusion of other varia-
bles of which there is general understanding. The model could include
situational variables, but the authors noted that these would be used
largely to support and understand the relational variables. For Bonoma
and Johnston, situational variables would not be the key constructs

(p. 216).

The model highlights five exchanges in industrial marketing. First
is the relationship between the sales representatvie and the purchasing
agent which involves and exchange of information and help in problem
solving on the part of the seller for credit for the specific sale given
by the buyer. Freiendship, trust, and cooperation were viewed as varia-
bles that can develop in a positive interactfion between buyer and seller.
Conflict between the buyer and seller was also viewed as a common varia-
ble but just how conflict is resolved in different circumstances was
expressed to be a much needed area for future research.

The second exchange occurs when the sales representative exchanges
sales efforts with the selling firm for a commission/salary. Recognition
and praise were viewed as being exchanged by the selling firm for loyalty
on the part of the salesman.

Third, the purchasing agent exchanges his talents and abilities of
buying and problem solving with his company for money, usually a salary.
Status is exchanged with the purchasing agent in return for loyalty.
Bonoma and Johnston noted that if the rewards the buying company is wil-
ling to exchange with the purchasing agent seem insufficient to the
purchasing agent, he may look elsewhere for more rewarding exchanges by

moving to another company or by seeking to increase the rewards that

212

accrue by accepting benefits from interested sellers.

Fourth, images of the buying firm are held by the sales representative
while the purchasing agent likewise holds feelings and images about the
selling firm. It was noted that purchasing agents' images of salesmen
and selling firms has received much attention by researchers, but sales
representatives' images of purchasing agents and of buying firms has
attracted relatively little research attention. While this part of the
model is obviously true, the authors do not explain what is exchanged
between these parties although it is listed as an exchange relationship.

The fifth and last exchange relationship included in the model occurs
between and selling firms where the product/service is exchanged for
money or credit. This exchange may be regulated by reciprocal trade rela-
tions agreements between vendor and buyer firms.

The second model presented by Bonoma and Johnston was called a power
systems model. This view of the marketing/purchasing interaction would
require all parties involved in the process as well as the social system
in which they are embedded to be considered. Any change in one of the
participants would bring about changes in other participants or, as the
authors stated, "for every action there could be multiple reactions"

(p. 218).

The model is based on three power relationships which may exist bet-
ween buyers and sellers. The unilateral power system in which a strong
party imposes influence on a weaker party is the first possible system of
interaction. The mixed power system in which two parties bargain to
agreement or deadlock is the second possible power relationship. The
third relationship is one in which interactants form unit relationships

and formulate joint policy programs. The authors proposed that power,

213

conflict, cooperation and trust are the major relationships of interest,
and that these require substantially different interpretations andtreat-
ment in each of the three interactive systems.

The power system reactions in industrial marketing are summarized in
Table 6. Bonoma and Johnston held that interactions occuring within
the unilateral power system are not very common in industrial marketing.
The reasons given why this power system is not commonly found was that
seldom is an industrial seller or buyer significantly more in control
of a resource. An example of this relationship would be the OPEC members
oil producing and marketing strategy where a price is fixed and buyers
have no alternatives. The authors noted that since cartels are illegal
in the U.S., such occurances are relatively rare. This type of power
relationship was felt to occur in shortage economies and in exclusive
dealership situations. For the marketer who enjoys a unilateral position
vis-a-vis his buyers, the authors suggested that the marketing task is
largely one of market maintenance and discouragement of competition.

A more typical power relationship is the mixed power situation where
the buyer and seller both approach equality of resource control and thus
are functionally equivalent in power. In this situation bargaining or
negotiation is used to effect exchange. In this situation, which the
authors felt was most prevalent today, the marketer was encouraged to:
(1) gain a repuation as being fair and bargaining in good faith, (2) main-
tain good customer relationships,,and (3) develop strong bargaining/
negotiating skills.

The third and last power relation is one in which the members of the
market consider themselves as a functional unit and place maximum utility
of the unit's welfare above the satisfactions of any one member. The

authors felt that three subtype5irfthis bilateral relationship could

214

TABLE 6

POWER SYSTEM INTERACTIONS OF INDUSTRIAL MARKETING

 

Mixed (Bargaining)

 

Unilateral Power System Power System Bilateral Power System
System Seller-elnfluence Attempt-oauycr Sellers—raw“ Sellers—#Buyer
strucmre Stimulus—akesponse Interactive dyadic process 1
Exchange system Third Party
(other market)
Group Welfare
Example Purchme of oil or other scarce Purchase of plant. machinery Purchase & sales by farm co-ops
product/service Hospital buying group
Buyer/seller Seller more powerful Buyer & seller operationally Group welfare stituation
relationship Primarily competitive equivalent in power power irrelevant
Goals basically divergent Bargaining a negotiation Bonded by economic organiza-
Compctitive a cooperative tional aspects
orientation
(Mixed)
Seller's Production Marketing Mutual Problem solving with
orientation other group members

Buyer's choice
criterion

Agreement
ratification
procas

Legitimization/
emalmuwu

Marketing
stntegy for the
industrial

categories

Price. quality. service need
satisfaction

Physical exchange of goods for
money

Legal System (seller)
Caveat Emptor (buyer)

Modest expenditures for promotion
Skim pricing

Limited distribution

Market maintenance activities
Discouragcmcnt of competition

High impornncc needs
Emergency items
Specialty products

Most favorable exchange ratio

Lowest reliable bid

Long range benefits of
interaction

Mutual (formal) contract

Professional norms & rules of
. .0“

Legal system (both parties)
Wombat-mouth to industry
Reliance on professional norms
& rules

Gain reputation for “fair" deals
and bargaining in good faith

Maintain good customer rela-
tionships

Develop strong bargaining]
negotiation skills

Major purchases

Unique (made to specifications)
purchases

Maximization of group‘s welfare

Consensus of the group

Threats to terminate relationship

Develop a consolidated strategy
with high group cohesiveness
for presentation to 3rd parties

All types where coalition forma-

tion & group purchasing!
selling is possible

 

SOURCE: Thomas V. Bonoma and Wesley J. Johnston,

of Industrial Buying and Selling,"

(1978): 219.

"The Social Psychology
Industrial Marketing Management 7

215

deveIOp: (l) a buyers' welfare system, (2) a sellers' welfare system
and (3) a buyer-seller system. An example of a buyers' welfare system
is a cooperative or consortium where organizations form buying groups
and purchase materials in large lots to receive price discounts which
are later divided between members at costs no one member could achieve
alone. The authors noted that arriving at a joint utility function must
involve mutual problem solving and only if a joint accord can be reached
can the power of those in the welfare system be increased. Should a
particular group member be unable to endorse the consensus reached by
the group, his only alternative is to leave the group. The authors gave
no advice on how to market in these welfare situations.

In concluding, the authors stated that the adoption of these models
would result in more coherence and parsimony would be added to explana-
tions of industrial buying. They likewise saw the difficulties in explan-
ation and prediction as bidirectional relational variables are introduced

to be researched.

A Synthesis of the Industrial Buying Literature
Major Research Trends

Numerous attempts have been made to summarize the research and theory
of industrial buyer behavior. The most comprehensive of these articles,
and consequently the most helpful in tying together the writings in this
area of marketing, are the following: Feldman and Cardozo (1967 and l969),
Webster (l969), Wind and Webster (1972), Wind (1973), Sheth (l976),
Nicosia and Mind (l977), Zaltman and Bonoma (l977) and Ferguson (l979).
When these summary articles are examined together with the reviewed
research studies, essays and models, the general trends and directions

of industrial buying can be traded.

216

Early research in industrial buying was primarily concerned with
discovering what motives industrial buyers (Copeland l925, Reed l936,
Duncan 1940). while these early studies stressed the economic rationality
of the buying decision makers, later studies more fully explored the impor-
tance of emotional or noneconomic factors. Examples of these latter
studies include Siebert (l955), stressing the reassurance of buyer ade-
quacy; Duncan (l966), stressing the buyer's status seeking behavior; and
Lazo (1966), emphasizing the buyer's extreme aversion to risk. Very close—
ly related to these motivational studies were studies which sought to
identify the criteria used by buyers in their decision making. These will
be discussed later with respect to buyer decision making.

Duncan (l940) recognized that multiple buying influences were common
in industrial buying and that variations in the training, experience,
and points of view of the different functional managers involved in the
purchase decision led to distinct buying motives. Recognition of multiple
buying influence appears to have been widespread by the early 1950's
(Lewis, 1950,. the American Marketing Association, l95l) and by the early
1960's these influences were being researched (Walsh l96l) and incor-
porated in industrial marketing texts (Alexander, Cross and Cunningham
196l). Recognition of the existence of multiple buying influences led to
research which sought to identify the various buying decision makers.

J.H. Platten's study for Scientific American (Flatten l950) attempted to
determine the importance of the various corporate departments in the
purchase decisions of raw materials, components, and equipment in a cross
section of American industry. The research interest of studying the roles
and influences of nonpurchasing personnel in buying decisions was continued

in the l960's (Harding l966, Weigand l966, Lister l966, Grover l966) with

217

Weigand (1968) being the article which perhaps stimulated the most sub-
sequent research by creating an awareness of the limitations inherent in
focusing research solely on the purchasing agent.

The behavioral theory of the firm (BTF) which was developed in the
late 1950's and early l960's (March and Simon, 1958; Cyert and March,
1963) was shown to have applications in the study of industrial buying
(Cyert, Simon & Trow, 1956; Wind, 1968). The BTF influenced the study
of industrial buyer behavior with each of its four principal propositions.
The theory's quasi-resolution of conflict provided a conceptual base for
studying the relationships among the industrial buying decision makers.
Three of the more important studies which looked at these relationships
are Strauss (1962) which studied the tactics used by purchasing agents
to influence their relationship with other departments; Strauss (1964)
which focused on workflow frictions, interfunctional rivalry, and the
purchasing agent's quest for status; and Patchen (1974) which dealt
with the locus and basis for influence in industrial purchase decisions.

The recognition of the existence of multiple buying influences also
led to the development of the buying center (BC) concept by Wind in 1967
(Wind, 1967a). The buying center was conceived as an informal or ad hoc
group whose members might perform the roles of influencer, user, decider,
buyer or information gatekeeper. Numerous studies have focused on mea-
suring selected attributes of individuals likely to participate in buying
centers, especially purchasing agents and engineers. Such buying center
studies include: McMillan (1973a) which examined the perceived influencer
and responsibility in buying decisions of purchasing agents, managers,
and scientists; Lambert (1976) which studied post decision self confidence

levels of purchasing agents and engineers; Spekman and Ford (1977) which

218

studied perceived uncertainty among BC members; and Cooley, Jackson, and
Ostrom (1977) which studied the relative power among BC participants.

Webster (1965), adopting the problemistic search proposition of the
BTF, was one of the first writers to present industrial buying as a prob-
lem solving process. The eight buyphases of the Robinson and Faris model
(Robinson and Paris, 1967) is one of the most frequently cited processes
in the literature. While many authors have offered their interpretations
of the problem solving process (Webster and Wind, l972a, Hill, 1972),
interest in the determining of a specific decision process that determines
buyer behavior has waned apparently because as Wind and Webster (1972a)
stated: "We do not know nor can we know whether consumers really follow
the stages suggested in the (decision process) model" (p. 12).

Another line of research began in the late 1960's concerned buyer
uncertainty reduction and the perceived ridk Concept. The uncertainty
avoidance proposition of the BTF was conceptually related to studies of
industrial source loyalty (Wind 1966, 1970) and need uncertainty (Hakan-
sson, Johanson, and Wootz, 1975). The industrial studies of perceived
risk are applications of the perceived risk concept as developed at
Harvard during the 1960‘s (Cox 1967a). Studies of perceived risk and
industrial buying include: Copley and Callom (1971) which studied associa-
tions between perceived risk and information search; Sweeney (1972) and
Sweeney, Mathes and Wilson (1974) which investigated the risk reducing
behavior of industrial buyers; McMillan (l973b) which studies the risk
perceived from potential supplier‘s product, salesmen, and company; Monoky
(1973) and Monoky et a1 (1975) which investigated the relationship between
perceived risk and buyclasses; and Newall (1977) which studied perceived

risk and source loyalty.

219

The perceived risk concept is conceptually related to two lines of
research concerning information sources since the seeking of information
is a risk reduction strategy. The first of these two research areas
concerned the use of certain sources of information such as word-of-mouth
(Webster, 1968b; Martilla, 1971; and Czepiel, 1974) and exhibitions
(Cunningham and White, 1974a). The second area of research investigated
the credibility of information sources (levitt, 1965, l967a, 1967b; Capon,
Holbrook and Hulbert, 1972; Khera, 1968; Khera and Benson, 1970; Kelly,
1972 and 1973; and Kelly and Hensel, 1974).

In the 1970's the individual decision maker again became the focus
of much industrial buying research. Few articles dealt with learning
(Lambert, Dornoff, and Kernan, 1977), personality (Reddy, 1971) or role
set (Gorman, 1970, 1971). The majority of the research on the decision
maker centered on information processing (Stiles, 1972; Luffman, 1974a
and 1974b; Crow, 1975; and Sweitzer, 1976) and decision style (Parkett,
1969, 1971, 1972; Wilson, 1970, 1971; Wilson and Blair, 1971; Cardozo
and Cagley, 1970, 1971). The area of buyer decision making which has
been the subject of the greatest number of research studies is the sup-
plier evaluation criteria used by buyers. Two trends were evident in
the researching of this tapic during the 1970's. The first series
studied the congruence of attribute ratings among members of the buying
center or among buyers and sellers or among different types of buyers
(Kiser, Rao, and Rao, 1974a, 1974b, 1975; Pingry, 1972; McAleer, 1971,
1974; King, 1977). The second trend was to investigate the importance of
specific marketing variables in patronage decisions. Illustrative of
these studies are Kelly and Coaker (1976a, 1976b) which investigated the

importance of price; Cunningham and Roberts (1974) which studied the

220

importance of customer service; Perreault (1973) and Perreault and Russ
(1976) which focused on physical distribution service; and Mathisen (1977)
which studied the importance of logistics in different market segments.

Research on interorganizational aspects of industrial buying behavior
has tended to focus on one of three areas. First, studies have investi-
gated dyadic relationships (Evans, 1963; Tosi, 1966; Arora, 1975; and
Alessandra, 1976). Second, selling influence tactics have been studied
(Kotler and Levy, 1970; Capon and Swassy, 1977; and Hakansson, Johanson
and Wootz, 1977). Reciprocity is the third interorganizational area
focused on by researchers (Stocking and Mueller, 1957; Ammer, 1962;
Dauner, 1967; Gravereau and Kon0pa, 1970; Meyer, 1970; Bird and Shepard,
1973; Weigand, 1973 and Finney, 1976).

Reciprocity might be considered to be a situational variable in that
there are certain conditions conducive to reciprocal trading agreements
and firms may or may not be involved in such agreements depending upon
whether these conditions are present. If reciprocity is considered to be
an interorganizational influence, a paucity of research exists on the
situational and/or environmental buying influences even though they are
important components in some models (Webster and Wind, 1972; Sheth,
1973). The two studies representing these influences are Skinner (1967)
which investigated procurement problems in developing countries and
Hutchin (1975) which studied the Canadian government's influence on pur-
chasing policies.

Finally, there also appears to be few essays or reported research
findings concerning interrelationships between different types of influ-
ences, e.g., between personal and organizational influences. Studies

which have examined aspects of different types of influences include:

221

Kernan and Sommer's (1966) behavioral matrix which integrated perceived
personal and institutional role commitment; Wind (1966, 1971) which exa-
mined decentralization and buyer motivation; and Monoky (1973) which stu-
died the relationship between perceived risk and buyclasses.

Having identified the major trends in the industrial buying literature,
the object of the following section is twofold. First, a synthesis repre-
sentative of the current state of knowledge in each of the researched
areas of industrial buying is presented. Second, relevant areas for

future research are identified.

Buying Influences, The Buying Center, Conflict Resolution
Numerous studies have established that industrial buying responsibility
is diffused across several departments. In one of the largest surveys

of industrial buying, the Scientific American, Inc., study, How Industry

 

Buys/1970, identified six management areas with primary buying responsi-
bilities. Purchasing appeared to have three primary duties: (1) to keep
in touch with market prices, (2) to find out who makes specified pro-
ducts, and (3) to select a supplier after the supplier's product had been
approved by the technical personnel. These generalizations were true for
materials, components and equipment purchases. Research and development's
main role was perceived as examining the feasibility of exploiting newly
developed materials, although it shared this responsibility with design

and development engineering. Production engineering and design and develop-
ment engineering dominated the motivations for the purchase of both mater-
ials and components. The initiative for purchases of equipment came from
policy and planning, operations and administration, and production engi-

neering. In the determination of the kinds of materials, components, and

222

equipment and in the verification with standards production engineering
and design and development engineering were felt to share the main deci-
sion responsibility.

While these departments may have the responsibilities outline above,
the buying center has come to be accepted in principle as the answer to
the question, "Who makes the buying decision?" In spite of this accep-
tance, the lack of utilization of the concept in industrial selling led
Wind himself to ask, "Is the buying center concept viable?“ (Wind, 1978,
p. 75). Wind suggested that two interrelated reasons may account for the
lack of practical utilization of the concept: (1) definitional short-
comings due to the ambiguity of the original definition, and (2) methodo-
logical difficulties in identifying the members of a buying center and
assessing their roles and influence (Wind, 1978, p. 68). While the first
problem may be formidable, researchers have generally been able to 'track
down' members of a buying center post hoc by a multistep process which
involves: (l) asking the purchasing agent who made specific decisions on
a specific purchase, and (2) asking all the individuals mentioned in
answering the previous question the same question again. On the other
hand, the methodological difficulties appear to have been a real deterrent
in studying buying centers. Most of the studies involving buying centers
have been post hoc studies and, therefore, have required decision makers
to precisely remember aspects of purchases which they might have paid
little attention to when the purchasing decisions were being made. A
common problem is bias in self-reported measures of influence and respon-
siblity (Weigand, 1966; McMillan, 1973b). In addition, there is evidence
from Patchen (1974) that respondents find it most difficult to assess

which individual or role position had the most influence on specific

223

buying decisions. In addition, most of the buying center studies to
date have utilized surveys but few have also incorporated such obser-
vational techniques as protocol prodecures or unobstrusive measures
such as correspondence content analysis which would greatly assist in
determining the validity of the survey results.

Another problem related to the buying center concept and central
to Sheth's (1973) model concerns the differences (in specialized educa-
tion, role orientation, motivation, among others) among decision makers
and the effect that these differences have on the patronage decision.

In the few studies that have researched differences among members of buy-
ing groups, there is little to indicate that the effect of the differ-
ences are as great as Sheth indicated. The results of these studies are
now considered.

Purchasing agents appear to be more concerned with uncertainties exter-
nal to both the firm and the buying center, while users appear to be more
concerned with uncertainties internal to the firm which impact upon day
to day activities (Spekman and Ford, 1977). Although this finding is
based upon the interpretation of a discriminate analysis, it is consis-
tent with the primary areas of decision making for purchasing agents
indentified in How Industry Buys/1970.

McMillan (1973a) found that of the three role positions of scientist,
manager and purchasing, scientist had significantly greater specific self
confidence. In the event of problems with a purchase, managers perceived
the greatest risk, followed by scientists and purchasing agents. This
perhaps can be explained by the fact that both the purchasing agent and
the scientist are more likely to receive risk reducing information than

managers.

224

In another study, no significant differences were found to exist
between purchasing agents and engineers when measuring post-decision
self confidence (Lambert, 1976). Perhaps the most surprising and the
most important finding is that a high degree of congruence on supplier
attributes has been found to exist among several different functional
roles and influences (McAleer, 1971, 1974; Pingry, 1972; Kiser, Rao, and
Rao, 19742, 1974b, 1975). This high degree of congruence would tend to
make less likely the conflict given so prominent a place in the Sheth
model.

When conflict does occur, how is it resolved? Both Webster and Wind
(1972b) and Sheth (1973) speak of the types of social negotiations and
methods of conflict resolution that may take place. Patchen's (1974)
research suggests that a constructive, problem solving approach is most
often employed in resolving conflicts. In that study the most common
method of conflict resolution was obtaining more information or further
analyzing the available data. Other frequently mentioned methods sugges-
ted a frequent emphasis on reaching consensus, as indicated especially
by the references to meetings, discussions and obtaining consensus. In
contrast to these constructive methods are the methods used by purchasing
agents as described in Strauss (1962). Although these findings have been
called impressionistic the idea that a person in a key role can almost
singlehandedly determine the outcome of an important purchase is supported
by Pettigrew (1975). It appears that more research is needed to better
understand conflict resolution in joint decision making. In examining
conflict resolution, insight could be gained by jointly studying the
source of the conflict such as differences in goals, risks perceived, or

personalities together with the method of resolution.

225

In summary, functional assignment of buying responsibility has
basically been determined. The most influential decision makers appear
to be those who have some stake in the purchase either as users or because
of organizational responsibility and those who possess some special exper-
tise (Patchen, 1974). The role of information gatekeeper has been shown
to be important throughout the decision process and not just in identify-
ing buying alternatives as suggested by Webster and Wind (Pettigrew, 1975).
The buying center concept suffers from problems relating both to defini-
tional ambiguity and methodological difficulties in application. Some
important conceptual issues relating to the buying center which need
clarification are the following: What is the proper definition of involve-
ment to be included in the buying center? Should individuals outside the
firm such as advertising agencies and public accountants be included in
the buying center? Does the buying center operate as a group making
group decisions or as a single decision maker influenced by other members
of the center? It has been suggested that purchasing has significantly
more influence in smaller organizations than in larger ones. This sug-
gests that organization characteristics need to be studied jointly with
buying centers to gain more understanding of these interrelationships.
Finally, it is suggested that methods of conflict resolution and factors
which lead to autonomous and joint decision making need more study to

validate existing models of buying behavior.

The Industrial Buying Process
Industrial buying is generally accepted as being an organizational
problem solving process which is initiated in anticipation or recognition
of a need or problem. The authors differ in the‘number of steps or phases

which should be included in the industrial decision process. The BTF

226

condenses all decision making into the two interdependent activities of
search and choice. Webster (1965) included four decision steps. Robin-
son and Paris (1967) advocated eight phases. Hill (1972) added two more
phases to the Robinson and Paris buyphases and Webster and Wind (1972a)
felt that the general process could be represented in a five-phase pro-
cess. There are not as many differences in these models as the differing
number of phases might indicate. The models are collapsible or expand-
able to be expressed most concisely in Webster and Wind's (1972a) five
phases of: (1) need identification, (2) establishing objectives and
specifications, (3) identifying buying alternatives, (4) evaluating
alternative buying actions, and (S) selecting the supplier. The Robinson
and Paris and the Hill models add an additional step of performance feed-
back and evaluation, although there is evidence to suggest that such
feedback is not routinized and only results if for some reason the product
does not meet up to expectations.

As Webster and Wind (1972a) noted, despite the intuitive appeal in
favor of these similar descriptive models, there is no way to identify a
'time' decision making process of universal applications. Further because
of organizational characteristics, changing compositions of buying centers,
and different buying situations, it is unlikely that such a universal
decision models is that they aid marketing strategists in developing ap-
propriate marketing strategies for the general decisions common to most
decision processes. For example, Grnhaug (1977) found that all of the
small firms in his study experienced a sudden need perception for computers.
This suggests the necessity of computer manufacturers being able to respond
quickly nameet the needs of the small potential clients. Luffman (1974a,

1974b) found that the reason for need recognition may affect the vendor

227

choice. When the process was begun due to the introduction of a new
component, no new suppliers were chosen. However, in every case when the
problem was dissatifaction with current suppliers, new suppliers were
ultimately selected. Understanding what brings about the problem recogni-
tion may then aid strategist in assessing how much effort should be put
into gaining or maintaining accounts.

There is evidence that not all of the buying decision phases outlined
above are present in some purchases. For almost one-third of the buyers
of machine tools, Cunningham and White (1974b) found the decision process
to consist of two steps: need recognition and order placement. Reasons
given for not taking competitive bids included maitenance, facilitations
of purchasing the same brand as current machines, the lack of technical
capability to evaluate bids, and source loyalty. Bubb and Van Rest (1973)
identified eight factors which, when present, would likely result in only
a few of the buying phases being present in the decision process.

Robinson and Faris (1967) recognized the differences in buying situa-
tions and created the three buyclasses in response to these differences.
Although the buyclass framework has been employed in several research
studies, only recently has it been empirically tested. Doyle, Woodside,
and Mitchell (1979) found differences between new task/modified rebuys and
straight rebuys for the following variables: (1) length of time of buying
process, (2) the number of participants in the buying center, (3) the
source of contact of suppliers, (4) the initiator of the need to buy,

(5) concession limits, and (6) the reason for supplier contact by custo-
mers. No large differences were found between the types of buying situa-
tions for: (l) the composition of the buying center and (2) the post

purchase evaluation procedure. These results support the idea that real

228

and not just intuitively appealing differences do exist between buyclasses.

The combining of the buyphases and the buyclasses resulted in the
buygrid conceptual framework. Robinson and Faris had hoped that the buy-
grid framework could prnve to be a useful analytical tool for the indus-
trial marketer. Ferguson (1979) developed nine hypotheses for testing how
well the buygrid model describes the decision processes used in changing
from a current supplier to a new supplier of public warehousing sectors.
The results of the hypotheses testing for both modified rebuys and straight
rebuys were unsupportive of the buygrid framework as a general model of
industrial buying behavior.

The selection process suggested by Moore (1969) is much more behavio-
rally oriented than the Robinson-Faris buyphases. The six responses which
are proposed are in some ways similar to the Robinson-Faris classification
but better define both the specific course of action likely to be followed
and the referent conditions likely to evoke the responses. Moore's dis-
cussion of the bargain response recognizes the importance of interorgani-
zational factors, such as power, which are essential to the more recent
exchange models of buying behavior. Although based on observations and
interviews, as is the Robinson-Paris buyclass framework, Moore's model has
not been empirically tested.

The works of Robinson and Faris (1967); Moore (1969); and Doyle, Wood-
side, and Mitchell (1979) strongly support the contention that real differ-
ences exist among buying situations. Fergusion's (1978) recent study re-
vealed the problems of identifying the relationships between different cate-
gories of buying situations and the decision making processes of these sit-
uations. Indeed, unless these relationships can be identified and some-

thing known about them, the lines of inquiry discussed here offer little

229

hope of analytical tools for industrial marketers. Unfortunately, it is
highly likely that no ideal industrial buying decision process exists.
What seems more likely is that responses are evoked as indicated by Moore.
This would appear to be a promising area of research. First, Moore's
responses should be tested empirically. Instead of focusing solely on the
purchasing agent, insight might be gained by looking at the responses of
buying centers. Cunningham and White's (l974b) research indicates that
some organizational factors might also be relevant for determing responses.
They found no bidding response where one might be expected because some
firms felt they lacked the technical capability of bid evaluation. As
with the previous section, more empirical testing needs to be done in this
area of industrial buying to validate the existing paradigms. Perhaps the
recent testing of the Robinson-Faris (1967) model is a recognition of this

need.

Perceived Risk, Risk Reduction, and Decision Style

The concept of perceived risk and methods of risk reduction have been a
major area for industrial buying research in the 1970's. In spite of this
emphasis, little is known about the importance of perceived risk in the
vendor choice decision. McMillan (1973b) found that non-buying firms per-
ceive significantly more risk toward out vendors than they do toward current
vendors. However, only a small protion of the observed variance in buying
behavior was explained by the perceived risk measures. Either through
replication of the McMillan study or through other approaches, the deter-
mination of the importance of perceived risk in the vendor selection process
should be placed high on the industrial buying research agenda.

McMillan's study aslo indicated that buying and non-buying firms

23O

differed in their perceptions of the vendor's product and company but

not for sales persons. The study also offered some insight into the per-
ception of risk by role type which conflicts with Sheth's (1973) concep-
tualization of the differences between buying center members. The stereo-
types of a purchasing agent as a cost minimizer with little concern for a
product's features and a scientists as a maximizer of product features with
little conern for cost were not substantiated in this study. Of the buying
roles of purchasing agent, scientists, and manager, no significant differ-
ences were found with regard to the perceived risk of product performance.
An important additional finding was that purchasing agents perceived signi-
ficantly less risk toward product price than either scientists or managers.

Webster and Wind (1972) suggested that there are four primary risk
reduction strategies: (1) search activities and information processing,
(2) goal reduction, (3) source loyalty and (4) reduction of investment
time. More research is needed to better underStand these methods of risk
reduction. Two relevant questions are: "What are the conditions conducive
for the utilization of each of these strategies?" and "Are these strate-
gies employed simultaneously or sequentially?" The search activities and
information processing strategy have been studied more than the other three
strategies.

From the research studies on this topic, composite descriptions of
three basic styles of risk perception/search patterns/decision making emerge.
The first group may be categorized as search simplifiers. In their dis-
cussion of cognitive styles, Kelman and Cohler (1959) describe simplifiers
in the following manner:

There are individuals who typically react to ambiguity

in a defensive way. They may avoid the challengining infor-
mation or misperceive it so that it no longer presents a

231

problem, or deny its challenging implications. They would

thus achieve congitive clarity by simplifying their environ-

ment and keeping out disturbing incongruous elements (p. 15).

The search simplifiers tend to be low risk perceivers so that search
activities increase at a much less rate than a proportionate increase in
risk (Copley and Callom, 1971). The search process, as Bauer (1961) noted,
often fulfills the need to justify previous decisions, that is, in the
case of conservative purchasing agents, decisions made according to tradi-
tional criteria. The search simplifier, therefore, simplified the buying
situation by avoiding new information and, as Copley and Callom (1971)
speculated, probably tends to stick to "tried and true" decision rules.
Wilson (1971) found that this group, which he called conservative, had a
significantly higher need for certainty than did the other decision styles.
Sweeney (1972) found that simplifiers were most likely to employ internal
uncertainty reduction and internal consequence reduction methods.

The second major type of purchasing agents have been called searchers
or clarifiers. About clarifiers, Kelman and Choler (1959) stated:

These are individuals who typically react to ambiguity

by seeking clarification, by trying to gain understanding.

They would tend to face a challenge head on, exposing

themselves to new information, trying to understand the

reasons behind the incongruity that confronts them, and

reorganizing clarity in increasing their understanding

(p. 15).

It is likely that searchers of clarifiers fit the model suggested by
Webster (1965), that is, "the search process starts with an evaluation of
goals, and if the present state of goal attainment is satisfactory, there
is no need to search" (p. 373). This group is activated to search when the

risk becomes high, however, Copley and Callom (1971) also found that when

goals are attained, apparently the searcher begins to feel "too comfortable"

232

and the search response again increases. In other words, perfect congruence
of goals and the desired level of attainment may not be a perfectly satis-
factory state, but rather an ambiguous situation needing clarification.

Such search activity at low levels of risk is apparently the condition that
Ammer (1968) was referring to when he said that buyers go to great pains to
develop new and untried suppliers, even when there is nothing new or revolu-
tionary about the product, if for no other reason than to stimulate competi-
tion. Wilson (1971) found this group, which he called normative because
group members generally tended to make choices congruent with a normative
decision model, had the lowest need for certainty of the three groups.
Sweeney (1972) found that searchers or clarifiers preferred external uncer-
tainty reduction and external consequence reduction methods.

A third group, probably representing from 8% (Coply and Callom, 1971)
to 14% (Wilson, 1971) of the purchasing agents, has been called search
norms by Copley and Callom (1971) since this group's rating on risk was
close to the overall mean of the three groups. This group sought informa-
tion from a curiosity motive at low levels of risk but behaved like search
simplifiers at higher fisk levels. It is probably this group which Wilson
(1971) identified as "switchers" whose behavioral patterns might appear at
times like either the search simplifiers or the searchers. Wilson found
this group's need for certainty between and significantly different from
the other two styles.

Wilson found that in his study conservatives represented 60% of the
purchasing agents. The normative or searchers made up 26% of the study
population and the remaining 14% of the purchasing agents were "switchers."
Although Wilson's sample was chosen by convenience rather probability, the

possibility of such as high percentage of simplifiers may present a

233

difficult problem for out vendors. The combined conSequences of (1) the
purchasing agent often playing an information gatekeeping role, (2) the
important role of the gatekeeper throughout the decision process (Petti-
gres, 1975) and (3) the simplifier's preference for internal uncertainty
and internal consequence reduction methods probably lessen the probability
that supplier controlled communication will be relied upon for reducing.
perceived risk.

From the description of simplifiers, it is reasonable to hypothesize
that source loyalty would also likely be used by this group of purchasing
agents to reduce risk. When source loyalty is considered as a method of
risk reduction, it becomes a vendor selection criterion rather than the
result of the purchasing process, as it is so often described. Bubb and
van Rest (1973) found source loyalty to be the most important factor of
vendor selection in a multiyear simulation of a new light metal in Europe.
The dependence upon source loyalty as a risk reducing strategy may be
related to several factors. A probably factor is firm size. Cunningham
and White (1974b) found that large companies purchased 80% of their machine
tools from previous suppliers. In small companies this rebuy figure drop-
ped to only 17% of the cases. Other factors influencing the use of source
loyalty as a risk reducing method appear to be buyer expertise and the
level of perceived risk. At moderate levels of perceived risk, Newall
(1977) found that low expertise buyers had a significantly greater propen-
sity to remain loyal than at lower levels of risk. This was not true for
high expertise buyers whose propensity toward souce loyalty remained the
same at both low and moderate levels of perceived risk. Source loyalty
did not appear to be an adequate risk handling mechanism at high levels

of perceived risk as both high and low expertise buyers tended to search

234

more for other available sources when the risk was high.

Recognition that search activities and information processing is an
important risk reduction method has led researchers to study the useful-
ness and credibility of different types of information sources. Monoky,
Mathews, and Wilson (1975) found the importance of information sources
varied by buyclass. The buyclasses were found to exist on a continuum
of perceived risk with the new task situation being perceived as the high-
est risk and straight rebuys as the lowest risk. Indirectly then, it
could be reasoned that the importance of information sources is dependent
upon the perceived risk of the buying situation. Monoky, Mathews, and
Wilson found that nonpersonal information was most important in the straight
rebuy or lowest risk situation. In the modified rebuy both personal and
nonpersonal sources were important. Personal sources were the dominate
importance sources for the new task situation. Intuitively, it might be
reasonsed that personal sources, especially those internal to the firm,
might be preferred for reducing the psychosocial risk associated with new
task buying. Conversely, little psychococial risk may be associated with
straight rebuys since, by the definition of straight rebuy, the buyer can
point to a vendor performance history if the purchase should prove unsat-
isfactory.

Although McMillan (l973b) found salesmen to be perceived as higher
in risk than either the vendor's product or company as a whole, the ven-
dor's salesman or representative has been found to be one of the most
credible information sources. 0f the possible personal variables of sales-
men, age has been shown to be important. Khera and Benson (1970) found
that a younger salesperson had significantly greater adotions from both

younger and older study participants than did an older salesman. The

235

studies concerning importance, usefulness and credibility which use a
ranking technique often do not present a clear image of the relative
importance of the different sources since multiple range tests are not
commonly used to measure the significant difference among the several
ranked criteria. The once accepted existence of the source effect, the
audience effect, and the sleeper effect, which was the essence of Levitt's
(1965, 1967a, 1967b) research has been seriously challenged and needs
further substantiation (Capon, Holbrook and Hulbert, 1972).

Personal forms communication and especially personal selling has been
shown to be important throughout the adoption of innovations process. Both
personal and nonpersonal communication appear to be important in the early
stages of the adoption process, but in the final stages the importance of
personal selling is dominant (Ozanne and Churchill, 1968; Webster, 1970;
Martilla, 1971).

The importance and frequency of occurance of word-of—mouth communica-
tion appear to be situationally determined. Webster (1970) found little
evidence of word-of-mouth communication in his study and concluded that
competitive reasons inhibit buyers in the same industry from engaging in
product related conversations. Martilla's (1971) research of word-of-
mouth communication among members of the competitive greeting card con-
verter industry substantiate Webster's contention. However, Martilla
found that in the envelope converter industry where companies generally
serve regional markets, frequent word-of-mouth communication took place
among firms serving different geographical markets. In Czepiel's (1974)
study of an innovation in the steel industry, he found that direct infor-
mal contacts among decision makers in different firms occured about five

times per month. In addition, the average firm in this industry maintained

236

regular opinion/advice relationships. with usually two or three other firms
in the industry. Baker and Parkinson's (1977) study indicates that slight-
ly over a third to one-half of the adopters of an earth moving machine had
engaged in informal communications with other firms before they adopted
the innovation. These findings suggest that the informal interfirm commun-
ication may depend upon the industry and the degree of competition among
firms, but further research in needed to substantiate this.

The search for information does not appear to happen haphazardly.
Kelly and Hensel (1974) found their study subjects strongly expressed
what type of information they expected from different sources. Salesmen
were consulted for information about product availability, price, delivery,
cost of operation and comparative information on models which matched need
requirements. Outside sources, in contrast, were most often consulted
about performance evaluation, reliability, dependability and opinion state-

ments.

Buyer Motivation and Vendor Evaluation

The area of industrial buyer motivation has not been extensively re-
searched. As Webster and Wind (l972a) wrote, "Motivation is a general
term used to describe an individual's inner strivings that provide the
impetus for his behavior . Terms such as wishes, desires, needs, goals,
and the like are all synonyms for 'motive'" (p. 94). When this definition
is considered, it is apparent that, although several studies have had the
stated objective of studying buyer motivation, most have really been
studies of the vendor evaulation criteria used by purchasing agents.

In their review of inudstrial buyer behavior, Feldman and Cardozo

(1969) spoke of one of the earliest conceptualizations of the industrial

237

buyer. In this conceptualization two views of the industrial buyer emer-
ged. First, he was viewed as a clerk who received requisitions from "man-
agement" and catalogs from suppliers. He was protrayed as rationally buying
so as to obtain the lowest price per unit. At the same time, marketers
viewed this "honest clerk" as having another nature, one which was greedy,
self-saving and whose goal was not to minimize expense to the firm but
instead was to maximize personal gain. While this portrait of industrial
buyers is both simple and extreme, it does point to the problem of trying
to determine what motivates industrial buyers. ‘As one article title sug-
gests, "The Industrial Buyer--Human But Rational, " (Parkett, 1971), the
industrial buyer is motivated by both personal and organizational goals.

Personal motivations which have been identified as being present in
some buying situations include; (1) the reassurance of adequacy (Siebert,
1955), (2) risk aversion (Lazo, 1966), (3) power and status (Strauss,
1962, 1964; Duncan, 1966; Pettigrew, 1975), (4) the recognition of accom-
plishment through advancement (Duncan, 1965) and (5) a good working rela-
tionship with peers (Wind, 1966).

The organizational goals which motivate are hard to express concisely.
The buying task has beenthought of as buying the "right" quanity at the
"right" price from the "right" source at the "right" time. As Webster and
Wind (l972a) noted, this definition is nearly tautological since it does
not define what is "right" except for noting that "right" means optimum in
terms of organizational objectives. "Right" might mean purchasing at the
lowest price or at the lowest total cost.

As Webster and Wind (1972a) noted, these task and nontask motives need
not necessarily conflict. Making "good buys" for the organization may lead

to increased status and advancement. Thus, to the extent that personal

238

goals can be met through achieving the organization's goals, organizational
objectives are likely to strongly influence the buyer in his decision mak-
ing. 0f the models reviewed perhaps the Hobbesian model most accurately
assesses the interaction of personal and organizational drives. In presen-
ting the model, Kotler suggested that, where there is substantial similarity
in what suppliers offer in the way of products, price, and service, the
purchasing agent may have little rational basis for choice. Since he can
satisfy his organizational obligations with any one or combination of
suppliers, he can be swayed by personal motives. 0n the other hand, where
there are pronounced differences among the competing vendors' offerings,
the purchasing agent may be likely to be held more accountable for his
choice and probably pays more attention to rational factors (Kotler, 1965).
While this logic is intuitively appea‘ing, knowledge of buyer motivation
and especially of how the interaction of personal and organizational goal
oriented behavior influence vendor choice remains an area of much needed
research in industrial buying.

In contrast to buyer motivation, studies of the criteria used to
evaluate vendors are numerous. A general conclusion from examining these
studies is that, in order of importance, quality, delivery factors, and
price are the three main criteria used in evaluating vendors. However,
studies have shown vendor criteria differ by buyclass and industrial type,
i.e., capital equipment vs. component part (Dempsey, 1978); by the type
of buying problem, i.e., no problem, procedural problems, performance
problems or political problem (Lehmann and O'Shaughnessy, 1974); and by
reason bought, i.e., original equipment manufacture vs. repair (King, 1977).
In addition, there are conceptual and methodological problems which affect

the conclusions which can be drawn from several of the studies. Surveys

239

have been widely used to ask purchasing personnel to rate or rank product/
supplier attributes. Some of these studies have included as many as sixty-
five such attributes (Kiser, Rao, and Rao, 1974a, 1974b, 1975). In none of
the published studies which were reviewed was any attempt made to verify if
buyer opinions were substantiated by actual purchasing behavior. Second,
there is good evidence to suggest that few criteria are actually used in
purchase decisions (Scott and Wright, 1976). Third, in the ranked impor-
tance surveys few contain multiple range tests to test for signigicant
differences between rankings. Fourth, invariabley the "visible" economic
criteria such as quality, delivery, and price are ranked higher than other
attributes. If specific purchases are studied ex postfacto, there is a
tendency for decision makers to rationalize their decision criteria (Duncan,
1940). These reasons, then, limit the applicability of direct questioning
techniques in discovering buying criteria. Studies that have used more
objective methods such as using bid tabulation cards (Kelly and Coaker,
1976a, 1976b) are also limited in that they do not take into consideration
implicit criteria such as source loyalty.

Enought variation has been shown by the studies to warrant the sugges-
tion that there are no general criteria which always are predominat. For
the marketing strategist, identification of such universal criteria would
probably be of little use anyway. The two important determinations that
can greatly aid marketing strategists appear to be: (1) what are the most
important criteria for the product in question, and (2) what strategy does
the buyer use in evaluating vendors. While the first determination is
probably product specific and thus beyond this general discussion, it is
often the subject of proprietary marketing research studies. Buyer stra-

tegies, on the other hand, appear to be generalized behaviors. It has been

240

shown that buyers use few criteria in evaluating products (Scott and Wright,
1976). In addition, Moore's research indicates that buyers have a fairly
well defined idea of how many vendors should be maintained on a vendor
list. Crow's (1975) research indicates that the product/supplier attri-
butes and the size of the vendor list form the basis for two general quota-
tion-selection strategies. The first strategy is to specify the number of
quotations to be selected and then to vary the selection criteria as neces-
sary to meet the specified number of quotations. The second strategy is

to specify an acceptable level for product/suppler performance and then to
request quotations from each vendor meeting those requirements. In the
evaluation of vendors it appears that buyers heavily prefer an array and
review method over a sequential search method. In Crow's experiment, which
was laboratory simulation of the vendor selection process, the buyers first
step in evaluating vendors was to review the quotations for significant
differences in price and delivery and to reject those quotations which
were significantly higher in either price and/or longer in delivery time.
If more than one vendor remained, the vendor with the best vendor history
rating was selected. Parkett (1969, 1971, 1972) included in his study
consideration of what happens if vendors are equally satisfying in spec-
ifications, price and delivery. We found that under these conditions
buyers based their choice on such secondary motives as credit and terms,
geographical proximity, cooperation in order processing, the possibility

of purchasing a complete line, spreading orders among several suppliers,
accomodation on small orders and salesmen. More observation of how pur-
chasing decisions are actually made would help to substantiate the results
of these experiemental studies. One area that merits investigation is if
and in what way other members of the buying center influence the selection

strategy.

241

Interorganizational Studies

The three areas of interorganizational influences which have been
studied in relation to industrial buying are buyer-seller dyads, influ-
ence tactics and reciprocity. The study of buying as a dyadic relation-
ship was orginally suggested by Evans (1963) in his study of insurance
salesmen. He found that the probability of a sale was higher to the
extent that the prospect and the salesman had similar characteristics.
These characteristics were believed to be the detenminants of a set of
role expectations for salesmen. While Evan's study was not of industrial
salesmen, the aide of selling as a dyadic relationship has been the focus
of a few studies in industrial buyer behavior. Tosi (1966) found that
role consensus between buyer and seller was not a significant factor for
the criteria of saleman's effectiveness as measured by the number of sup-
pliers and volume obtained by the salesman. However, Tosi found that the
buyer's expectations of the salesman were important in determining future
interaction. The buyer's level of expectation appeared to be a necessary
but not sufficient condition for effective selling performance. Arora
(1975) found that a salesman's planning and preparation and task empathy
are the two most important determinants of his overall performance as per-
ceived by buyers. However, Arora found that statistical tests showed
independence between the salesman's performance and the buyer's recommenda-
tion to buying committees. Alessandra (1976) found that the height, weight,
sex, hair length and beard similarities were statistically significantly
related to sales success. From the results of these studies it would ap-
pear that a salesman's similarity, either physically or in expectations,

can positively influence buyers toward the salesman's product. However,

242

how much this similarity helps vendors vis-a-vis the other factors which
determine the vendor selection remains to be determined.

The literature on compliance gaining consists largely of theoretical
essays. Kotelr and Levy (1970) identified four influence tactics likely
to be imployed by sellers: coercion, inducement, persuasion and education.
Hakansson, Johanson and Wootz (1977) suggested that sellers can influence
buyers toward a desired course of action by manipulating the buyers' per-
ception of product and market uncertainties. Capon and Swassy (1977)
tested twenty-three compliance gaining techniques for effectiveness. The
techniques differed widely in effectiveness with salesmen stressing company
experience and showing competitive comparisons being the most effective
techniques. Although the Capon and Swassy study was in a nonorganizatidnal
setting, it does show the possibility of testing such techniques rather
than just conceiving how and when they might be effective. The recent
work of Johnston and Bonoma (Johnston and Bonoma, 1978 and Bonoma and
Johnston, 1978) concerning power system interactions provides a conceptual
framework for testing compliance gaining techniques. Their work suggests
that a given technique's effectiveness may depend upon whether the power
system involving buyers and sellers is a unilateral, a bargaining, or a
bilateral system. While the testing of these techniques in real buying
situations would be difficult, testing through simulated buyer-seller is
feasible.

Reciprocity has been shown to be a common practice among firms in the
U.S. Sloane's (1961) survey of 300 purchasing agents revealed that 100%
of the firms surveyed in the petroleum, chemicals and iron and steel in-
dustries engaged in reciprocity. In significance, reciprocity accounted

for more than 20% of total sales for 9% of these companies. Bird and

243

Shepard's (1973) study of manufacturing firms in Virginai revealed that
around one-fifth of the firms engaged in reciprocity. Despite the fre-
quency and importance of reciprocity in purchasing in the U.S., the
questionable legality of the practice makes research of this topic diffi-
cult. Ammer (1962) noted that not a single participant of a major survey
on reciprocity was willing to be quoted directly about reciprocity. Per-
haps because of this questionable legality, the studies of this practice
have tended to emphasize either the economic conditions conducive to recip-
rocal trading or the attitudes of purchasing agents about the problems and
benefits of reciprocal trading practices. Conditions favorable for recipro-
cal trading practices. ConditiOns favorable for reciprocity, in addition
to the parties being mutual clients who buy in volume, have been identified
as: (l) homogeneous products, (2) fixed or nonvariable costs to sellers,
especially when the seller is operatingat below capacity, (3) orderly
competition, and (4) diversification (Stocking and Mueller, 1957). Con-
cerning buyers' attitudes toward reciprocal practices, studies have shown
that buyers generally oppose such practices but feel that reciprocity may
bring about a better appreciation of mutual problems and capabilities and
better service (Danner, 1967; Bird and Shepard, 1973).

Gouldner (1960) found that a univeral norm exists which requires
individuals to help those who have helped them and not to injure those
who have helped them. If Gouldner's hypothesis is correct, then the
economic factors mentioned above may not be the determining factors of
whether or not reciprocal practices take place. It should be noted that
few studies have distinguished between reciprocity due to coercion and
reciprocity which results in purchasing agents wishing to maintain good

will toward suppliers. Such good will might be important for the prompt

244

consideration of special requests such as expedited shipments. In times
of resource scarcity, the reverse of reciprocity has taken place. Bird
(1976) found that the practice of "If you will sell your firm's product
to me, my firm will sell our product to you" to have taken place by 35%
of the firms who could have used this agreement during the recession of
the mid-1970's. The maintenance of supplier good will for a "rainy day"
may entail the use of reciprocal practices in the present. How much a
desire for reciprocal trading will offset such other vendor selection
criteria as price and delivery requirements is an important area to be

researched.
Environmental[Situational Variables

Environmental variables are important components in several indus-
trail buying models, including Robinson and Faris (1967), Wind (1967),
Cardozo (1969), and Webster and Wind (1972a). Sheth (l973) stressed the
importance of situational variables, a term, as used by Sheth, almost
synonymous with environmental variables. What has been included as an
environmental variable has varied widely among authors because of differ-
ences in interpretation of the term "environmental." Robinson and Faris
and Cardozo employed this term in its general meaning which referes to
"circumstances or conditions which surround," (Webster's, 1977) in this
context, a buying situation. Because of this usage of the term environ-
mental, the variables under this heading in both models were classified
as being factors either internal or external to the buying firm. Internal
environmental factors included such variables as the organization of the
buying company and the working relationships between purchasing and the

other functional areas of the buying firm. External environmental factors

245

included such variables as the characteristics of the supply industry,
socio-politico-economic conditions, and signficant events such as fires.
Wind and later Webster and Wind used a more restricted meaning of environ-
mental which refers only to influences from outside the buying firm.

In these two models buying influences inside the firm were classified
as being organizational, interpersonal or individual influences. In their
chapter on environmental influences, Webster and Wind, (1972a) included a
brief discussion of the physical, technological, economic, political, legal
and cultural environments. Because of the breadth of each of these environ-
ments, only general comments were made on how each of these variables affect
industrial buying behavior. Collectively these variables were discussed
as influencing industrial buying in four ways. First, they define the
general economic conditions. Second, they define the availability of goods
and services. Third, they influence the flow of marketing conmunications.
Fourth, they determine the value system and norms that guide interpersonal
relations between buyers and sellers and between competitors (Webster and
Wind, l972b, p. 14).

Sheth empahsized the critical role of situational factors in his
model of industrial buying. Sheth states that there is ample empirical
evidence in the buying literature to suggest that some of the industrial
buying decisions are determined by ad hoc situational variables and not
by systematic decision making. By using the term "ad hoc situational"
variables, Sheth emphasized the uniqueness of the circumstances surrounding
specific purchases. These important variables that determine industrial
buying decisions and which preclude systematic decision making are largely
environmental variables. With the possible exception of organizational

changes, the central variables in this mode component, which are the

246

temporary economic conditions, product related special events, and the
changes in the marketplace, have each been classified as environmental
variables in other models of industrial buying. Moreover, Sheth's term
"situational" is synonymous with the combined variables discussed as

being external environmental factors in Robinson and Faris and the environ-
mental influences of Webster and Wind.

Sheth's discussion of these situational factors merits two qualifi-
cations. First, some of the variables classified as ad hoc, such as
an economic recession, most likely affect many purchase situations and
therefore are not truly ad hoc although they may be temporary conditions.
Second, Sheth spoke of these variables as being determinants of vendor
or supplier selection and therefore, in the situations where these variables
are operative, the selection was not the outcome of systematic decision
making. Probably a more common case is that the situational factors greatly
restrict the options available to the decision makers and therefore should
be thought of as constraints rather than determinants (Webster and Wind,
l972a, p. 52).

In spite of the emphasis which has been placed on environmental/
situational factors in the models of industrial buying, these variables
have received relatively slight attention by industrial buying researchers.
This may be because, as Webster and Wind (1972b) wrote, "Environmental
influences are subtle and pervasive as well as difficult to identify and
to measure" (p. 14). Webster and Wind, (l972a) also noted that these
factors are likely to vary significantly from one country to another.
Perhaps because of these reasons, a majority of the research studies con-
cerning these factors have been comparative or multinational studies. From

the few research studies, three interrelated groups of variables emerge

247

as affecting industrial buying: nationalism, government policies and
regulations and market factors.

The impact of nationalism on industrial buying is hard to assess
directly. There is evidence that national pride creates a preference of
nationally made products. This evidence comes from studies in both
developing and advanced economies (Schooler, 1965; Greer, 1971). Nationa-
lism is also believed to be one of the major underlying causes for govern-
ment policies and regulations. These government policies and regulations
have been shown to greatly affect industrial buying behavior, especially
in encouraging industrial buyers to purchase nationally made products.
Among the most commonly found such regulations are local content regula-
tions, heavily restricted import licences, foreign currency restrictions,
differential tax rates, high import tarriffs and meticulous documentation.
(Hutchin, 1970; Davis, Eppen and Mattsson, 1974; Boseman and Simonetti,
1973). The problems associated with restricting purchases to those on the
national market have been identified by Skinner (1967) as favoritism,
finding potential sources, and getting suppliers to provide consistent
quality, understand specifications, and provide reliable delivery.

It is important to note that, as a whole, these findings are based on
general surveys whose purpose is not to examine how environmental/situa-
tional variables affect industrial buying behavior. More research is need-
ed to examine specifically how these variables affect buying behavior. Are
the situational factors determinants as protrayed by Sheth, or do they act
only as constraints? Can differences in buying behavior between countries
be explained by situational variables? For example, can the greater empha-
sis placed on service by British purchasing agents vis-avia their American

counterparts (Lehmann and O'Shaughnessy, 1974) be explained by these

248

variables? A beginning point for future study of these factors has been
suggested by Sheth (1973); what is needed are empirical observations to
identify and better understand specific factors and how they affect indus-

trial buying behavior.

CHAPTER III
THE RESEARCH INTERVIEW

The research interview guide, reproduced in Appendix A, consisted of
thirty items. Four were designed to enable comparisons between the buying
behavior of the study population and that identifed through a review of
the literature. These questions are examined in the following section.
A general discussion of the remaining questions is then presented. Com-
parisons of the results from the comparative questions are made and tenta-
tive reasons for any differences are offered. In the final section, the
general findings from answers to the remaining questions are discussed and

a respondent profile is developed.

Four Comparative Questions

The four comparative questions in the interview guide were chosen as
representative of major areas of research identified in the synthesis of the
literature review. Two major research areas were not included: the buying
process and environmental/situational variables. It was felt that specific
buying phases, the essence of the buying process, could not be ascertained
through interviews. Questions from the environmental/5ituational research
areas were not included since the purpose of the comparative questions was
to investigate the role of situational variables in explaining observed
differences in behavior. Thus, the four comparative questions were drawn
from the remaining four areas of (1) buying influence, the buying center,

and conflict resolution; (2) perceived risk, risk reduction, and decision

9A0

250

style; (3) buyer motivation and vendor evaluation; and (4) interorganiza-
tional studies.
The first comparative question was designed to investigate the impor-
tance of product/supplier attributes in the industrial purchase decision.
A general finding of the literature review was that quality, delivery,
and price, in that order, are the three main criteria used by purchasing
agents. Although this conclusionfiwas qualified, the importance of inclu1
ding some measure of the importance of these attributes in undeniable;
more research studies in industrial buying have been undertaken on this
t0pic than on any other. Therefore, item number five asked: "What
are the most important purchasing criteria used in vendor selection, in
order of importance?" After slight deliberation, most respondents could
supply their criteria in ranked order. The product/supplier attributes
listed on the interview guide were recorded to facilitate the ranking of
the attributes which had been mentioned most often in pretesting. In the
few cases in which propting was necessary, a variation of the question
was reiterated at least twice, with care being taken to alter the order
and composition of possible attributes. For example, the respondent would
be asked: "In determining which vendors get the order, are financial terms
the most important factor and delivery dates the second most, or is price
the most important factor and quality the next most?" When respondents
mentioned quality as an attribute they were told: "Quality can have at
least two meanings. A product/supplier has to have a certain quality in
order to qualify as a supplier. However, this question refers to a product/
supplier's quality relative to the quality of competing product/suppliers.”
The second comparative question, item fourteen, concerned the frequency

and importance of reciprocity, an interorganizational buying influence.

251

The question was: "Reciprocity--how frequently does it occur and how
important is it as a percentage of purchases by value?“ Reciprocity has
been shown to be a common practice in the United States; between 20 and

50 percent of purchasing agents admit that this is a consideration in

the buyer-seller relations of their company (Bird and Shepard, 1973). In
the U.S. studies, the percentage of total purchases by value due to recip-
rocity has been found to vary between 5 and 20 percent (Sloane, 1961, and
Dauner, 1967).

The third comparative question, item sixteen, was based on research
on conflict resolution among members of the buying center. The question
was: "Conflicts are common in every organization. How is it resolved
when, for example, engineering wants to indicate which supplier or brand
should be chosen?" Stauss (1964) indicates that this particular situation
is a point of conflict between purchasing agents and engineers. Concerning
the resolution of conflicts, Strasuss (1962) noted a variety of purchasing
agent tactics employed to resolve conflicts with other functional areas
of the firm. Most of these could be classified as nonconstructive methods
of conflict resolution. However, he did not investigate whether these
tactics were employed more frequently than constructive resolution methods.
Patchen (1974), in the most complete research in this area, found that by
far the most frequent method used to solve this particular problem was to
obtain more information of further analyze existing information. He found
very little use of bargaining and no use of threats or of the nonconstruc-
tive tactics which Strauss found.

The fourth comparative question concerned the use and frequency of
word-of-mouth communication between purchasing agents in different firms.

The interview guide items for exploring this aspect of informal communication

252

are items nineteen and twenty. Item nineteen asked: "Do you speak with
your colleagues in other firms about products? suppliers? problems in
your industry?" Item twenty asked: "How often, in general, would you say
that these conversations occur?" Most of the studies of word-of—mouth
communication in industrial buying concern the adoption of innovations.
However, Webster's (1970) research examined this behavior in a regular
business context and found that purchasing agents conversed about once a
month, and that such conversations were more likely to take place if the

firms were in geographical proximity.

The Remaining Questions

The remaining twenty-five questions were selected to gain information
concerning existing buying practices, procedures, and preferences; environ-
mental factors specific to Brazil as opposed to the United States; and
relevant personal information about the respondents. Pretesting revealed
that respondents were unlikely to be at ease until it became clear that
the interviewer was not motivated by commercial interests and had not been
sent by management to "check up" on the purchasing department. Consequently,
item one and two were asked primarily to put the respondent at ease. Items
three through eleven explored the respondents' preferences and practices
with regard to current suppliers. Items twelve and thirteen sought infor-
mation about the decentralization of the buying function. Item fifteen
asked about source loyalty. Items seventeen and eighteen examined prefer-
red information sources for finding new suppliers and the process for quali-
fying potential vendors. Items twenty-one through twenty-three inquired
about the impact of Brazil's high inflation rate on purchasing and about
the origin of imports. Item twenty-four sought to identify changes in

purchasing procedures due to foreign adquisition. Personal information

253

was gathered in items twenty-five through twenty-nine. The final item
explored the purchasing agent's desire for professionalization. In pre-
testing it was found that at least 90 minutes were needed to complete the
interview and for respondents to complete the questionnaire, so there was

no time for additional questions.

Comparative Findings and Conclusions

The responses to question five are summarized in Table 7. A simple
comparison of rankings clearly indicates a pattern of importance of quality,
price, and delivery time, in that order. This pattern is also supported by
comparisons of the weighted scores and through analysis of the final column
in Table 7, which presents the weighted scores with combinations separated.
An examination of the data by industry revealed that this pattern of rank-
ing was consistent across all six industries. Interestingly, the second
most frequently given response was neither price nor delivery time, but
some combination of attributes. Again, this was not restricted to any one
industry; respondents from at least one firm in five of the six industries
stated that a combination of criteria was either the most or the seond most
important consideration in the vendor choice decision.

This pattern differs from the most frequently reported ranking (qua-
lity, delivery, and price) in the U.S. studies. The difference in the
ordering may be explained if the Brazilian purchasing agents fit the “clas-
sical model" of buyer behavior discussed by Feldman and Cardozo (1967, 1969).
The sole duty of the buyer in that model is to purchase the specified item
at the lowest price per unit. The inversion of price and delivery also may
be due to the lack of sophistication among the Braxilian agents concerning

the total cost of purchases and especially of the role that physical

254

TABLE 7
A SUMMARY OF PRODUCT/SUPPLIER RANKED CRITERIA

 

 

 

 

 

 

 

 

 

 

Criteria Times Times Times Weighted2 .Weighted Score
Ranked Ranked Ranked Score with Combinat ons
No. 1 No. 2 No. 3 Separated

.Quality 13 2 4 47 54

Price 4 ll 1 35 41.5

Delivery 2 7 10 30 32

Financial Terms 0 1 2 4 5

Combinations1 5 l 0 l7 --

Fource Loyalty 0 O 1 2 2

I

 

1Five respondents ranked the following combinations of attributes
as most important:

3 cases: Quality - Price

1 case: Quality - Price - Delivery

1 case: Quality - Delivery
One respondent ranked Price -Fdnanciallerms as the second most important
attributes.

2The weighted score was calculated by multiplying the number of times
an attribute was ranked lst by three points; the number of times an attri-
bute was ranked 3rd by one point; and then by adding the products of these
multiplications.

3The weighted score with combinations separated assigned an equal
proportion of the weighted score to each attribute in the combination. This
was then added to the weighted score.

255

distribution costs play in the total costs to the buying firm. Both of
these explanations do not seem probable, since price was ranked as the
second most important criteria by the purchasing officers in all five of
the American, German, Italian, and Japanese subsidiaries which partici-
pated in this study.

The difference in attribute importance is quite possible due to a
combination of Braxil's high inflation rate and a working capital short-
age which has put pressure on Brazilian money markets and has been re—
flected in a high cost of capital. Although financial terms were not
ranked among the three most important criteria, they were probably con-
sidered part of the price criteria by the Braxilian respondents. After
this survey was completed, purchasing agents in three different firms
were interviewed about this matter and all three equated price with
financial terms. Two of the purchasing agents used rule-of-thumb interest
rate figures to compare the differences in financial terms and prices for
determination of a total purchase cost. The third purchasing agent
attempted to get vendors to offer the same financial terms so that the
prices quoted could be evaluated without explicit consideration of this
factor. The current cost of working capital is much higher in Brazil than
in the United States. Interviews with financial personnel in three differ-
ent industrial firms revealed that the annual interest rate on short-term
capital paid by these firms is in the range of 43-44 percent. The same
interview also revealed that the three firms averaged delaying payments on
most noncritical purchases some thirty to sixty days beyond the financial
terms of the purchase agreement. This, for most purchases, generally called
for payment within sixty days of invoicing. Not paying for these purchases

within the specified time was costly. A private report by a major industrial

256

holding company calculated the average effective rate of interest charged
by suppliers and fianacial institutions for late payment to be in the 58-
61 percent range on an annual basis. With such high interest rates, it is
understandable that the price/financial terms of a purchase could be more
important than the delivery times of the vendors.

The second comparable question concerned reciprocity. Purchasing
agents in eleven of the twenty-four surveyed said that reciprocity was
not a factor in any of their purchases. The remaining thirteen admitted
that this was a factor in some purchases, but very few overall. Typical
responses were: "It is a factor in one of the 3,000 items we purchase,"
and “It is considered in 2-3 percent of the items we buy." No purcha-
sing agent indicated that the value of such purchases amounted to more
than 5 percent of the total annual value of purchases. Indeed, nine of
the thirteen respondents incidated that the value of such purchases was
less than one percent of the annual total. Because these figures were
estimates rather than detailed calculations, it is reasonable to assume
that in general, purchases involving reciprocity account for less than
5 percent of the total value of annual purchases in these firms. The
respondents were unanimous in stating that when reciprocity does occur,
it is the result of "good business sense" rather than pressure. The
respondents probably would have felt free to admit to pressure, as there
are no laws governing this practice in Brazil.

The results compare favorably with two findings of Sloane's (1961)
study. He found that 51 percent of the purchasing agents he studied
practiced reciprocity. In 64 percent of the firms in which reciprocity
was a factor, it accounted for less than 5 percent of sales. There are

other findings, however, which indicate that reciprocity may account for

257

a slightly, higher percentage of sales and purchases in the United States
than was the case in Rio Grande do Sul. Sloane found that in 36 percent
of the firms surveyed, more than 5 percent of sales were attributable to
reciprocity, and 9 percent of the respondents reported reciprocity to be
responsible for more than 30 percent of sales. We also found that recipro-
city was practiced in all of the firms surveyed in the petroleum, chemical,
and iron and steel industries. Dauner's (1967) study population consisted
largely of the same industries studied in Rio Grande do Sul. He reported
that reciprocal agreements accounted for 8.5 percent of sales and 12.3 per-
cent of purchases. The higher percentage of transactions in which recip-
rocity plays a part in the United Staes could be due to a combination of
factors related to the conditions conducive to the practice. First differ-
ences in the findings in Rio Grand do Sul and in the U.S. studies may

be related to the nature of the final goods produced by the firms studied.
The production of consumer goods is not conducive to the practice of
reciprocity. (Stocking and Mueller, 1957). Second, there are indications
from the U.S. studies that as firms increase in size, the practice of recip-
rocity also increases (Stocking and Muleller, 1957, and Bird and Shepherd,
1973). The Sloane and Dauner studies mentioned above included companies
much larger than those surveyed in Rio Grande do Sul. Third, the market
situation in Brazil differs from conditions in the United States. The
basic industries which manufacture materials representing a major percen-
tage of total purchases of the firms studied in Rio Grande do Sul are all
government monopolies. The production and importance of sheet metal,
aluminum, copper, and the refining of petroleum are all exclusive rights
of the Brazilian government and its corporations. Such monopolies rule out

the possiblility of reciprocitylnreliminating competition. It appears

258

that this monomploy situation is an important factor in the more restricted
use of reciprocity in Rio Grande do Sul.

The third comparative research question concerned methods of conflict
resolution in situations in which engineers desire to choose the supplier/
brand. The findings here largely support Patchen's (1974) study results.
ReSpondents were allowed to give more than one response. The following
types of conflict resolution were mentioned: testing (11 times/37 percent);
rule citing (6 times/20 percent); yeilding to engineering (6 times/20
percent); asking engineering to provide alternative suppliers/brand (4
times/13 percent); and discussions (3 times/10 percent). These last two
menthods were only cited by the respondents after one of the first three
had been indicated. One respondent said that such disagreements never
occurred in his firm. The most commonly reported methods of conflict reso-
lution in the Patchen (1974) study were: getting more information or fur-
ther analyzing information (42 percent); discussions or meetings (18 per-
cent); finding new solutions to problem (9 percent); persuasion (7 percent);
and numerous other less frequently used measures (23 percent total). Simi-
larity betweeen the study findings are evident not only in the most fre-
quently used resolution method but also when the overall findings are con-
sidered. Testing, in the Rio Grande do Sul case, and getting more informa-
tion or further analyzing information, in the Patchen study, each accounted
for approximately 40 percent of the total responses. Overall, if the
yielding response is considered separately, equivalent resolution methods
account for approximately 80 percent of the total responses.

There is some indication for the Rio Grande do Sul study that the type
of industry or firm may influence the method of conflict resolution. Sheth

(1973) suggests that if a companyis technologically oriented, buying

259

decisions are likely to be made by the firm's technical personnel. This
might have been a factor in the responses given by Brazilian purchasing
agents in the chemical and electrical equipment industries, although with
different effects on the methods of conflict resolution. In the chemical
industry, the influence of chemists and chemcial engineers could be assumed
to be important; the purchasing agents were unanimous in reporting that
this conflict situation would be resolved by testing. Raw materials in
this industry can readily be evaluated through chemical analysis. However,
in the electrical equipment industry, three of the four purchasing agents
indicated that they normally yielded to engineering in such conflicts.
This supports the Sheth contention previously mentioned and may be due to
the dufficulty in testing or to the lack of resources adequate for testing
the materials and components used by this industry. A senior executive

in one of the Brazilian electrical firms admitted that his company didnot
have test facilities for the proper evaluation of materials and components.
Thus, some of the differences in methods of conflict resolution may be due
to industry factors.

Rule citing was used by some purchasing agents in all industries ex-
cept chemicals and electro-electronic equipment. An examination of personal
data reveals only one factor, years of service to the firm, which differs
substantially for purchasing agents who use this method. Those who cite
rules averaged 16.3 years of service in their respective firms, compared
to an average of 10.5 years for yielders and 9.6 years for testers.

In summary, it appears that both the industry and the number of years
of service in the firm may influence the type of conflict resolution used.
The findings of the Patchen study were supported. One Brazilian purchasing

agent did mention a situational factor which would influence his choice of

260

ways to resolved the conflict. This agent, who preferred testing, stated
that he would yield to the engineering in emergency situations, such as
ordering an item to keep the production line moving. Except for this one
instance, situational factors did not appear to influence the method of
conflict resolution.

The fourth comparative research question concerned the nature of
frequency of word-of-mouth communication among purchasing agents. Although
respondents were asked about the nature of their conversations with other
purchasing agents, only twelve responses were given. Four responses each
were given for conversations concerning products, suppliers, and problems
relating to the particular industries involved. Webster's (1970) findings
that purchasing agents converse about once a month and that these conversa-
tions are more likely to occur if firms are in geographical proximity were
supported by this study. Purchasing officers in sixteen of the twenty-four
firms conversed with their counterparts at least once a month. The situa-
tional variable of proximity as an influencing factor is more clearly seen
when findings from the two metropolitan areas are examined separately.
Among the fifteen firms located in the seven cities which constitute the
Porto Alegre metropolitan area, respondents in eight firms reported that
conversations took place at least monthly. In the much smaller geographical
area of Caxias do Sul, eight of the nine respondents indicated conversations
at least monthly.

Webster found that regional purchasing agent associations played an
important role in providing contacts. In Caxias do Sul, the local steel
commission apparently not only provided contacts but also an opportunity

for purchasing agents to converse once a month. Local steel commissions

261

exist in major Brazilian industrial cities to advise the government-ope-
rated steel mills concerning the future needs of firms in the area they
represent. While purchasing agents in Caxias do Sul regularly attended
these monthly meetings, only one purchasing agent in the Porto Alegre area
did so. The only purchasing agent in Caxias do Sul who reported having
conversations with colleagues less than once a month did not attend these
meetings.

In summary, several situational factors apparently help explain dif-
ferences in vendor choice criteria and the practice of reciprocity found
in studies U.S. and Rio Grand do Sul Firms. Although no substantial dif-
ferences were found between the methods of conflict resolution, one situa-
tional factor -- agreeing with engineering -- was mentioned. No differences
were found with respect to the frequency of word-of-mouth communication
among purchasing agents. However, geographical proximity, a situational
factor, apparently increases the probability that such communication will

occur .

Summary of the General Findings
As was previously mentioned, the first question on the interview guide

was intended more to put the respondent at ease than to gain detailed
knowledge about how the firm's forecasts are made. Although many of the
companies differed slightly with respect to the forecast period, most
made annual, quarterly, or trimester forecasts. The annual forecasts usu-
ally were based on historical trends, production capacity, and what was
termed market research, although this latter actually meant asking sales
personnel for an evaluation of potential sales to major clients in the

coming year. Purchasing never participated in these annual forecasts and

262

usually received specific purchasing forecasts from production scheduling.

Of the twenty-two firms responding to the ideal number of suppliers
question, four preferred to choose from five or more vendors, but three was
the number mentioned most frequently (in eight cases). Although the num-
ber of bids taken varied greatly, most purchasing agents took bids from
three to four suppliers. In only four firms, two of these in the chemical
industry, was the actual number of suppliers consulted less than the sta-
ted ideal. All except three respondents divided orders: ten divided them
50-50 and seven divided them 60-40. In only one case of divided orders did
a supplier receive as much as 70 percent of the total order.

Respondents had difficulty in giving the percentage of items for which
they had only one qualified supplier. They also had trouble assigning a
percentage of total value of purchases to items with only one supplier. Too
many data are missing to make generalizations.

Respondents indicated that the most common financial terms were 60
days without a discount. A subsequent analysis of 300 purchases in three
industrial firsm confirmed this as the most common arrangement, but terms
of 30 days, 45 days, and partial payment in terms of 30, 60, and 90 days
also were frequent.

Concerning order cycles, the average reported for shipments from Sao
Paula and Rio de Janeiro, Brazil's leading industrial cities, was 35 days
or only 3 days longer than reported cycles for ordersshipped from firms in
the state of Rio Grande do Sul.

Thirteen of the companies in the study were multiplant firms, and in
all but one the buying function was centralized.

0f the nineteen firms reporting why leading suppliers had been dropped

or had had their percentage of total orders reduced, the most frequently

263

given reasons were changes in prices (9 times), change in quality (8 times),
and delivery problems (twice).

Sources most frequenty ranked first for the finding of new suppliers
were manufacturer salesmen or represenative (9 times), industry annuals
(5 times), and current suppliers (5 times). A composite weighted score
was also caluculated for this item by giving points of three, two, and one
for each time a source was ranked first, second, or third. According to
this weighted scoring, the most frequently used methods appear to be
manufacturer salesmen or representatives (39 points), technical magazine
(31 points), industry annuals (29 points), and current suppliers (27
points).

The process whereby potential vendors were qualified varied gratly
among firms. Although the order of the steps differed, most processes
included the following: calling the sales representatives; asking for com-
mercial references and recent balance sheets; asking for a equipment. inven-
tory; giveing the potential vendor design specifications; testing submitted
samples; asking for commercial terms of sale; visiting the potential
vendor's plant to confirm equipment and quality control methods and per-
sonnel; and asking for a small initial order.

When asked how the high inflation rate affected the purchasing process,
agents were unanimous in stating that they maintained minimum stock levels,
generally for two to three months, and ordered frequently. The shortage of
working capital was said to make speculation impossible except for firms
purchasing seasonal agricultural products, in which case the changes in
seasonal prices were likely to more than offset the high interest rates
charged. A few firms also had plotted the trends in steel price increases

and tried to hedge by placing orders for slightly more than was needed in

264

anticipated of price increases.

All twnety-four firms had imported during the previous five years,
and these imports had come from twenty-five different countries. The most
frequently mentioned sources included West Germany (20 cases), the United
States (17 cases), and Japan (13 cases). No firms had been acquired by a
foreign concern since the purchasing agents had been with their companies.

All but three of the respondents were purchasing personnel holding
positions equivalent to purchasing agents in the United States. The three
exceptions were vice-presidents of administration andoversaw the purchasing
function. Respondents' age averaged slightly over thirty-nine years and
they had held their current positions an average of eight and one-half years.
Positions held directly before their current one included jobs in such
diverse areas as general administration, warehousing, production, finance,
personnel, industrial engineering, and purchasing. Eleven of the respon-
dents held university degrees, ten being equally diveded between engineering
and business and economics. All but one of the remainder had the equivalent
of a U.S. high school degree. Among the twenty-one purchasing agents,
twenty stated they would like to belong to a professional purchasing organ—
ization. Two were members of a recently formed materials management organi-
zation, but it did not have a local chapter. Most added that they had par-
ticipated in various short courses relating to purchasing and that contacts
made with other agents generally had been more benefical than these courses.
The one respondentiWNiprofessed no interest in a professional purchasing
organization had tried to organize a group, but the heavy workload of fellow
agents and frequent business trips resulted in too many absences to sustain

the association.

CHAPTER IV
THE RESEARCH QUESTIONNAIRE

The second research instrument used to examine aspects of comparative

buying behavior consisted of questions translated from the Scientific American

 

survey, How Industry Buys/1970. It is reproduced in Appendix B. A note in
the Scientific American study indicated that as many as one-fifth of the re-

 

spondents indicated the "others" column in response to some questionnaire
itesm, and it was necessary to make a supplemental inquiry to identify these
"others." To avoid this problem and to encourage specificity, the format
was changed for the Rio Grande do Sul study. Respondents were asked to list
and number all departments and others outside the firm which were cited in
their answers and to use the appropriate number in the space beside each
question. The results of the two studies are compared in Tables 8, 9, and
10. Some of the categories have been collapsed from those used in the

Scientific American study. ”Overall Corporate Policy and Planning" and "Oper-

 

ations and Administration" were combined into "Operations and Administrations"
in Tables 8, 9, and 10. Responses from the Brazilian participants indicated
that the same individuals were involved in activities in both of these cate-
gories. This fusing of line and staff functions is quite possible attribu-
table to the relatively small size of the Brazilian firms studies. The cate-

gories of "Finance," "Others in Company," and "Others Outside Company,‘ were
collapsed into "Others." After combination, the three original categories
represented a major influence in only three situations, which are discussed

later. The functional area of quality control appeared as a major

265

266

influencing factor in certain aspects of the process and because of this
it is listed as a separate category.

The study populations differed greatly in size. The Scientific
American survey was based on an analysis of 2,260 usuable questionnaires,
whereas the research in Rio Grande do Sul was based on only twenty-four.
Because of this large difference, the percentages, which indicate the fre-
quency with which the various categories were reported as steps in the pur-
chasing process, are not directly comparable. Therefore, the analysis
which follows focuses on the differences in the most frequently given

responses rather than on direct comparisons of percentages.

Decision Making for Material Purchases

Summary findings for decision making for material purchases are pre-
sented in Table 8. Differences relating to the departments most frequently
involved in material purchases were noted in only three of the ten questions.
In both studies product engineering was involved in more aspects than any
other department. In the first series of questions, identifying the motives
for initiating material purchases, both studies showed purchasing as the
department most likely to initiate a purchase to take advantage of a price
differential. Both studies found that purchases to accommodate a change
in the production process were most likely to be initiated by production
engineering. Also, materials purchased to meet a new performance require-
ment and to manufacture a new product were most likely to be initiated by
product engineering, according to both studies.

The only difference found in motivation concerned the initiation of
a project to exploit a newly developed material. In the U.S. study, the

first and second most likely departments to initiate such a purchase were

RIO GRANDE DO SUL

UNITED STATES

267

TABLE 8

THE PURCHASE OF MATERIALS: A COMPARISON OF STUDY FINDINGS
IN RIO GRANDE DO SUL, BRAZIL WITH HOW INDUSTRY BUYS/197D

A.

 

PURCHASES OF MATERIALS

 

1. Who is most likely to initiate a project leading
toward the purchase of a material to:

(a) Take advantage of a new price differential?

(b) Exploit a newly-developed material?

” RESEARCH
P SALES

' PRODUCTION ENG.

9 0 AND A
T OTHERS

 

 

 

 

 

53:0

 

 

a O
19 i3 {)1 83 U‘ 9‘ PRODUCT ENG.

 

 

 

 

 

S 8‘ “1&0 Lo 0 0 0 r QUALITY CONTROL

 

atom o o o 01 mu, gfiPURCHASING

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0 5 3
MOTIVE O 5 a
(c) Accommodateachange in the production process? 5 28 3 s
(d) Meetanew performance requirement? 18 la 9 o
(e) Manufactureanew product? ‘3 o ‘0 '4. 5
2. Who If t' dd t ' k' d
mgmmmmmm"mm fismfiso
3. Whod l 'n 'l' f' d h -
“”5”“ tarsus“,ié'l',°n?ei°:y°ii§‘ni§?;;"n ° W 27 o 3 55 3 o
4. Wit '1 til it Mb ‘I‘ d t ' I
MAKE “33.33;: 25331,; 723m°l§omioshllléiaa23 °“‘ 32 O 23 14- 5 5
5. Wit 1 b lied l ' | l d
wmgg ..::;:.:::;::::.3" m 23 o is 3 5 o
6. Who decides which supplier gets the order? 5 O 5 ‘4. 5 5 5
A. PURCHASES OF MATERIALS
1. Who is mostlikely to initiateaproiect leading 1- I 2‘ 3~ 4" 5' 6. 7‘ 3- 1
toward the purchase of a material to:
(a) Take advantage 013 new price differential? 6817 4' 232.! 2.3 10
(b) Exploitanewly-developed material? x 44 5 2| 6213 a
OTIVE
M (c) Accommodateachange in the production process? C ‘0 l 75 29 2° %
(d) Meetanew performance requirement? 4 24 8 ZS 6319 g
(e) Manufacturaanew product? 7 5'3 '3 Zl +1 42 u
' d ' k' d
K1139 2' 3352;335:3331?” d°‘°'"""°’ '" 15 33 1 2‘3 6‘} lb 10
.Wh d ' ‘f' t' d h -
”mm“ 3 l.n21ic‘i'iél'é‘fieipffli‘éariile’élv° "3° 4 Z? 2 23 CS 3 l3
. I bl k llh ‘l‘ d ate '2“ 4‘ 4‘
MAKE ‘ wflfli25331,;lfimelfiomioshlllélidl‘? " 76 l?— I 243610 3
5. Wh l t b 'tt d ter'alsforaccord
SW2; willé’licliciiélsl' ° ”‘3 ' lb 22. l ‘15 ii, 2.3
l

6. Who decides which supplier gets the order?

 

 

 

24

IO

 

 

 

 

 

 

268

product engineering and research. In the Rio Grande study, the first and
second most likely were purchasing and product engineering. Since product
engineering was indicated in both studies as either the most of the second
most likely department to initiate this type of purchase, the most notice-
able difference is the involvement of purchasing in Rio Grande do Sul and of
research in the United States. An analysis of the Scientific American data
did not indicate that this difference was attributable either to firm sizes
or industries studied. Moreover, as Table 8 indicates, the research depart-
ments of Brazilian firms were about as frequently mentioned in other aspects
of material purchases as were their U.S. counterparts. This difference may
have been due to respondent bias or at least to a different interpretation
of the question. The purchasing agents surveyed did regularly receive the
technical magazines sent to their firms and, as was noted previously, rated
these as the second most important source for finding new suppliers. It is
also probably that purchasing agents in general have more personal contact
with manufacturer representatives and salesmen than do members of research
departments. It may be that they interpreted these initial contacts as the
initiation of the buying process, although they may have only requested
samples for analysis by the research department.

In the case study phases of this research, purchasing agents reported
actions which led to the eventual adoption of new products. In one in-
stance, a firm needed a more effective rust inhibitor. The purchasing
agent phone a nearby firm and talked with his colleague about the problem.
It was learned that this second firm had adopted such a product and was
well pleased with its performance. This contact eventually led to the
purchase of the new product by the first firm. In this situation, pur-

chasing appears to have been very active in the search and in the initiation

269

of the buying process. In a second case, purchasing was contacted by a
manufacturer's salesman regarding a new filtering material. Purchasing
had samples sent to technical personnel for testing. Eventually, the
material was approved, and the production engineering and materials
department substituted this product for the filter they were using. In
this instance, purchasing appears to have been a passive participant

in the decision, although it might be regarded, in a limited sense, as
the initiator of the process which led to the eventual purchase.

As can be seen in Table 8, in both studies product engineering was
most likely to initiate purchases to meet new production performance
requirements and to manufacture new products. Likewise, product engineer-
ing was most frequently involved in decisions concerning the kinds of
materials needed and in writing the specifications for them. A difference
was observed between the two studies, however, in responses to questions
four and five concerning the make of materials purchased. In the United
States, purchasing most frequently surveyed the makes of specified mater-
ials and chose suppliers from who to invite bids. In Brazil, these acti-
vities were most likely to be performed by quality control. In the United
States, product engineering was the department involved in evaluating
materials for accordance with specifications. This, too, was likely to
be done by quality control in Brazil. In the Scientific American's supple-
mental inquiry, it was found that quality control was the fourth most
likely department involved in this evaluation. .The Brazilian data on
purchase of component parts indicated that quality control was most fre-
quently involved in the activities described in question four and five.
The importance of the quality control department in performing these tasks

possibly can be attributed to the problem of finding and maintaining quality

27D

conscious suppliers in developing countries. Skinner (l967) lists finding
such vendors as one of the principal problems of local sourcing for Ameri-
can manufacturing firms abroad. Change in quality was given almost as
frequently as change in prices as a primary reason for dropping regular
suppliers or for reducing their percentage of total orders. Brazil's
severe import restrictions apparently have worsen this problem. One U.S.
subsidiary in the electrical equipment industry for years had imported
from the United States with virtually no rejections due to quality pro-
blems After compulsory import deposits were begun in 1976, the firm had
to turn to local suppliers, and the rate of rejection has since averaged
30 percent.

Both studies agreed that purchasing was most likely to choose the

supplier of the material.

Decision Making for Component Parts Purchasing

 

Summary findings for decision making for component parts purchases
are presented in Table 9. As was the case with materials, both studies
indicated that component parts purchases were more affected by product
engineering than by any other department. In both studies, purchasing
was most likely to initiate a purchase to take advantage of a price
differential, and product engineering was the most likely to initiate
a purchase to take advantage of innovations in component design. In the
two studies, both product engineering and production engineering were
the two most likely to initiate purchases of component parts to accom-
modate changes in the production process and to accommodate changes in the
design of existing products. Product engineering was most frequently

cited in both studies as initiating purchases of components to be

271

TABLE 9

THE PURCHASE OF COMPONENT PARTS: A COMPARISON OF STUDY FINDINGS

IN RIO GRANDE DO SUL, BRAZIL WITH HOW INDUSTRY BUYS/1970

 

RIO GRANDE DO SUL

UNITED STATES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- .1
c5 0
2 M
an . t—
CD 2
(5 z z D
Z O I.“ U
3'; 5 Z i- < i:
enmeeeee
a m a‘ o: a: l— a
B. PURCHASES OF COMPONENT PARTS o. or V) o. o. O 0 C7
1. Who ismostlikelyto initiateaproisctleading 1. z. 3. 4. 5. 6. 1. a
toward the purchase of component parts to:
(a) Take advantage ofa new price differential? 33 O o O o o '7 O:
(b) Take advantage of innovation in
MOTIVE component design? 36 '7 0 21 4'3 0 7 D
c Acc ed to h e' thedes' n
Housman; pFo‘Buac'Ig m .9 7 0 $4319 0 O
(d) Accommodateachange in the production process? D 24 o 21 7‘ o o o
(e) lncorporateintoanew product? '7 2‘ O ‘4. 57 b D [4
2. Whoa rve saltem t' nd date m'nes k'nd
“1:306ng (not mikeyof compth‘geristzarts to beIused‘; D $ 0 1+ 7' O D 2‘
C: A PART 3. Who determines specifications and charac-
teristics to be met by the component parts? 0 2.1 o 14 71 O D 111
4. Wh 'I bl k fthe ec'l' d nent .
we p.n°.‘i’.ll°!i:.¥§éf”$23,313.... Jiom'tfimiil'l‘a’m '7 36 D 2% 23 o o 41
5. Who I t b ‘tted t rt 1 d .
3099.423 with summer i°"‘°°"°" '” ’1°“°°°' ‘7 21 o 21 14: O o 51
B. Whodecldes which supplier gets the order? 0 D 7 21 D 7 D
B. PURCHASES OF COMPONENT PARTS
1. Who is most likely to initiateaproiect leading i. 2. 3. 4. 5. 6. ‘l a
toward the purchase of component parts to:
(a) Take advantage ofanew price differential? E3 7 '3 276‘ ’5' (O
b) T k ad ntage of ‘nnovatlon in 1
H011“? ( cgmcponzztdesign? '7 22. Z 3173 3 8
A odt h ' th d i
"" J:.‘."2£?..£,°pioiuili°‘" ° ”9" 6 ll 3 4'1 65 to g
(d) Accommodateachange in the production process? 6 3 ‘ 74. 32 ‘5 a
(a) lncorporatelntoanew product? e 26 6 2+ 65 23 5
2. Wit If t' dd 1 ' k' d
“£353; ...:::m:r.:m:r::partial" ‘4. 20 l 32.72 3 to
3. Wh dt ' 'f" t'o and charac-
PW Mimiifil‘fii‘éfiffiéfionm ms? 5 :3 Z 31 76 '7 t4
4. W11 '1 bl k fth 'f’ed e t
"m ”32.533.33.324:alliemiomffiifi{o $1313.? 2 9 l 25 46 9 ll
5. Wh l t b ‘tted po e tpart for accord
sum‘éfi witiil’ic‘iicliiélsl' °°"‘ " " ’ l5 l6 0 3557 '7 22.
l 2.2

6. Who decides which supplier gets the order?

 

 

 

Zl

 

 

 

 

 

 

272

incorporated into a new product. It was also most likely in both the
United States and Rio Grande do Sul to be the department to survey alter-
natives, determine the kind of component needed, and designate component
specifications. As was the case with materials purchases, in the United
States, purchasing was the department most frequently involved in survey-
ing available suppliers of the specified components and in choosing bidders.
In Rio Grande do Sul, these tasks were most frequently performed by quality
control. In the United States, product engineering was most likely to
evaluate the submitted components for accordance with specifications,
while this was done most frequently by quality control in the Rio Grande
do Sul firms. A possible reason for these differences -- the problem of
quality conscious suppliers -- was discussed previously with respect to
the purchase of materials.

In both studies, purchasing was found to be most frequently involved

in choosing the supplier.

Decison Making for Equipment Purchases

Summary findings for decision making for equipment purchases are
presented in Table l0. In both the United States and in Rio Grande do Sul
production engineering and operations and administration were found to
be the departments most frequently involved in equipment purchase decisions.
These two categories were either the most or the second most often mentioned
in both surveys for initiating projects leading to the purchase of new
equipment to replace existing equipment, to expand capacity, and to change
production processes. Regarding purchase of new equipment to take advan-
tage of new materials, the U.S. respondents cited product engineering and

production engineering as the two main initiators and they were involved

273

TABLE 10

THE PURCHASE OF EQUIPMENT: A COMPARISON OF STUDY FINDINGS IN
RIO GRANDE DO SUL, BRAZIL WITH HON INDUSTRY BUYS/1970

 

 

RIO GRANDE DO SUL

UNITED STATES

C.

PURCHASES OF EQUIPMENT

 

MOTlVE

1. Who is most likely to initiate a project leading
toward the purchase of new equipment to:

(a) Replace existing equipment?

(b) Expand-capacity?

(c) Change production processes?
(d) Take advantage of new materials?

(e) Manufacture new products?

N RESEARCH
y SALES

P PRODUCTION ENG.
M PRODUCT ENG.

” OTHERS

 

 

not“:

 

{3:00

132,135 "OANDA

 

3100-503

Zl

 

#6323

”SO

 

Kmo
or
EOWPNENT

2. Who surveys alternatives and determines kind
(not make) of equipment?

3. Who determines specifications and charac-
teristics to be met by the enninmann

D
()1

Zl 42

 

 

67

7.1

 

MAKE
OR
SUPPLIER

4 Who surveys available makes of the specified equipment
and chooses suppliers from whom to invite bids?

5. Who evaluates offered equipment for accord
with specifications?

6. Who decides which supplier gets the order?

kn
tn

:7

 

12‘.

H-

 

 

gflSJZ-J o o o o o o ,‘PURCHASING
7.:

coco-Smooono

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1. Who is most likely to initiate a project leading
toward the purchase of new equipment to:

(a) Replace existing equipment?

(b) Expand capacity?

(c) Change production processes?
(d) Take advantage of new materials?

(e) Manufacture new products?

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274

with about the same frequencies. In the Brazilian study, this process
was dominated by production engineering, with little mention being made
of product engineering. While a real difference may exist, it is the
author's opinion that a combination of carelessness in reading the ques-
tion and fatigue may better account for this response. Unlike the

Scientific American study,the questionnaire was administered in Brazil

 

after the interview, which generally lasted well over an hour. Respond-
dents answered this last section of the questionnaire noticeably more
quickly than they had the previous two sections.

Responses to the remaining questions concerning equipment purchases
revealed a high degree of consensus as to which department was the most
frequently involved in the tasks mentioned. -In both studies, buying
equipment for the manufacture of new products most frequently involved
operations and administration. Similarly, production engineering was
most frequently mentioned in both studies as likely to survey alternatives
and determine the kind of equipment needed. Specification writing most
often involved production engineering in Brazil and both production
engineering and product engineering in the United States. An analysis
of the Scientific American data revealed that in industries common to
the two studies, the production engineering department was more frequently
involved than was product engineering in the writing of specifications.

In the United States, purchasing was most frequently mentioned as surveying
alternative makes of specified equipment and choosing bidders. In Brazil,
these functions most often were performed by production engineering. As
was the case with materials and components, it appears that equipment pur-
chasing functions are not performed by purchasing in Brazil because varia-

tions in quality require a more technical evaluation than purchasing

275

personnel can provide. Again, in the Brazilian case, quality control
most often evaluates offered equipment for accordance with specifications
while this is done by prOduction control in the United States. Purchasing
decides which supplier gets the order in both countries.

In summary, few major differences were found between the findings
of the Scientific American survey, How Industry Buys/l970, and this study
of Rio Grande do Sul firms. The one difference apparently attribuable
to a situational factor concerns the problems which Skinner (1967) identi-
fied as common to developing countries: finding sources which produce a
product of adequate quality and which understand specifications. These
problems are reflected in the fact that technical departments -- quality
control in the case of materials and component parts, and product engi-
neering in the case of equipment -- are most involved in surveying avail-

able makes of specified items and in choosing bidders.

CHAPTER V
FIVE CASE STUDIES OF MOFIFIED REBUYS

Five case studies of modified rebuys were undertaken to meet the
second research purpose of identifying situational factors which sub-
stantially restrict or eliminate buying decision making. The three com-
panies which participated in this phase of the research are briefly de-
scribed in the following section. Next, the five studies are presented
and tentative conclUsions are drawn. At the end of the chapter, Table

ll summarizes aspects of the five.studies.

The ParticipatinggFirms

All three participating companies were headquartered in Greater
Porto Alegre. A brief description of the firms, identified as Companies
A, B, and C, now follows.

Company A's major products included screws, lathes, and pumps for oil
pipelines. It operates three plants, two adjacent ones in the Porto Alegre
area and one in the Northeast. Buying is centralized, and reorder stock
levels are established annually. Slightly over l,000 workers are employed
and gross sales in l977 were in the U.S. $l5-20 million range.

Company B's major products included industrial refrigeration equipment
and large air compressors. The firm operates three plants, one in Greater
Porto Alegre and one each in Brazil's northern and northeastern regions.
Buying is centralized, and purchasing operates on an annual production-

based budget, which is divided into fifteen major categories of items.

276

277

Orders are programmed for delivery on a quarterly basis. Employed are
approximately 950 workers, and sales in 1977 were in the U.S. $15-20
million range.

Company C's major products include window air conditioners, home re-
frigerators, air purifiers, hot water heaters, and color television sets.
There are three plants, on in Greater Porto Alegre and one each in Brazil's
northern and western regions. Buying is centralized, and major purchases
are programmed each trimester. Employment numbers slightly over 800, and

gross sales in I977 were in the U.S. $35-40 million range.
Case Number One: Oil Gauge Casing

Company A had used guages in the manufacture of its lathes for several
years. These had a clear plastic window through which the gauge face
could be read. When ComparyA won a contract to produce pumps for the
national refining company, specifications called for gauge windows of
glass, not plastic. A search of the market revealed no supplier. Company
A contracted with four firms to produce the gauge. The first provided the
metallic casing, the second the rubber ring seal, and the third the glass
for the window; the fourth firm assembled the finished product. Six months
after production began, the chief engineer of the Company A plant producing
the pumps noticed an advertisement in a technical magazine for the required
gauges. The plant engineer sentaamemo to purchasing asking it to secure
samples. Purchasing wrote to the local office of the manufacturer, and
samples were sent for testing. The product engineering department sent a
report to purchasing partially approving the item. It was noted that
engineering desired better finishing of the threads which would connect

the gauge to the pump. The manufacturer responded by letter, assuring that

278

finishing would be improved, and the company was approved by product
engineering as a vendor subject to reinspection of the threads in a
pilot order. Company A's plant engineer asked purchasing to obtain
the commercial terms of sale for the glass-windowed gauge in specified
quantities. The price quoted was higher than the four-step method
being used, but purchasing and the plant engineer agreed to purchase
the new gauges because there would be less administrative paperwork
and no loss due to breakage in assemply. It was felt that the savings
thus realized would more than offset the difference in price.

In this case, buyer decision making appeared to be greatly restricted
by the item specification. Purchasing's only decisions were to choose
the firms to supply the subcomponents and to decide whether Company A
should then make the item itself or contract out the assembly. Once a
supplier of the component was found, the only decision to be made was

whether to continue with the current process or buy from this new source.

Case Number TWO: Galvanized Sheet Steel

Company B used painted galvanized sheet steel in 1.2 meter widths as
walls in industrial refrigeration chambers, one of its leading products.
The steel was purchases from the USIMINAS steel mill, located 850 miles
north of Porto Alegre in Belo Horizonte. This mill, one of the three
government-controlled mills which are the exclusive producers of sheet
steel in Brazil, was the only one which produced steel in l.2 meter
widths. From Belo Horizonte, the steel was trucked out to the CSN govern-
ment mill near Rio de Janeiro for galvanization. This is the only mill
in Brazil which galvanized sheet steel. The galvanized metal was then

trucked farther south to Sao Paulo, where it was painted by Tekno, the

279

only firm in Brazil that has a continuous process for painting steel.

One day the CSN mill sent a telex informing Company B that it would
no longer galvanize steel for third parties, only for firms which purcha-
sed steel directly from CSN. The purchasing agent informed the indus-
trial director, who called a meeting to discuss how this decision would
affect Company B. In addition to the purchasing agent and the industrial
director, the sales manager, the product manager, and the head of design
engineering were included. Since the CSN mill only produced sheet steel
in 1.0 meter widths, and since Company B's styrofbam process required l.2
meter widths, changes in the production schedule and in product design were
contemplated. With the new projections of needed steel determined, the
industrial director asked the local representative of CSN to visit Com-
pany B's plant to discuss the problem. He arrived with the necessary
order placement forms. These were filled out and sent to CSN, which
communicated that it was taking Company B's order under advisement, subject
to working it into the production schedule. One month later, CSN confir-
med delivery dates for Company B.

In this situation, process monopoly, Company B had no decision to
make if it desired to continue the production of its major product. The

monopoly situation eliminated the need for decision making.

Case Number Three: Gas Forklift
Company C used electrically powered forklifts in several departments
at its main plant in Greater Porto Alegre. These were not powerful enough
for some warehousing tasks, and much time was being lost in recharging
the battery. Other departments were fully utilizing their forklifts, and
none could be loaned to warehousing during recharging. As a temporary

measure, purchasing leased a forklift from a local equipment rental firm,

280

which also held an exclusive franchise for this type of forklift for the
Porto Alegre area. The leased forklift was powered by gas and had been
adapted from a gasoline model. The rental experience created an interest
on the part of purchasing to find out more about this new type of forklift.
The salesman agreed to leave the rented machine an additional week, free
of charge, for testing purposes, provided that Company C would supply the
bottled gas necessary for operating the forklift. During the test week,
purchasing evaluated the comparative operating costs of gas, gasoline, and
electrically powered forklifts. The gas powered type performed better and
at a lower cost than the others. In addition, no down time was needed
except to exchange the gas bottles, a relatively quick operation. An
advantage of the gas vehicle over the gasoline powered ones was the possi-
bility of doing away with the gasoline storage tank, a container that had
worried management due to its volatile contents. Warehousing was pleased
with the performance of the test vehicle. The purchasing agent checked
with the financial director to make sure that funds were available; when
this was confirmed, he proceeded to purchase the gas powered forklift.

In this situation, Company C had to decide about three types of
forklifts. However, once the gas powered forklift was selected, the firm
had no choice of vendor, since the vehicle was sold through an exclusive

dealership.

Case Number Four: Steel Bending Machine
Company B used steel bending machines in the manufacture of tanks
for air compressors, one of its major products. As the compressor's
size increased over the years, and as the necessary steel became thicker,

the heavy machinery foreman noted that a steel bending machine capable

28l

of handling the thicker metal was needed. It was also noted that time
could be saved in manufacture and the appearance of the product could be
improved if a machine were bought which could be fed prebended steel.
These needs were communicated to the industrial director, who brought
the matter before the board of directors. No action was taken at the
board meetings and the subject was eventually drOpped from the agenda.
In a reorganization a member of the board who owned substantial amounts
of Company B's stock became the industrial director. Once he became
aware of the need of the new steel bending machine, he met with the
foreman, the plant manager, and a production engineer to draw up speci-
fications. The board of directors approved the purchase, and the finance
director included the item in the following year's budget. A local dis-
tributor was selected to search the market for the alternatives available.
He found two Brazilian producers of machinery of the needed size, but
neither could work with prebent steel. The high deposit effectively
ruled out importation. The distributor found one manufacturer in Argentina
who produced equipment called for by the specifications. Because of
LAFTA agreements, the machinery could be imported without paying the large
deposit usually required. The foreman was sent to Argentina to observe
the machines in operation. He returned with a favorable report. The in-
dustrial director then wrote colleagues in the firms using this brand of
machinery to confirm the adequacy of performance and repair services. These
reports were also favorable. When the money became available, the machine
was purchased.

In this situation, the lack of a national producer, import restric-
tions, and special trade agreements appear to have been the situational

factors which left Company B with no choice in the vendor selection.

282

Case Number Five: Air Conditioner Filter

Company C used filters in the production of its major products,
window air conditioners. Several materials had been used, the current
product being compressed fiberglass. A new petrochemically based anm
filter was introduced by a French multinational which launched a national
campaign to market the product. During the campaign a salesman called
on purchasing; it was agreed that samples would be sent for testing.
Product engineering and quality control tested the foam filter and appro-
ved it but specified changes in color , density and thickness. Production
engineering and materials management decided to purchase the new material
for two reasons. First, the price was lower than the fiberglas product
currently in use. Second, the product would permit less diversification
of stock; it was sold in rolls and could be cut to fit the different sizes
of air conditioners, whereas the fiberglas supplier sold his product
precut to model sizes.

Again, a situational factor, the lack of brand competition, appears
to have greatly restricted decision making. Decisions had to be made as
to whether the new product was better than the existing one, but once
this determination had been made, the lack of competitors eliminated

the vendor choice decision.

Conclusions
In these five case studies, situational factors appear to have elimi-
nated or greatly restricted the decision making process. In the case of
galvanized sheet steel, the decision concerning the choice of vendors was
eliminated due to the monopoly of the process by one government-controlled

steel mill. In the case of the steel beding machine, the vendor choice

283

was iliminated by import restrictions and tariffs which would have made
the price ofa machine from a non-LAFTA country exorbitant. In the remai-
ning instances, decision making was not eliminated, for alternative ways
of solving the purchasing problems existed. However, once the determina-
tion had been made concerning the best material or component, decision
making was unnecessary due to exclusive dealerships and/or the lack of
brand competition.

It should be stressed that these case studies only illustrate the
type of situations that can occur. Much research is needed to determine

the conditions under which such factors are likely to be operative.

SUMMARY RESULTS OF THE FIVE MODIFIED

284

TABLE 11

REBUY CASE STUDIES

 

 

 

 

 

 

 

 

 

 

 

Case Oil Gauge Galvanized Gas Forklift
: Casing Sheet Steel
Type Good é Component Component Accessory
3 Part Material Equipment
l
Precipitating ' Client Supplier Existing Product
Cause ; Deficiency
i
Market Contact 2 Technical Telex Emergency
’ Magazine Rental
Buying Center Purchasing Purchasing Purchasing
Members Plant Manager Industrial Warehouse Manager
Product Director Finance Director
Engineering
Patronage Less Breakage No Option More Efficient
Motives Less Paperwork in Use
No Gasoline
3 Storage Needed
Brand No No No

Competition

 

 

 

 

285

TABLE ll (cont'd.)

 

 

 

 

 

 

 

 

 

Case Sheet Steel Bending Air Conditioner Filter
Machine
Type of Good Capital Equipment Component Material
Precipatating Organizational New Product
i Cause Change
i Market Contact Manufacturer's Manufacturer's
Representative Salesman
Buying Center Industrial Director Materials Director
1 Members Foreman of Heavy Production Engineering
Machinery Product Engineering
Financial Director Quality Control
g Patronage Reduced Production Economy in Purchase
Motive Time Less Inventory Required
_ Brand No No
3 Competition

 

 

 

 

CHAPTER VI
STUDY CONCLUSIONS AND LIMITATIONS

Theoretical Findings_

The findings of this study support Sheth's (1973) emphasis on the
critical role of situational factors in industrial buying. Sheth stated
that, in some cases ad hoc situational variables determine industrial
buying decisions. In the case studies, two situational factors, monopoly
and import restrictions, did eliminate the need for decision making in
choosing vendors. In other instances, exclusive dealerships and new
production introductions restricted the decision making to the considera-
tion of generically competing products. Once the generic substitutes
had been ruled out as acceptable alternatives, the lack of dealer/brand
competition made additional decision making unnecessary. The study findings
also suggest that the Sheth assertion of the critical importance of these
factors may be expanded to include factors which are not strictly ad hoc,
such as import restrictions and working capital shortages.

Support was also found for Webster's (1970) study findings concer-
ning word-of-mouth communication among industrial buyers and for Patchen's
(1974) conclusions on methods of conflict resolution among members of buy-
ing centers. The finding of similar results as the two studies suggests
that some of the conclusions of other industrial buying studies in the
United States may also be relevant in business environments which differ

substantially. However, as was suggested in comparisons of buying criteria

286

287

and the practice of reciprocity, in some instances situational factors

may be operative and result in buying behavior different from what could
be expected based on study findings from the United States. Care should
be taken, therefore, to study the impact of relevant situational factors

before applying the conclusions from U.S. studies.

Practical Applications

At least three practical marketing applications can be made from
this study of industrial buying in Rio Grande do Sul. First, the increased
importance of price and financial terms in the vendor selection decisions
works to the advantage of suppliers which have more financial resources
than their competitors. As was noted, the shortage of working capital
in Rio Grande do Sul firms resulted in companies shifting their cash flow
problems to suppliers by delaying payment for purchases. This resulted in
suppliers refusing to sell to certain customers because the supplier could
not afford to carry accounts for extended time periods due to their own
financial obligations. Vendors that are able to accept late payments earn
interest charges in the 58-6l percent range, substantially more than the
43-44 percent charged for working capital.

Second, purchasing agents appear to have more responsibility for
obtaining market information than their U.S. counterparts. The study
indicated that purchasing agents are likely to initiate purchases for new
materials and for newly designed components. In addition, purchasing agents
converse with their purchasing colleagues an average of once each month.
This suggests that the purchasing agent should be the focus of new product
introduction efforts in Rio Grande do Sul.

Third, the effect of situational factors should be carefully

288

considered by multinational firms in the decision of whether or not to
centralize the purchasing function. This study supports the findings

of Skinner (l967) and Davis, Eppen, and Mattsson (1974) which presented
the difficulties of centralizing the purchasing function. The Brazilian
business environment and the situational factors discussed in this study '
suggests that Brazilian subsidiaries need to be allowed flexibility in

their purchase decisions.

New Area of Research

Two types of studies are needed to gain a better understanding of
situational factors in industrial buying. First, more of these factors
need to be identifed to make the checklist which Sheth (l973) called for.
In this study several situational factors have been identified, however,
they are only illustrative of the factors which can be found. The case
study approach used in this study is useful for identifying these factors
in actual buying situations.

Second, of special interest to decision-makers are the "reoccurring"
situational variables such as recessions. There is some evidence, for
example, that the degree of formalization of the buying process and the
influence of buying center members change with economic cycles (Guillet
de Monthoux, 1973). In order to better understand such reoccurring factors

logitudinal studies are needed.

Limitations
Nhile offering the conclusions presented in this study, the limiti-
tations of the research are conceded. First, the study sample was not
chosen so as to be a random sample and therefore may not be truly repre-

sentative of the study population. Second, the findings were discussed in

289

qualitatively rather than statistically. Third, only a few selected
aspects of industrial buying were chosen for comparative purposes and
the areas chosen may not be representative of the true influence of
situational factors in industrial buying. Fourth, in using a comparable
approach, especially when comparing findings from studies using differ-
ent methodologies and study populations, the conclusions drawn should
not be taken as more than tentative. Fifth, the case study approach
revealed findings which can occur, but other types of research studies,
such as longitudinal studies, may be more appropriate for an in-depth
understanding of how situational variables affect buyer decision making.
Even with these restrictions, the importance of situational factors in

industrial buying has been clearly established.

APPENDIX A

INTERVIEW GUIDE

10.

11.

12.

13.
1h

RESEARCH INTERVIEW GUIDE

Are forecasts made annually or how often?
How does purchasing participate in the process?
What would be the ideal (minimum) number of suppliers?

In formal or informal bidding. how many suppliers are
consulted?

What are the most Important purchasing criteria used in
vendor selection. in order of importance?

 

Quality Delivery Time Price
Financial Terms Other (Specify)
Is it purchasing policy to split orders? Yes No

If yes. how are orders split?

 

What percent of your items have only one producer?
What does the value of these items represent as a percen-
tage of all purchases?

 

What percent of your items have only two producers?
What does the value of these items represent as a percen-
tage of all purchases?

 

what are the most common financial terms used by this
organization in purchasing?

What is the average time from order placement to order
delivery for: Suppliers located in Sao Paulo-Rio de
Janeiro?

Suppliers located in Rio Grande do
Sul?

 

 

Is this a multiplant firm?
If yes. is the buying centralized or decentralized?

Reciprocity--how frequently does it occur and how important
is it as a percentage of total purchases by value?

289

15.

16.

17.

18.

19a

20.

21.

22.
23.
2“.

What are the main reasons (in order of occurrence) why
suppliers are switched?

 

Conflicts are common in every organization. How is it
resolved when. for example. engineering wants to indicate
which supplier/product should be chosen?

What are the most frequently used sources for finding new
suppliers. in order of frequency?

Sales Reps. Industrial Annuals ‘___CPA

'____Technical Magazines Supplier furnished information
Current Supplier Internal Research

 

 

 

Yellow Pages
Other (Specify)

 

 

 

Please describe the process a potential supplier goes through
to be a qualified supplier.

Do you speak with your colleagues in other firms about:
Products suppliers problems in your industry

 

 

 

How often. in general. would you say that these conversa-
tions occur? Weekly monthly less than monthly

How does the high rate of inflation influence the purchasing
process?

.Has this firm made importations in the past fiweiyears?

From which countries?

For foreign subsidiaries only--If you have been purchased
by a non-Brazilian firm. has the purchasing procedure been
altered?

Personal Data:

25.
26.
27.
28.
29.
30.

Title

 

Age

 

Years in current position

What was your former position?

 

Years of education completed

 

Would you like to belong to an organization for professional
purchasing agents?

290

APPENDIX B

QUESTIONNAIRE

A. PURCHASES OF MATERIALS

“a? “to h

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Who is most likely to initiate a project loading
toward the purchase of .- mater ill a:
(I) Take advantage of a new price differential? I.-
(b) Exploit a newly-developed material? is.
(c) Accommodate a change in the production process? ll-
(6) Meet a new performance requnremont? 11-
(e) Manufacture a new product? is-
2. Who surveys alternatives and determines kind
(not make) of material? ‘*
3. Who delarmmes specifications and charac-
teristics to be met by the material N
4. Who surveys available makes of the speCilied material
and chooses suppliers from whom to invite bids
5. Who evaluates submitted materials for accord
with specifications? ’2‘
6. Who deCides which supplier gets the order? 2:-
B. PURCHASES OF COMPONENT PARTS
1. Who is most likely to initiate a project leading
toward the purchase of component parts to:
(a) Take advantage of a new price differential? u-
(b) Take advantage of innovation in
mponenl design? "
(c) Accommodate a change in the design
of an existing product ct? "
(d) . . .. ' . .2 i r .. n-
fe) Incorporate into a new product? a
2 “" nll-o-ol -- A 4 ‘ hn‘
(not make) of component parts to be used? 3-
3. Who determines specifications and charac-
teristics to be met 'by the component parts? 3'
‘ u...
98'“ II“: T .. I wuum w mun: mu. r ,b
5 Who evaluates submitted compoth parts for accord
with specifications? :-
6. Who decides which supplier gets the order? n-
C. PURCHASES OF EQUIPMENT
1 Who is most likely to initiate a project leading
toward the purchase of new equipmen
(a) Replace existing equipment? so-
fb) Expand capacity? as-
(c) Change production processes? ss-
ld) Take advantage of new materials? :1-
(el Manufacture new products? a»
. u. , l .I A A I. cad
(not make) of eqmpmenl? ’
a_ \IIL A o 1‘ -n‘ nh- -:
mm." .. ~ - F ‘* equipment? ‘-
4. -‘: _ , ' _" . ' ‘ “ ‘-'““‘.:_;.....-... w
5. Who evaluates offered equipment for accord ._
with specifications?
6. Who decides which supplier gets the order? 6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

iqi

 

 

APPENDIX C

COVER LETTER FROM THE PRESIDENT
OF THE FEDERATION DE INDUSTRIES
0F RIO GRADE DO SUL

MINIST‘RIO D“ IDUCAC‘O I CULTUIA
0s g 'K'r“ 597$? UNIW'SID‘D' 'IDIIAL 0° RIO GRAND! M ’UL
. a I

s asJ
PROGRAM DE PCs-GRADUAQKO EM ADMINISTRACKO

704/78-PPGA Porto Alegre, 14 de novembro de 1978.

Prozado Senhor:

Venho por meio deste apresentar-lhe o Senhor
DENNIS ALAN GUTHBRY, natural dos Estados unidos e residente
em Porto Alegre ha dois anos. 0 Sr. Guthery esti escrevendo
sua tese de doutoramento na area do Administraqio de Empre-
sas pela Universidade Estadual de Michigan, sob a orienta-
950 do Professor Don Taylor. A pesquisa que 0 Sr. Guthery
pretends fazer trata-se do processo de compras em empresas
do médio e grande porte do Rio Grande do Sul.

Acredito na relevincia da pesquisa, pols se
trata de uma area do suma importancia para nossas empresas
e as resultados podem trazer beneficios n30 somente para as
empresas qua participam, mas também.para todos os diretores
do empresas interessados em entender melhor este assunto

complexo. Portanto, solicito seu apoio ao Sr. Guthery nesta

    

pesquisa.
No aguardo de suas providéncias,subscrevo-me
atenciosamente. /
f 'I'l‘ ’x’v
Prof; Volnei'Alves Corréa,
Coorhenador.
Ilmo. Sr.

ENIO VERLANGIERI
M.D. Presidente da FIERGS

”ESTA Pfinfmar

APPENDIX D

COVER LETTER FROM THE DIRECTOR OF GRADUATE
PROGRAMS IN ADMINISTRATION AT THE
FEDERAL UNIVERSITY OF RIO GRANDE DO SUL

 

FEDERACAO DAS INDUSTRIAS DO ESTADO DO RIO GRANDE DO SUL

 

I) " SIDS: PONTO ALIONI o I8 - ”I". . (DIP. PUMAC - 19.0 e 20.0 ANDANID
2 U 3' CAIXA POS‘IAL. W - POND 28°25“ - IND. TlLIOIAFICOt “FIINOS”
m1 NJ 061.190.

Porto Alegre, 14 de novembro de 1978.

Prezados Colegas Industriais,

Anexando copia de correspondéncia re
cebida do Coordenador do Programa de Pds-Graduagao em Administra
gao, da Universidade Federal do Rio Grande do Sul, temos a satis
fagio de lhes apresentar o Senhor DENNIS ALAN GUTHERY, que esta
compondo Tese de Doutoramento na area do Administracao de Empre-
sas pela Universidade Estadual de Michigan. 0 tema escolhido é
o Processo de Compras em empresas de médio e grande porte do Rio
Grande do Sul.

Trata-se, assim, de um trabalho altg
mente técnico-cientifico, deveras importante sob o aspecto da 19
gistica empresarial, matéria, hoje, largamente difundida nos Es-
tados Unidos da América.

Desta forma, o contato que o Senhor
GUTHERY mantera com Vossas Senhorias reveste-se, também, de gran-
de importancia para o nosso Parque Industrial, razéo pelacuml es
peramos que lhe seja proporcionada toda a copperagao possivel.

Gratos pela atengéo, valemo-nos do en
sejo para expressar-lhes nosso real aprego e particular stencio.

Cordiais Saudagées,

FEDERACAO DAS INDUSTRIAS DO
ESTADO DO RIO GRANDE DO SUL
T)»

fi«-——~———/"7.
ENIO VERLANGIERI
Presidente

Anexo: 1 (um)

SELECTED BIBLIOGRAPHY

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