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Purchasing strategies in supply relationships

Senja Svahn
Faculty of Business and Technology Management, Tampere University of Technology, Tampere, Finland, and

Mika Westerlund
Department of Marketing and Management, Helsinki School of Economics, Helsinki, Finland
Abstract
Purpose Purchasing has emerged as a key source of competitive advantage. This paper aims to explore how different purchasing strategies are
connected to complex supply relationships and to the goal of purchasing.
Design/methodology/approach The study draws on the literature on industrial network theory and industrial buying behaviour.
Findings The contribution describes six types of purchasing strategies that firms exert. These strategies depend on the complexity of supply
relationships and the buyers purchasing goal. Conventional products and services are bought through transactional exchange relationships, whereas
strategically important items are purchased through intentional supply networks.
Practical implications Purchasing strategies of a firm emphasise either efficiency or effectiveness of operation. The type of exchange varies
according to the nature of supply relationships: it is either transactional or relational. A key implication for managers is that they should recognise the
goal of buying, the strategic importance of the object of purchasing, and choose accordingly between the different types of supplier structures.
Originality/value The paper shows that firms purchasing strategies depend on the nature of their supply relationships and the motive for
purchasing. Different strategies emphasise different aspects and events that ultimately manifest themselves in the firms business models.
Keywords Buyer-supplier relationship, Supply chain management, Purchasing
Paper type Conceptual paper

management philosophy: managers of companies face the fact


that no organisation is an expert in everything and the
integration of processes essential in delivering value to their
customers requires intense collaboration among several actors
in the supply network.
Consequently, the purchasing function of companies has
increased its strategic importance (Gadde and Hakansson,
2001, pp. 19-24; Pressey et al., 2007). Since the strong focus
on developing purchasing strategies in the late 1980s and
early 1990s (see, e.g. Campbell, 1985; Morgan, 1987; Gadde
and Hakansson, 1994; Macbeth, 1994), the purchasing
function has lacked attention in both business and academic
literature for a long time. However, after a period of neglect it
has become a new source of competitive advantage for a firm
(Axelsson and Wynstra, 2002; Moeller et al., 2006).
Contemporary purchasing in the twenty-first century is
strategic and can be called procurement as suggested by
Macbeth (1994) and Spekman et al. (1994). Due to the active
encouragement by buyer organisations, the collaboration
among suppliers is now greater than before (Dubois and
Gadde, 2000).
The make-or-buy question in research literature and
management practice considers whether to make required
products and services in-house or buy outside (Brandes,
1994; Gadde and Hakansson, 1994; Bryntse, 1996).
However, recent studies (e.g. Parmigiani, 2007) show that
modern firms opt for concurrent sourcing (i.e. they
simultaneously make and buy, but with emphasis on one or
the other). Thus, key questions are less concerned with the
make-or-buy dilemma, than with whom to collaborate in
supply activities, and how to choose the optimal purchasing
strategy in a supply network environment. However, these
issues have not received sufficient attention in the research
literature.

An executive summary for managers and executive


readers can be found at the end of this issue.

Introduction: transition from purchasing to


strategic sourcing
Competitive advantage in contemporary market flux does not
depend solely on firms competence in providing competitive
ranges of offerings (Dyer and Singh, 1998). Conversely, it
draws on firms skill to establish superior purchasing strategies
in complex inter-organisational setting of numerous suppliers.
This is because the traditional way in which economic
activities are carried out is changing, as business practitioners
and academics alike are being encouraged to adopt a multifirm network context (Axelsson and Easton, 1992; Achrol,
1997; Foss, 1999; Knoke, 2001; Jarratt, 2004). Firms are no
longer able to develop major product or service innovations
alone because of the dispersion of knowledge and
technological
resources
driven
by organisational
specialisation. In addition, the growing need for greater
effectiveness in their operation has forced more companies to
focus on their core competencies, leading to the
externalisation of the activities to partners and business
actors, and thus, to increased dependence on each others
resources and capabilities (Barney, 1986, 1991; Grant, 1996;
Prahalad and Hamel, 1990; Rumelt, 1974; Wernerfelt, 1984).
The development is especially noticeable in the supply chain
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0885-8624.htm

Journal of Business & Industrial Marketing


24/3/4 (2009) 173181
q Emerald Group Publishing Limited [ISSN 0885-8624]
[DOI 10.1108/08858620910939723]

173

Purchasing strategies in supply relationships

Journal of Business & Industrial Marketing

Senja Svahn and Mika Westerlund

Volume 24 Number 3/4 2009 173 181

In this study, we focus on firms purchasing strategies in


supply relationships. Our aim is to explain the relationship
between purchasing and the type of supplier relationship. To
be more specific, the objective here is to explore:
.
the purchasing strategies of a firm in the supply
relationship context; and
.
the way in which these strategies differ according to the
complexity of the buyer-seller relationship and the firms
purchasing goal.

for each product or service (Richardsson, 1993). A company


choosing this strategy is seeking scale advantages through
lower-cost products in a dyadic relationship.
Parallel sourcing is a strategy in which the buyer
simultaneously purchases conventional products from a
group of suppliers each specialised in a single product
category (Richardsson, 1993). However, in the case of
products that are crucial for the buyers business, a company
opts for a single supplier. In this respect, the parallel sourcing
strategy combines the advantages of single and multiple
sourcing. By adopting this strategy the company can also
easily compare potential suppliers.
Finally, multiple sourcing strategies are adopted when the
buyer systematically utilises several suppliers for each product
or service (Richardsson, 1993). A key benefit in this strategy
is the buyers independence of any specific supplier, which
ensures reliable distribution of materials and components. It
should be noted, that companies may prefer to keep a reserve
of alternative suppliers at hand in order to avoid becoming
dependent on any specific supplier.
Two main types of exchange can be distinguished:
transactional and the relational. Their theoretical basis
stems from transaction cost economics (TCE), introduced
by Coase (1937) and developed by Williamson (1985), and
from the resource-based view of the firm (RBV) that
originated from the work of Penrose (1959) and was refined
by Wernerfelt (1984). The TCE provides us with some
attributes for the exploration of market versus hierarchical
mechanisms for analysing strategic dependencies, through
identifying three attributes of exchange:
1 The frequency with which transactions occur focuses on
the type and degree of inter-organisational exchange.
2 The uncertainty to which transactions are subject.
3 The asset specificity involved in supplying products and
services.

Our paper is structured as follows: After this introduction, we


discuss the theoretical foundations of purchasing and supply
networks. Then, on the basis of the literature review, we
establish our conceptual framework in order to describe
different purchasing strategies and organisational buying
contexts related to supply relationships. Finally, we conclude
the study by discussing the theoretical and managerial
implications derived from our analysis and recommend
some avenues for future research.

Antecedents of organisational purchasing


The purchase of components and services has direct effects
on the business. According to prior studies (e.g. Chisnall,
1985; Brandes, 1994; Gadde and Hakansson, 1994; Hutt and
Speh, 1998; Cavinato, 1999) industrial purchasing involves
many activities: identifying the supplier-base, establishing
bidding competition, creating tools for managing the
purchasing activity, minimising supplier-related risk,
evaluating and comparing the potential supply partners, and
forming supply contracts. Despite the complexity of the
purchasing process the essential choices are manifested in
companies purchasing strategies in different contextual
buying settings (Faes et al., 2001; Hutt and Speh, 1998,
pp. 70-75). Key dilemmas in strategy formulation relate to the
nature of exchange and to the selection of suppliers among
the plethora of potential actors (Cavinato, 1999; Faes et al.,
2001).
An interesting approach to these aspects is presented by
Kraljic (1983), who categorises types of purchases both
according to their criticality to the buyer and to their
availability from the supplier. Based on this categorisation it is
possible to valuate the potential suppliers by first identifying
the set of challenges related to purchasing situation and then
evaluating the different actors capability to respond to these
issues. Although Kraljics portfolio has received much
attention and critique (e.g. Gelderman and van Weele,
2003), it is one of the best-known purchasing tools. The
assumption is that the buyer has power-based benefit as there
are many potential suppliers in the market willing to compete
and join the bidding competition (Cox, 2001). Purchasing
behaviour based on such arms length relationships is
supposed to enable firms to take advantage of the market
forces (Gadde and Hakansson, 1994; Lilliecreutz, 1998).
However, Dubois and Gadde (2000) point out that most
supply markets show few signs of being real markets, because
in many cases only a few suppliers are available.
Dealing with both single and multiple sourcing is a classic
issue in purchasing strategy (Gadde and Hakansson, 1994).
According to Richardsson (1993), the buyers primary
considerations in the purchasing process are whether to
prefer single, parallel, or multiple sourcing strategies. Single
sourcing takes place when a company has only one supplier

Dwyer and Oh (1988) and Tsang (2006) explain that


transactional exchange typically involves single short-term
events with a distinct beginning and end. Moreover,
according to Arino and de la Torre (1998), the increasing
complexity of markets makes it difficult for firms to possess all
the resources to compete effectively, and exchange leads to
relational interdependency. Thus, Axelsson and Wynstra
(2002, p. 213) claim that purchasing behaviour in regard to
supplier relationships becomes either transaction- or relationoriented. According to them, the transactional approach is
characterised by the companies efforts to exploit the potential
of competition, and the relational approach describes their
intention to exploit the potential of co-operation.
Transactional exchange is the dominant form of business in
industries such as the construction industry, where the
business exchange tends to be contractual rather than
relational (Dubois and Gadde, 2000). However, many
industries show a clear trend towards intentionally created
and managed supply networks. Dubois and Gadde (2000)
argue that focusing on transactional exchange hampers the
development of network substance, and increasing reliance on
relational exchange would enhance conditions for
innovativeness and adaptations among firms in the network.
Purchasing has two primary functions concerning buyers
business strategy: operational efficiency and effectiveness.
The essential difference between the two is that efficiency is
connected with price-orientation and cost-reduction and
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Purchasing strategies in supply relationships

Journal of Business & Industrial Marketing

Senja Svahn and Mika Westerlund

Volume 24 Number 3/4 2009 173 181

effectiveness is linked with improvement and valueorientation (Macbeth, 1994; Axelsson and Wynstra, 2002,
p. 214). From the efficiency perspective of view, purchasing
adds value to the organisation by providing the lowest cost to
the firm as well as by managing the supplier relationships
(Cavinato, 1999). The buyers expectations in a buyer-seller
relationship emphasise the awareness of competitive prices
and efforts to minimise the costs (Cavinato, 1999). Thus, the
added-value of purchasing is based on acquiring the lowest
price and meeting the related information needs, and the
specific ways for seeking efficiency of operation are: the
rationalisation of administrative costs, the rationalisation of
production costs, and the rationalisation of material flow costs
(Gadde and Hakansson, 1994; Gadde and Hakansson, 2001,
pp. 3-5). The established criterion of efficiency has often
resulted in multiple sourcing, as supplier competition has
been given priority. By promoting competition among
suppliers, customers are expected to be given both better
control of price levels and more reliable supply through the
diversification of risks (Gadde and Hakansson, 1994).
However, the traditional view of efficiency in purchasing
does not allow for making direct use of the total resources of
the suppliers, because it refers to transactional market
exchange.
The specific way of seeking operational effectiveness is the
business development activity through supplier relations
(Gadde and Hakansson, 1994; Ford et al., 2003). In this
situation, the added-value of purchasing supports the
generation of innovation through a network of actors. Hyun
(1994) argues that in a stable business environment, many
companies opt to improve efficiency, but the environmental
change demands increased flexibility and innovativeness.
Thus, from the purchasing perspective, the buyers
expectations relate to the ability to create novel packages of
products and services for internal and external partners
(Cavinato, 1999). This notion is consistent with Dubois and
Gadde (2000), who point out that the customisation of
products and service solutions improve both efficiency and
innovation. Adapted solutions reduce the need for
adjustments and thus increase efficiency or site operations,
and customised solutions stimulate the differentiation of
offerings. In sum, seeking effectiveness through supplier
relationships provide customers with opportunities for
rationalisation and for development activities (Hakansson,
1987; Gadde and Hakansson, 1994). However, such effects
do not follow automatically from a concentration on fewer
suppliers. Suppliers resources and the quality of relationships
become dominant aspects in the success of concentration. In
this respect, the key decisions to consider must involve
optimising the size and number of actors who belong to the
supply network, and choosing the appropriate partners.

purchasing in the network of supply actors is a broad and


multifaceted phenomenon (Richey and Wheeler, 2004).
Topical issues in supply network discussion reflect a new
awareness of the benefits of utilising resources from beyond
the boundaries of firms (Dubois and Gadde, 2000). In
addition, the analysis of purchasing strategies of companies
operating in inter-organisational relationships requires
constructs to describe the organisation of a supply network,
the characteristics of participating organisations, and the
alternatives concerning suppliers. Especially useful for the
purposes of our study is the description of supply networks
dynamics popularised through the industrial network
approach (INA).
The INA studies the interaction between companies,
especially how relationships between companies in industrial
markets are formed and managed, and it creates conceptual
frameworks for analysing these relationships (Hakansson and
Ford, 2002; Hakansson and Snehota, 1995; Mattsson, 1987).
According to the INA, actors depend on each others
heterogeneous resources and capabilities to carry out value
activities. These interdependencies are manifested in complex
direct and indirect business relationships forming borderless
networks (Hakansson and Snehota, 1995; Frels et al., 2003;
Kleinaltenkamp and Ehret, 2006). The characteristics of
supply network relationships can be described by analysing
the activities, resources and actors concepts employed in
the ARA-model within the industrial networks approach
(Hakansson, 1987). Based on their resource collections,
actors carry out activities through which they produce
resource sets or offerings that are valued by other actors or
buyers. Actors participate in business relationships that are
constituted through activity links, resource ties and actor
bonds (Hakansson and Snehota, 1995, pp. 24-49).
Consequently, a supply network can be described through
its web of actors and the activity pattern they carry out
through their resource constellation.
The emergence of a supply network is based either on the
organic or intentional expansion or contraction of supply
relationships. Intentionally-developed networks started to
receive more attention in the work of Jarillo (1993) and
Parolini (1999) on value networks, and the emerging theory of
network governance in strategic management (Amit and Zott,
2001; Dyer and Nobeoka, 2000; Jones et al., 1997; Park,
1996; Uzzi, 1997). This view assumes that a firm can
intentionally form different types of networks related to
supply, distribution, or R&D and innovation activity
(Ha kansson and Ford, 2002). The sourcing options
delivered through an intentionally developed supply network
influence the purchasing activity structures by implementing
novel actors and relationships in the network. In addition to
traditional relationships between buyers and suppliers, these
include relationships between buyer and sub-suppliers, and
between the customer and other buyers (Gadde and
Hakansson, 2001, pp. 75-77). It is obvious that such
complex and heterogeneous structures change the
fundamentals of supply activities, and the multifaceted
phenomenon of purchasing in the supply networks demands
a variety of strategies (Normann and Ramirez, 1993;
Anderson et al., 1997).

Supply networks the new context of purchasing


Gadde and Hakansson (1994) point out the need for variety
in supplier relationships. It is important because customers
can use the skills and capabilities of their suppliers, and cope
differently with diverse interdependency situations. This is of
particular importance where networks are concerned (Dyer
et al., 1998; Gulati, 1998). A supply network is a pattern of
temporal and spatial processes carried out at facility nodes
and over distribution links, which adds value for customers
through the manufacture and delivery of products. However,
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Purchasing strategies in supply relationships

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Senja Svahn and Mika Westerlund

Volume 24 Number 3/4 2009 173 181

Purchasing strategies construction of the


framework

Table I Different purchasing strategies in supply nets


Goal of purchasing
Efficiency
Effectiveness

In this section, we develop a conceptual framework to


categorise different purchasing strategies. In constructing the
dimensions of our framework, we draw on the sourcing
strategies or situations suggested by Gadde and Hakansson
(1994, 2001). The central idea of their work is that efficiencyoriented sourcing strategies can be divided into three types on
the basis of the supplier relationship: seeking efficiency in a
single transaction, seeking efficiency in a series of transactions
with one supplier, or seeking efficiency in a series of
transactions with multiple suppliers. Thus, we establish a
dimension describing the nature of supply relationship as a
basis to identify diverse purchasing situations. We focus on
the complexity of relationships in three purchasing situations:
in transactional exchange (Walker and Weber, 1984;
Williamson, 1975), in relational partnerships, and in
collaborative networks (Hakansson and Ford, 2002;
Hakansson and Snehota, 1995; Mattsson, 1987; Dubois
et al., 2003). This is analogous to the evolutionary aspects
identified in the purchasing literature; the buyers sourcing
policy often evolves from transaction-based activity to dyadic
relationships, and finally to strategic alliances or even
networks (Webster, 1992).
Ford et al. (2002) also emphasise the relational value of
firms stakeholders. They claim that the companys most
valuable assets are its relationships. Our perspective is the
focal buyers perspective to purchasing strategy, meaning that
the buyer tries to achieve either efficiency or effectiveness in
operation through these relationships (Jacob and Ehret,
2006). When the buyer seeks efficiency, a specific actor has
often more power than another, thus enabling it to control the
supply relationship or network. In effectiveness-oriented
supply relationships, the control may be more widely
distributed among the parties, as the knowledge required to
produce an offer is distributed among different actors. This
can be crucial in supply networks, which typically aim at
effective distribution of resources among the actors in order to
gain superior performance and competitive advantage (Svahn,
2004; Brito and Roseira, 2005). Although firms may want to
balance these two orientations, research literature points out
that efficiency and effectiveness are two extremes that should
be clearly distinguished from each other (Pirnes, 1994; Moller
et al., 2005; Gupta and Woodside, 2006). Thus, the
differentiation between efficiency and effectiveness in a
purchasing situation forms the second dimension in our
framework. This dimension is the goal of purchasing, which is
a basis of identifying diverse purchasing strategies in
connection with different supply relationships.
In sum, by describing the purchasing situation and the goal
of purchasing we derive the complexity of relationship, which
is the vertical dimension of our framework. In addition, by
placing the emphasis of purchasing either on efficiency or
effectiveness in connection with business strategy, we derive
the goal of purchasing, which is the horizontal dimension in
our framework. We combine these two dimensions in our
conceptual framework to derive six purchasing strategies.
Three of them focus on achieving efficiency of operation and
three emphasise effectiveness of operation. Our framework is
presented in Table I, which illustrates the dimensions and the
types of purchasing strategies.

Complexity of
relationship

Transactional
exchange
Relational
partnerships
Collaborative
network

Price minimiser

Adaptator

Bargainer

Projector

Clockwiser

Updator

The first type of purchasing strategy in our table is the


price minimiser. This situation refers to buyers efficiencyoriented single purchasing behaviour in which the main
objective of purchasing is to seek the lowest price for the
product. The buyer invites suppliers to join the bidding
competition, in order to choose the supplier with lowest cost
(Macbeth, 1994). Thus, the buyer actively promotes the
competition among several potential suppliers. In the
literature, this type of buyer-supplier behaviour is described
as the bow-tie model (Christopher and Juttner, 2000).
Price is the primary criterion for choosing a supplier;
therefore, using Porters (1985, pp. 12-14) generic terms,
this purchasing strategy is similar to the cost leadership
strategy where economies of scale and tight cost control are
key drivers. The nature of relationship in this strategy is
arms-length (i.e. highly transactional with numerous
potential suppliers), and the actual purchasing occurs
arbitrarily. This strategy does not reflect customer loyalty,
rather the buying process is very similar in the next
purchasing occasion, (i.e. independent of the previous) and
the potential suppliers are promoted to compete between
them again. However, the purpose of purchasing may change.
In sum, the main characteristics of the price minimiser
strategy are: focus on price, promotion of competition among
potential suppliers, and one-time purchasing. The role of
purchasing is to support the organisations efficiency-seeking
goals. An example of price minimiser strategy in industrial
market setting is the situation, where a company arranges for
a bidding competition for the maintenance of a machine that
does not require any special expertise. That is, the
maintenance is a routine-type of operation and the buyer is
able to select among multiple service suppliers.
The second type of purchasing strategy, the bargainer,
focuses on a dyadic buyer-seller relationship. In this strategy,
the buyer aims to achieve efficiency of operation through
long-term collaboration with a selected supplier (Anderson
and Narus, 1999; Hakansson and Snehota, 1995; Gronroos,
1994). A typical method is to encompass contracts that cover
a specific period of time, for example two to five years, and
allow an annual decrease in price. For example, the agreed
unit price of purchased component is e150 for the first year,
e145 for the second year, and gradually decreasing until the
termination of the contract. In this situation, the purchaser is
expected to enjoy more competitive prices with respect to
long-term contract, whereas the supplier gains a degree of
certainty concerning the demand over a specific time-period.
This is especially useful in the planning and optimising the
production schedules and scales. In purchasing literature, this
type of arrangement is referred to as the diamond model
(Christopher and Juttner, 2000). As caveat, however, is that
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Purchasing strategies in supply relationships

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Senja Svahn and Mika Westerlund

Volume 24 Number 3/4 2009 173 181

according to Thompson et al. (1998), most standard forms of


contracts actively encourage non-collaborative behaviour.
This may weaken the implementation of the purchasing
strategy. To summarise the main characteristics of the
bargainer strategy in purchasing, we identify them as: a
long-term oriented buyer-seller relationship, where both
parties benefit through fixed contracts, and the gradually
decreasing price tied with the period of operating in that
specific business relationship. The use of bargainer strategy
is especially popular in the computer and car industries,
where some components are required on a continuous basis.
Often the manufacturers of computers or cars co-operate with
a limited number of selected suppliers.
The clockwiser strategy in purchasing, the third type in
our table, describes network relationships that work like a
clockwork. The main objective in employing this type of
strategy is strict efficiency. This can be achieved through the
careful integration of the logistics of integrated control
systems and IT in production, and the coordination of value
activities of each supply network partner (Glenn and Wheeler,
2004). Time- and project management are essential, since
have direct effects on the operability and effectiveness of the
supply network (Gadde and Hakansson, 2001; Rajala and
Westerlund, 2006). The supply chain/network literature
summarises the core ideology of this purchasing strategy as
managing and coordinating the processes of actors to produce
and distribute products and services effectively and without
interruptions (Wagner and Boutellier, 2002; Jarratt, 2004).
Conversely, key challenges of purchasing related to operating
in supply networks involve integrating multiple actors and
giving them simultaneous roles in the network (Gadde and
Hakansson, 2001; Brito and Roseira, 2005). After the roles of
actors have been determined, they need to be integrated to
produce the total value proposition of the supply net.
Information technology, in general, plays a remarkable role
as an enabler of higher efficiency through the network (Wu
et al., 2006). In summary, the clockwiser focuses on specific
partners in an intentionally created network, efficiency
benefits though limiting the amount of suppliers in the net,
and on enhanced learning in the relationships with chosen
suppliers. Toyota is a representative example of this strategy;
the company has an efficient supply network and it has
organised its operations through the layers of suppliers at the
1-, 2-, and n-tier levels (Dyer and Nobeoka, 2000).
On the effectiveness-oriented side of purchasing strategies,
the adaptator focuses on adapting in manufacturing
processes between the exchange parties. This situation
describes one major purchase of product or service
component with few customised elements. The seller is
often required to accommodate its product to the needs of the
buyer. This often occurs in the case of large purchases related
to the industrial production system or manufacturing line of a
factory. These investments are typically acquired at an
interval of 10-15 years, and their purchase is
characteristically a one-time occasion. In summary, the
typical adaptator is a significant purchasing occasion that
requires after- sales activities in the form of professional
maintenance services.
The fifth type of strategy is the projector. It is a dyadic
relationship between two companies in which both the buyer
and seller are development partners; such is typically the case
of collaborative R&D projects. In line with the metaphorical
label of this strategy, the buyer-seller relationship is grounded

in projects. Some partners develop their products and services


in close collaboration, after which the joint-development
project is completed and the parties continue the
development work independently. The relationship-specific
investments (i.e. initiating necessary changes to the
partnerships as they evolve) are strong in this type
(Ganesan, 1994; Dyer and Nobeoka, 2000). Studies
investigating the firms of this type often note the paradox of
simultaneously collaborative and competitive relationships
(Parmigiani, 2007). As an example of this strategy, we could
explore the collaboration between Nokia and Skype. These
major players in the ICT industry joined their development
efforts in order to develop a radically novel type of mobile
phone that utilises the voice-over-internet service (the free call
system created by Skype). Thus, the projector-type
purchasing strategy is a project-based research and jointdevelopment in a dyadic partner relationship, which provides
a win-win situation.
The final type of purchasing strategy is the updator that is
based on collaboration in research and development. In this
sense it resembles the previous type of strategy. However, the
key difference is that here the collaboration between partners
is continuous and the nature of relationship is the supply
network instead of dyad. Intentional collaboration enables the
partners to benefit from adaptation and open knowledge
sharing (Dyer and Nobeoka, 2000), as well as competence
transfer between the participants in the network. This is
generally because networks are arguably better adapted to the
knowledge-economy than hierarchical organisations are
because of their flexibility and better information-processing
capabilities (Achrol and Kotler, 1999; Jarillo, 1993; Snow
et al., 1992). In-depth R&D activity enables new product
updates and service offerings. The characteristics of
updator, are its long-term research and development work
in intentional supply networks, and updates in product
versions. This final type is illustrated with an example of
collaboration between Intel and PC manufacturers produce
updated versions of personal computers due to a constant codevelopment. The identified types and their main
characteristics are presented in Table II.
To summarise, we have presented six purchasing strategies
in connection with their respective supply relationships.
Whether the emphasis is on achieving either operational
efficiency or effectiveness, a defining characteristic of these
strategies is the degree of purchasing related to the nature of
relationship. This notion is in line with prior literature on
supply and purchasing, and we identify the idea as focusing
on transactional exchange in multiple relationships
(Williamson, 1975; Walker and Weber, 1984), repetitive
purchasing in dyadic relationships, and strategic purchasing in
the network context (Mattsson, 1987; Hakansson and
Snehota, 1995; Hakansson and Ford, 2002).
The type of strategy is a direct function of the make-or-buy
decision (Brandes, 1994; Gadde and Hakansson, 2001,
pp. 122-125). In principle, the objectives in the three types of
relationship are cost-, quality-, or innovation-based. These
represent distinctive drivers for operating by the selected
purchasing strategy. In reality, these strategies are rarely
accelerated by only one type of driver; rather they are
emphasised differently, but simultaneously, according to the
goals of companies (Pressey et al., 2007). Large companies
with multiple operations often exert several purchasing
strategies simultaneously.
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Purchasing strategies in supply relationships

Journal of Business & Industrial Marketing

Senja Svahn and Mika Westerlund

Volume 24 Number 3/4 2009 173 181

transactional exchange in multiple relationships, repetitive


purchasing in dyadic partnerships, and strategic purchasing
through collaborative supply networks.
Fourth, we identified key motives for supply collaboration
in the three different types of relationship categorized by
their nature to be cost-based, quality-based, or innovationbased. They represent distinctive drivers for operating by the
selected purchasing strategy. However, we emphasised a
notion that purchasing strategies are rarely accelerated by a
single driver; rather they are emphasised differently, but
simultaneously, according to the goals of companies.
Finally, we see that managers of companies may benefit of
our conceptual framework in a sense that they can identify
and understand better the types and characteristics of
purchasing strategies in the supply network context.
Purchasing matters as each euro or dollar that is saved
increases directly the revenue of a company or enables more
competitive prices and offerings to customers. Managers of
companies should recognise their goal, whether they seek
efficiency of operation and cost leadership, or effectiveness
and new business innovations through their purchasing
behaviour. Thus, the firms motive of buying determined
the purchasing strategy. Moreover, managers should identify
and categorise their supply relationships, and consider which
materials and services to purchase through which supply
relationships. Whereas the conventional items can be
purchased through transactional exchange relationships, the
strategically important items should be purchased through
collaborative networks. In this vein, we hope that our paper
makes a valuable contribution to the literature of purchasing
strategies in the supply network context.

Table II Characteristics of purchasing strategies

Transactional
exchange

Relational
partnerships

Collaborative
network

Efficiency

Effectiveness

Price minimiser:
Single purchase
Focus on price
Many competing suppliers
One time purchasing event
Bargainer:
Long-term orientation
Repetitive purchases
Dyadic partner
Diminishing price
according to the length of
contracts
Clockwiser:
Strategic procurement
Key partner network
Decreased number of
suppliers
Better knowing of chosen
suppliers

Adaptator:
Single purchase
Significant purchasing
After sales experts
Maintaining services
Projector:
R&D project
Repetitive purchases
Dyadic partner
Win-win situation

Updator:
Strategic procurement
Long-term R&D
collaboration
Updated product
versions
Mutual knowledge
transfer

Conclusions and managerial implications


Our rationale in this study was to explore the types of
purchasing strategies in the supply relationship context.
Especially, we sought to understand how these strategies
differ by the nature of the buyer-seller relationship and by the
purchasing goal.
First, we constructed a framework to illustrate the variety of
purchasing strategies in supply relationships and networks.
Our framework combined the purchasing situation with the
complexity of relationship, which we used as a basis to derive
the vertical dimension of our framework. We established the
horizontal dimension in our framework on the goal of
purchasing, which emphasises either efficiency or
effectiveness of operation. As a result, we combined these
two dimensions in our conceptual framework to derive six
diverse purchasing strategies: price optimiser, adaptator,
bargainer, projector, clockwiser and updator.
Second, we analysed the main characteristics of each type of
strategy in the supply relationship context. The diverse
purchasing strategies have essential differences. A distinctive
feature among the strategies is their emphasis on either
efficiency or effectiveness. In some companies, purchasing
raw materials, services, components, and relevant parts to the
manufacturing process may account for 50-80 per cent of
production expenses (Hakansson, 1989; Dubois and Gadde,
2000). Thus, managers become easily focused on cost
reduction activity (Macbeth, 1994). However, an emphasis
on operational efficiency is not the only objective of
purchasing strategy. Another objective is effectiveness, in
order to ensure future business potential for the company. In
this case, relationships focus on constant improvement and
are characterised by innovation activity (Macbeth, 1994).
Third, the emphasis on either efficiency or effectiveness,
reveals an interesting characteristic. The type of exchange
may vary in connection with the nature of supply
relationships. This variation is identified as firms conveying

Limitations and future research


As a limitation to the current study, we recognise that our
conceptual model describing the key purchasing strategies is
strictly derived from prior literature. It should be noted that
industry, the size of the company, as well as the scope of the
supply network may influence the choice of the purchasing
strategy. Therefore, further studies should analyse the issue
through empirical data in different contexts in order to
provide more comprehensive findings and to gain support for
the proposed model.

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About the authors

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Senja Svahn is Professor of Marketing at the University of


Jyvaskyla, Finland. Her research focuses on strategic
management, business nets, and marketing capabilities. She
completed her doctoral dissertation on the management of
business nets, and has co-authored a managerial book on the
inter-organisational networks in business. Her recent articles
have been published in journals including Industrial Marketing
Management, Journal of Business Research, Journal of
Management Studies, and Marketing Theory. Senja Svahn is
the corresponding author and can be contacted at:
senja.svahn@tut.fi
Mika Westerlund is researcher and coordinator of the
ValueNet Research Program at the Helsinki School of
Economics, Finland. His research interests address interorganisational networks, relationship value, and business
models of firms, especially in the software industry. His
research has been published in journals including California
Management Review, Industrial Marketing Management,
International Journal of Technology Management, and
International Journal of Entrepreneurship and Innovation.

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