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Business logic in buyer-seller relationships


Business logic in buyer-seller relationships

Seppo Leminen Competence and Knowledge Center for Electronic Commerce and Digital Economy, Helsinki Business Polytechnic and Center for Relationship Marketing and Service Management, Swedish School of Economics, Helsinki, Finland

Keywords

Channel relations, Interaction, Telecommunications industry

Why business logic?
Ford (1980) points out that product and process technologies determine the nature of buyer-seller relations. Webster (1991) states that buyer-seller relationships can be illustrated as different relationships from a simple transaction to strategic alliances in industrial marketing. Vasconcellos (1988) differentiates projects from goods and services in a transaction/production typology. In addition to that, Cova et al. (1993, p. 376) illustrate two main features, namely: complexity and specificity which differentiate projects[1] from other industrial products (i.e. goods and services). Webster (1991, p. 66) points out that:
. . . buyer-seller relationships in industrial marketing develop in the purchasing decision process and continue through negotiation of the sale and consummation of the transaction to post-sale service and repeat orders.

Business logic
The business logic links activities, actors, and resources together within and between companies in buyer-seller relationships. Ford (1980, p. 341) points out that ``each episode affects the overall relationship and a single episode can change it radically''. This means that there are two-way interactions between a relationship and an episode as well as between an episode and an act. This study in turn suggests that business logic widens the understanding of buyer-seller relationships in the four approaches. These four approaches are: interaction and network approaches, service marketing and management approach, relationship marketing and project marketing approach. Figure 1 describes how the four approaches have viewed business logic and how the present study views them. There are five main differences between earlier research and the current study. These differences are shown in bold numbers in Figure 1 and are described in the following sub-sections.

Abstract

Aims to increase understanding of business logic in buyer-seller relationships. Increasingly complex, fast-changing, and dynamic business environments provide a rich research environment for analysing business logic in business relationships. Defines a new concept, the business logic (operation mode), in order to holistically understand projects, services, and packaged products in their lifecycles between and within buyers and sellers. This means offering, delivering, and installing and maintaining the project, service, and packaged product.

Management Decision 39/8 [2001] 660±665 # MCB University Press [ISSN 0025-1747]

Further, there are three types of business logic (i.e. project, service, and packaged product business logic) in buyer-seller relationships, which may exist simultaneously. All business logic affects other business logic as well as entire business relationships (Leminen, 1996, 1997). There are no particular models and frameworks which discuss a combination of the three business logics. There is surprisingly little discussion in the literature about the connection between the three business logics in buyer-seller relationships. Business logic has been described indirectly in studies which point out that many industrial marketing situations are similar to many service situations (Gronroos, 1994), ? or that the service and goods quality models should be integrated (Gronroos and ? Gummesson, 1985; Gronroos, 1993). ?
The current issue and full text archive of this journal is available at http://www.emerald-library.com/ft

1 Business logic forms entire relationship

The theoretical approaches typically describe concepts which fill the functions of theories in order to clarify research problems in their contexts. The interaction and network approaches focus on interaction and longer dynamic relationships between companies in industrial marketing settings, for example. The present study proposes that the companies can simultaneously have three kinds of parallel types of business logic, i.e. business logic. These in turn form the entire relationships

2 Discussion of business logic in the four marketing approaches

The interaction and network approaches mainly describe the project business logic (e.g. Hakansson, 1982; Alajoutsijarvi, 1996) ? ? and the packaged product business logic (e.g. Hakansson, 1982; Turnbull and Valla, 1989). ?

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Seppo Leminen Business logic in buyer-seller relationships Management Decision 39/8 [2001] 660±665

However, this does not mean that the interaction and network approaches could not describe the service business logic. The inclusion of service business logic (see e.g. Gronroos, 1990a) would widen the ? understanding of buyer-seller relationships in the interaction and network approaches. Thus, Gronroos and Gummesson (1985, p. 8) ? point out that ``concepts and models developed for service firms may also be useful for industrial firms''. Further, Gronroos (1993) points out that service and ? goods quality models should be integrated because the border between service and goods industries is not very clear. Furthermore, Gronroos (1994, p. 10) argues ?

Figure 1 Business logic

that ``in many industrial marketing situations customer relationships are similar to many service situations''. Until now the relationship marketing approach has mainly discussed the service and packaged product business logic (e.g. Gronroos, 1990b). Relationship marketing ? has its foundation in the service marketing and management approach as well as in the interaction and network approaches. It would be quite natural to extend the discussion of the project business logic to relationship marketing, because the interaction and network approaches describe the project business logic (see, e.g. Hakansson, 1982; Alajoutsijarvi, 1996). This is ? ? especially important because within the project business logic short or long relationships can be found, and the project business logic sheds light on the longitudinal development of buyer-seller relationships. The service marketing and management approach mainly describes the service business logic (see, e.g. Gummesson, 1977; Gronroos, 1979, 1990a). The service ? marketing approach defines services as consisting of tangible and intangible products (Gronroos, 1990a). Further, within ? service marketing, mapping techniques for developing processes that deal with concrete and detailed specifications and drawings of a particular service have been discussed (see e.g. Shostack, 1984, 1987; Gummesson and Klingman-Brundage, 1992). In addition, the project business logic widens the service marketing and management approach by describing how the development of a complex system (service) can be achieved and coordinated in a limited time period between the temporary actors in order to serve the end customers. The project marketing approach mainly describes the project business logic (see, e.g. Mattsson, 1983; Ahmed, 1993). Traditionally, projects are temporary and actors have a specific goal and a short-term strategy. Some authors have described projects as being a part of longer buyer-seller relationships (see e.g. Mattsson, 1983; Jansson, 1979; Hadjikhani, 1993). The project business logic is described from the perspective of a project consisting of elements of services and packaged products (e.g. Ahmed, 1993). Nevertheless, the present study sees projects as affecting entire relationships and vice versa. Further, products and services are not merely elements of projects; all three types of business logic may affect entire relationships and vice versa. The combination of all three business logics and their temporal development, before, during and after a project, help to see projects as a part of a

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longer buyer-seller relationship. This also involves how the buyer and the seller take care of the delivered system after the project is finished, or how the different projects are linked together.

3, 4 Interactions in relationship and business logic

As described earlier, the business logic is partly discussed in the four approaches. Hakansson and Snehota (1995, p. 25) state that ? ``a relationship develops over time as a chain of interaction episodes ± a sequence of acts and conteracts. It has a history and a future.'' The approaches have suggested connections of business logic between a single business logic and an entire relationship[2] or connections within a single business logic[3]. The present study in turn widens the understanding of relationship development by suggesting that the development of an individual business logic affects not only the business logic but also other business logic and entire relationships. This means that there exist connections to the surrounding environment from each single business logic. By viewing relationships phenomena which occur in other types of business logic should be considered. The three types of business logic affect each other dynamically. The business logic widens the approaches by describing connections between all single business logics and relationships as well as connections between the three business logics. The business logics connect single operations to relationships from the past, present and future perspectives. Leminen (1999) gives two examples of development of gaps between business logics. 1 The social gap found in a project business logic may also reflect on other business logic, and in turn reflect in there difficulties which might lead to gaps. 2 It is also possible that instead of the buyer perceiving gaps in a single business logic, the buyer might also perceive a lack of trust due to inadequately completed activities in every business logic. Further, activities may fall between the business logics in the buyer-seller relationships. Such activities may in turn lead to the development of gaps in buyer-seller relationships. These activities may be related to offering, delivering, installing, and maintaining projects, services, and packaged products types of operations between and with a buyer and a seller or connected to the surrounding network. Three examples of these activities are presented below: . Activities falling in between business logics. When co-ordinating the

.

.

customer specific changes between a buyer and a seller from earlier software versions into a current version in the project business logic, may lead to activities falling in between business logics. This is especially relevant to changes which were made earlier in the service business logic and should also be made in the current software version in the project business logic. Change of system configuration leads to updating of spare parts in service business logic. The co-ordination of spare parts delivery after completed projects between a buyer and a seller is a challenge in the packaged product business logic. Thus, the configuration of the system may change, which in turn may lead to the need to update another range of spare parts. Changes in service business logic affect project business logic. Changes made to various systems and their software may take place during a period of several years in the service business logic. However, these changes must be considered in the current software version in the project business logic. The co-ordination of changes is even more challenging when it occurs between several parties.

5 Analyses of gaps in business logic of buyer-seller relationships

Business logic can be further divided into levels (Leminen, 1997, 1999). By looking at relationships from the three business logic perspectives, these types of business logic increase understanding of process of identifying and establishing, maintaining, enchancing and when necessary terminating relationships. Thus, Leminen (1999) suggests that the same types of analyses of gaps in buyer-seller relationships can be done with the help of tools provided in this study, regardless of business logic. The constructed tools and the viewpoints provided by the framework can be used in three types of business logic for analysing gaps in buyerseller relationships.

Dynamic of business logic
The business logics are illustrated by different types of squares in Figure 2. The bold, dotted square indicates the project business logic. The dotted square indicates the service business logic. The solid square refers to the packaged product business logic. The projects are represented by solid, bold

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Seppo Leminen Business logic in buyer-seller relationships Management Decision 39/8 [2001] 660±665

ellipses. The business logic axis is located in the bottom left-hand corner. The relationship continues in the service business logic and the packaged product business logic after a project is finished. These modes can be understood as pre or post project stages. Further, the relationship can also continue in new projects in the project business logic. This can be interpreted as the service business logic and packaged product business logic from previous projects affecting the existing case. However, all three business logics can be presented at the same time. The bold arrows and bold characters indicate the connections between the different business logics. The projects and the connections between the business logics occurred on every composite level of the relationship, although the projects and the connections are only illustrated on the relationship level in Figure 2. The character a stands for the connections between the earlier project(s) and the existing project. An earlier project affected the existing project by transferring difficulties from the past project (Leminen, 1999). The characters b, c, and d stand for the connections between the service business logic and the project business logic before the project, during the project, and after the project. This means, for example, how the maintenance of the case is arranged after the project is finished with the help of the existing service business logic. The connections between the service business logic and the project business logic occurred in all cases, by transferring unsolved issues of the projects to the service business logic at the end of the project. The character e indicates that the studied project affected the projects that followed. Leminen (1999) describes the effect of an existing project on

the following project via a single case in the chain of projects between the buyer and the seller, i.e. the main projects, the industrialisation project, and its roll out project. The characters f, g, and h stand for the connections between the packaged product business logic and the project business logic before, during and after the projects. The composite levels axis, which represents the composite levels of the relationships, is located on the left side of Figure 2. The time axis is located at the bottom of the figure. The environment level surrounds the entire cube, i.e. the buyerseller relationship, which consists of the summary of the levels, the business logic, and time.

Summary
The approaches have recognised one or several business logics. A concept which would cover the content of business logic does not exist. This study suggests that: . there is a need for a new concept in order to combine the discussion of the business logic with the four approaches; and . to describe the business logic with the help of a single term for analysing buyerseller relationships. The present study suggests various managerial implications in order that managers may develop the management of their companies. The business logic is concrete and important for managers to consider. Thus, managers may face three types of business logic in their business, i.e. project, service, and packaged product types of operations in buyer-seller relationships. Further, managers may also face the challenge of managing these operations since a single business logic does not only affect that business logic but all three types of business logic via connections between them. The business logic provides a tool for seeing the connections between different types of business logic. Phenomena which have occurred in earlier incidents may affect current incidents or entire relationships. This development may be understood within a single project. This may also be understood as also occurring between projects. The business logic also provides a tool for understanding buyer-seller relationships as entities not only as a partial business logic. Furthermore, the business logic enables seeing the project, service, and packaged product business logic as part of a chain in the developing relationship between buyers

Figure 2 Business logic, composite level, and time

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Seppo Leminen Business logic in buyer-seller relationships Management Decision 39/8 [2001] 660±665

and sellers. The buyer and the seller do not transfer experiences from the past to the future, even though they have a great deal of experience in handling traditional projects with each other. Thus, the study suggests that companies should study their business logic and processes and especially find solutions for transferring experiences from the past in order to manage gaps. In sum, this study suggests various managerial implications for the managers of the buyer and the seller. The business logics are a basis for starting to improve business logic and processes related to buyer-seller relationships. This study suggests: . evaluating business logics and their processes between and within companies; . considering the connections between the single business logics; and . transferring the understanding and knowledge from each business logic to other modes.

Notes

1 A project occurs in a limited time period in buyer-seller relationships, with a well-defined set of desired end results to create or expand a facility or a service at a given time and a place and it is non-recurrent (Leminen, 1999). 2 This means how services affect entire relationships or how a project may affect an entire relationship, for example. 3 This means how earlier service episodes affect current ones, or how earlier projects affect current ones, for example.

References

Ahmed, M. (1993), ``International marketing and purchasing of projects: interactions and paradoxes, a study of Finnish projects export to the Arab countries'', doctoral thesis, Swedish School of Economics and Business Administration, Helsinki, p. 337. Alajoutsijarvi, K. (1996), ``Rautainen pari: ? Kymmenen ja Valmetin suhde, lahiverkosto ? ja makrovoimat 1948-90'', doctoral thesis, University of Jyvaskyla, Jyvaskyla Studies in ? ? ? ? Computer Science, Economics and Statistics, Jyvaskyla, p. 279. ? ? Cova, B., Mazet F., Salle R. (1993), ``Towards flexible anticipation: the challenge of project marketing'', in Baker, M. (Ed.), Perspectives on Marketing Management, Vol. 3, John Wiley & Sons Ltd, pp. 375-400. Ford, D. (1980), ``The development of buyer-seller relationships in industrial markets'', European Journal of Marketing, Vol. 14 No 5/6, pp. 339-54. Gronroos, C. (1979), ``Marknadsforing av tjanster. ? ? ? En studie av marknadsforingsfunktionen i ?

tjansteforetag'', doctoral thesis, Swedish ? ? School of Economics and Business Administration, Akademielitteratur ± Marknadstekniskt Centrum, Helsingfors, p. 286. Gronroos, C. (1990a), Service Management and ? Marketing, Managing the Moments of Truth in Service Competition, Lexington Books, Lexington, MA, p. 296. Gronroos, C. (1990b), ``Marketing redefined'', ? Management Decision, Vol. 28 No. 8, pp. 5-9. Gronroos, C. (1993), ``Toward a third phase in ? service quality research: challenges and future directions'', in Swartz, T., Bowen, D. and Brown, S. (Eds), Advances in Services Marketing and Management, JAI Press, Greenwich, CT, Vol. 2, pp. 49-64. Gronroos, C. (1994), ``From marketing mix to ? relationship marketing: towards a paradigm shift in marketing'', Management Decision, Vol. 32 No. 2, pp. 4-20. Gronroos, C. and Gummesson E. (1985), ``Service ? marketing ± Nordic school perspectives'', Department of Business Administration at University of Stockholm, Stockholm, Vol. 2, p. 153. Gummesson, E. (1977), ``Marknadsforing och ? inkop av konsulttjanster, En studie av ? ? egenskaper och beteenden i producenttjanstmarknader'', doctoral thesis, ? Foretagsekonomiska Institution, Department ? of Business Administration, University of Stockholm, Stockholm, p. 257. Gummesson, E. and Klingman-Brundage, J. (1992), ``Service design and quality: applying service blueprinting and service mapping to railroad services'', in Kunst, P. and Lemmink, J. (Eds), Quality Management in Services, pp. 101-14. Hadjikhani, A. (1993), Project Marketing and Changing Relationship, Department of Business Studies, Working Paper 1993/10, Uppsala University, Uppsala, p. 9. Hakansson, H. (Ed.) (1982), International ? Marketing and Purchasing of Industrial Goods, John Wiley & Sons, Chichester, pp. 10-27, p. 406. Hakansson, H. and Snehota, I. (1995), Developing ? Relationships in Business Networks, Routledge, London, p. 418. Jansson, H. (1979), ``Marketing to projects in South-East Asia'', in Cavusgil, S.T. (Ed.), Advances in International Marketing, Vol. 3, pp. 259-76. Leminen, S. (1996), ``Buyer-seller relationships in telecommunication industry'', presentation held in Marketing Tutorial, Tampere, 12-13 December. Leminen, S. (1997), ``Gaps in buyer-seller relationships'', in Mazet, Salle and Valla (Eds), 13th IMP Conference, Work in Progress Papers, Vol. 1, 4-6 September, Lyon, pp. 355-79.

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Leminen, S. (1999), ``Gaps in buyer-seller relationships ± case studies in the telecommunication industry'', doctoral thesis, Nr 77, Helsingfors, Swedish School of Economics and Business Administration, Helsinki, p. 354. Mattsson, L.-G. (1983), ``Design of supply systems for technology transfers ± an analysis from the equipment supplier's point of view'', in Goldeberg, W.H. (Ed). Mergers, Motives, Modes, Methods, Gower, Aldershot, pp. 189-206. Shostack, L. (1984) ``Service design in the operating environment'', in George, W.R. and Marshall, C. (Eds), Developing New Services,

American Marketing Association, Chicago, IL, pp. 27-43. Shostack, L. (1987), ``Service positioning through structural change'', Journal of Marketing, January, Vol. 51, pp. 34-43. Turnbull, P. and Valla, J. (Eds) (1989), ``Strategies for international industrial marketing'', The Management of Customer Relationships in European Industrial Markets, Croom Helm, London, 2nd ed., p. 310. Vasconcellos, e Sa J. (1988), ``Some empirical ? evidence on a contingency theory of success factor'', European Management Journal, Vol. 6. No. 3, pp. 236-49. Webster, F. (1991), Industrial Marketing Strategy, 3rd ed., Wiley, New York, NY, p. 365.

Application questions
1 Which business logics and their connections used in your company need to be influenced? 2 How could the business logic described in this article be used for managing buyerseller relationships in your company?

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