Citation:

C. P. Rao, E. M. Krishna, and S. C. Mehta (1985) ,"", in SV - Historical Perspective in Consumer Research: National and International Perspectives, eds. Jagdish N. Sheth and Chin Tiong Tan, Singapore : Association for Consumer Research, Pages: 270-274.

Historical Perspective in Consumer Research: National and International Perspectives, 1985     Pages 270-274

DIMENSIONS OF INDUSTRIAL BUYER "CHOICE CRITERIA" IN A DEVELOPING AFRICAN COUNTRY

C. P. Rao, University of Arkansas, USA

E. M. Krishna, University of Arkansas, USA

S. C. Mehta, National University of Singapore, Singapore

ABSTRACT -

The major purpose of this paper was to identify the Nigerian industrial buyers' "choice criteria" in selecting vendors in the purchase of standard and special products. Intergroup differences based on organizational characteristics -- sectoral, size of organization and type of industry -- were also investigated. Implications of the research findings were discussed.

INTRODUCTION

Organizational buyer behavior is an important emerging field of study with considerable significance to both industrial marketing and purchasing management fields. While considerable conceptual and empirical work has been done by scholars like Sheth (1973, 1975, 1977), Cardozo (1971), Webster (1965), Webster and Wind (1972), Zaltman and Bonoma (1977), Wind and Thomas (1980) and others, the field is still in the process of evolving a definitive theory of organizational buyer behavior. In a comprehensive review of research in organizational buyer behavior, Sheth emphasized the need for cross cultural studies dealing with various aspects of organizational buyer behavior. He concluded:

"With the mergence of multinational corporations and global marketing activities, there will probably be systematic research undertaken to understand cross-cultural differences among the organizational buyers scattered across different socio-economic and political structures. While many multinational corporations provide training for their sales representatives in recognizing and adapting to cross-cultural variations among industrial buyers, this train ing will be recognized as insufficient."

Cross-cultural studies dealing with organizational buyer behavior in general and determination of industrial buyers' "choice criteria" in particular will be significant from several perspectives. First, such studies provide a clear understanding of the choice behavior of industrial buyers in diverse cultural contexts. Second, investigation of the similarities and differences among the industrial buyers of different countries will be greatly useful for international marketers operating in diverse international markets. As the manufactured exports of industrial products constitute a major portion of the total world exports, understanding of industrial buyer behavior in various cultures would be significant for facilitating trade flows between countries. This aspect of world trade is particularly crucial with regard to industrial goods trade between developed and developing countries of the world. Finally, and most importantly, crosscultural studies would facilitate the development of a definitive generic theory of industrial buyer behavior.

CHOICE OF THE COUNTRY: NIGERIA

Nigeria is considered an "awakening giant" in the context of socio-economic development of Africa in recent times (Economist 1982, Business International 1979). It is a member of OPEC cartel and its oil wealth is facilitating the socioeconomic development of the country. Endowed with oil wealth Nigeria is intensifying developmental activity during the last decade. In the Nigerian context international transactions constitute a significant proportion of her aggregate economic activity. In 1970, according to one estimate the foreign sector (exports and imports) amounted to 32 percent of the country's GDP (Fajana 1979). This ratio had increased to 52.28 by 1980 (Fourth Plan 1981). While the export sector is dominated by oil, Nigeria imports a wide variety of goods and services geared to the socio-economic development process of the country. Between 1970 and 1980 total Nigerian imports increased 1~r sixteen times. Capital goods imports which constituted about two-thirds of the total imports, increased ten times between 1982-78 (Schatz 1977). Such accelerated import activity in the 70's which continued through early 80's makes Nigeria an ideal setting to study organizational buyer behavior. Such an investigation will not only add to the limited body of knowledge on organizational buyer behavior in developing countries in general, but will also be very significant for international marketing practice.

VERDOR ATTRIBUTE SELECTION AND MEASUREMENT

One of the pivotal aspects of organizational buyer behavior is concerned with deriving "choice criteria" based on vendor attributes. In explaining and predicting organizational buying decisions, vendor attributes provide the anchor points. Vendor attributes form the basis for qualifying, evaluating, selecting and retaining the sources of supply. Industrial marketers need to know what salient vendor attributes their target-market buyers perceive and use as "choice criteria" so that marketing strategies can be designed in accordance with the relative importance of those attributes.

For purposes of this research study, a final list of 52 vendor attributes was employed. In developing this list, two different methods were utilized. First, lists developed by other researchers were utilized (Dickson 1966, Steward 1968, Klass 1961, Kiser and Rao 1974, Rao and Kiser 1977). Second, after extensive consultations between two of the researchers and the Nigerian industrial buyers, whose behavior formed the focus of the research reported in this paper, the vendor attribute lists were finalized. The discussions with the Nigerian industrial buyers were intended to ensure the relevance of the attribute items in a different cultural context.

The 52 attributes or vendor characteristics were arranged in a structured questionnaire in first-word alphabetical order in an attempt to avoid clustering similar attributes. Directors for completing the questionnaire required the respondents to rate the importance of each characteristics when selecting vendors for standard products and special products. For purposes of this study two buying situations were simulated: One involved the purchase of standard products; the other was limited to the purchase of special products. The respondents to the questionnaire were provided with a scale of weights ranging from 1 through 7.

SCOPE OF THE RESEARCH STUDY

In view of the importance of industrial buyer .. choice criteria" based on vendor attributes to organizational buyer behavior theory and practice and the lack of cross-cultural studies, this research study was conducted with industrial buyers in Nigeria. The following are the major purposes of the research reported in this paper.

1. To determine the "choice criteria" of the Nigerian industrial buyers in selecting vendors for the purchase of standard pro-products and special products.

2. To investigate whether any significant differences existed as to the "choice criteria" among different groups of Nigerian industrial buyers based on:

a) Sectoral differences (e.g., public vs. private sector)

b) Size of the industrial firm (e.g., large, medium and small)

c) Industry type (e.g., consumer goods, intermediate goods, and capital goods)

FIELD RESEARCH IN NIGERIA

Field research for the study was carried out in Nigeria during the period of October 1980 through June 1981. The Nigerian context was chosen for several reasons. First, in recent years Nigeria has been emerging as a major politico-economic power in the African context. Nigeria is Black Africa's most populous and influential country. Second, as mentioned earlier, endowed with oil wealth, the country has been intensifying efforts to industrialize the nation. Third, Nigeria still a developing country, typically represents the future trends in other African countries. In this sense, what is found in the Nigerian context can be generalized for other Black African countries or even other developing countries. Third, conducting research effectively in a foreign setting requires close collaboration with foreign industry organizations. In this context, the senior author was able to obtain the active cooperation of the Nigerian Manufacturers Association in Lagos, Nigeria in carrying out the field research.

Research data were gathered in Nigeria by means of a mailed questionnaire survey using a structured questionnaire. The structured questionnaire was mailed to 500 industrial buyers representing a cross section of the Nigerian industry and business. The research effort was endorsed and partially supported by the Nigerian Manufacturers Association. One hundred and fifty (150) usable responses accounted for a response rate of 28 percent.

METHODS OF ANALYSIS

There are two research objectives in this study. The first objective is to derive the dimensions of vendor "choice criteria" of the Nigerian industrial buyers in selecting vendors for the purchase of standard and special products. For this purpose data were gathered from a cross section of the Nigerian industrial buyers as to the importance they attach to each of the 52 vendor attributes included in the study. The second objective is to determine whether there are significant intergroup differences based on the organizational characteristics with regard to the .. choice criteria" of the Nigerian industrial buyers. Given the nature of the data gathered, the research objectives virtually dictated the methods of analysis.

To achieve the first research objective of deriving the vendor attributes, the factor analysis procedure was utilized. The primary purpose of factor analysis is data reduction and summarization. Factor analysis results in analyzing the interrelationships among a large number of variables and then interprets these variables in terms of their underlying dimensions (factors). This process of condensing the data contained in a number of original variables into a smaller set of few composite factors is accomplished with a minimum loss of information (Sheth 1970, Hair et. al. 1979).

The factor analysis was accomplished via the factor procedure described in the SAS handbook (1979). Using the principle axis method coupled with a varimax rotation, the solution, consisting of nine factors, was derived (see Tables 1 and 2 for the factor analysis results of standard and special products buying situations respectively). According to the VARIMAX criteria, the factors retained after rotation have eight values of greater than one. The variables under each factor with loadings less than .5 were dropped from subsequent analysis.

The second research objective required to test whether the "choice criteria" dimensions significantly varied across various groups of Nigerian industrial buyers based on organizational characteristics. Three organizational characteristics -- sectoral (public, private and other), size of the organization (large, medium and small) and the industry type consumer, engineering, electrical and electronics and chemical and others) -- were investigated. Multivariate analysis of variance (MANOVA) was chosen as the technique to statistically analyze the relationships between a single predictor (i.e., group levels) and a combination of dependent variables (i.e., the "choice criteria" dimensions as reflected in the nine factor solution. The MANOVA analysis was performed for each factor with the significantly loaded variables as criterion variables as criterion variables and each organizational characteristic groups as predictor variables. The General Linear Models procedure in SAS (1979) was used for the computation of MANOVA and various related AMOVAs. The results of MANOVA and ANOVA analyses are discussed in the next section.

RESEARCH RESULTS AND DISCUSSION

"Choice Criteria" Dimensions

The factor analyzed data reflecting the Nigerian industrial buyers' vendor "choice criteria" in the purchase of standard products are presented in Table 1. In this research standard products are defined as those that are defined as those that are commercially available or off-the-shelf items. From the data in Table 1, it is significant to note that even for the standard product purchases, the Nigerian industrial buyers attached greater importance to non-price factors than the price factor. In fact, the price dimension is reflected only in factor 6. The first five factors reflect the non-price factors such as the vendor reputation, capabilities and past experience with the vendor. Following the price factor, factors 7, 8, and 9 reflected the performance expectation of the industrial buyers. Thus a structural analysis of the .. choice criteria" dimensions for standard product buying situation revealed three key dimensions. These may be summarized as: (1) confidence in vendor reputation and capabilities; (2) price considerations; and (3) performance assurances with regard to sales, services, delivery practices and overall adaptiveness.

The factor analyzed "choice criteria" dimensions in the purchase of special products for the Nigerian industrial buyers are presented in Table 2. For purposes for this research investigation, special products are defined as products supplied to company specifications or custom built. From the data presented in Table 2, it is evident that while there are some interesting differences compared to the data in Table 1, the overall structural aspects of vendor '-'choice criteria" for special product buying situations are somewhat similar to those of the standard products. The first six factors are related to confidence in vendor's capabilities and competences. This clearly indicated that vendor's competences to perform the job according to buying company's specifications will be the major buying consideration in the purchase of special products. Although one of the variables under factor four is related to price considerations, factor seven reflected the price related variables. For special products, price considerations are relatively less important than vendor's competences and capability dimensions. The last two factors reflected vendor's delivery services and suitability to the specific needs of the buying firm. As mentioned earlier, the structural composition of .. choice criteria" for special products is similar to standard products consisting of the three key dimensions -- vendor competences, price offerings and performance assurances. For both types of buying situations the competence and capability factors are significantly more important than price considerations.

The Nigerian industrial buyers' "choice criteria" dimensions identified and discussed above have interesting implications for international marketers. First, even in a developing country like Nigeria, the dominant considerations in the choice of vendors for the purchase of industrial products will be those relating to vendor competences, capabilities, overall reputation and past experiences with the vendors. These primary considerations are equally applicable in the purchase of both standard and special products. Price considerations, which can be expected to be very significant in the capital poor developing countries are much less important in the hierarchy of important considerations. In the light of this research finding, the international marketers should emphasize the non-price factors in their promotional efforts in developing countries in general and in Nigeria in particular.

Intergroup Differences Based on Organizational Characteristics

The second research objective is concerned with investigating the intergroup "choice criteria" differences based on selected organizational characteristics. As mentioned earlier, intergroup differences based on sectoral, size and industry type groups were investigated. Research results showed that for most of the "choice criteria" dimensions there were no significant intergroup differences. However, for a few factors MANOVA results were found to be significant. Similarly, for a few individual variables under each factor ANOVA results were found to be significant. These significant MANOVA and ANOVA results are summarized below.

For standard products MANOVA results were found to be significant for factor 9 at .05 level and for factor 2 at .07 level in the case of sectoral groups. Regarding individual variables significant ANOVA results were obtained under sectoral difference for 5 variables under factor 1, one variable under factor 2 and two variables under factor 9. For size groups one variable under factor 2 and one variable under factor I for industry type groups were found to be significant. Overall for standard products the intergroup differences were of limited practical significance.

For special products significant MANOVA results were found for: factor 7 at .02 level for sectoral groups; factors 2, 3 and 6 at .10 level for sectoral groups; factors I and 2 at .03 level for size groups; factor 3 at .01 level and factor 5 at .07 level for industry type differences. For special products significant ANOVA results for individual variables were found for: two variables under factor 1; two variables under factor 3 and one variable under factor 6 for sectoral groups. For size groups five variables under factor I and one variable under factor 2 were significant.

As can be seen from the above summary of MANOVA and ANOVA for special products, the intergroup differences are somewhat more extensive than in the case of standard products. These intergroup differences will have significant implication for international industrial marketers in targeting their marketing efforts at specific types of industrial buyers in developing countries. Space limitation precludes a more detailed discussion of the practical implications of these research findings.

CONCLUSIONS

While the literature on organizational buyer behavior in developed countries is quite extensive and growing, research studies in the context of developing countries are generally lacking. In this paper the "choice criteria" dimensions of the Nigerian industrial buyers in the purchase of standard and special products were investigated. Additionally, intergroup differences based on organizational characteristics -- sectoral, organizational size and industry type -- were investigated. For both the buying situations simulated in this study three key dimensions of "choice criteria" have emerged. These are: confidence in vendor competences; price considerations; and performance assurances. While the significant research findings with regard to intergroup differences are not extensive, they are more pronounced in the case of special product buying situations.

TABLE 1

FACTOR ANALYSIS OF NIGERIAN INDUSTRIAL BUYERS' "CHOICE CRITERIA" IN THE PURCHASE OF STANDARD PRODUCTS

TABLE 2

FACTOR ANALYSIS OF NIGERIAN INDUSTRIAL BUYERS' "CHOICE CRITERIA" IN THE PURCHASE OF SPECIAL PRODUCTS

REFERENCES

Cardozo, Richard N., and J. W. Cagley, (1971) "An Experimental Study of Industrial Buyer Behavior," Journal of Marketing Research, Vol. 8 (August) pp. 329-334.

Dickson, Gary W., (1966) "An Analysis of Vendor Selection System and Decisions," Journal of Purchasing II No. I (February) pp. 5-17.

Fajana, Olufemi, (1979) "International Trade and Balance of Payments" in F. A. Olaloku, et. al., Structure of the Nigerian Economy, (New York: St. Martin's Press).

Guidelines for the Fourth National Development Plan 1981-85 (1980), (Lagos, Nigeria: The Federal Ministry of National Planning).

Hair, Joseph F., et. al., (1979) multivariate Data Analysis (Tulsa, OK: Petroleum Publishing Co.).

Kiser, G. E., and C. P. Rao (1974) "Perceptual Differences and Similarities of Vendor Attributes Between Purchasing and Non-Purchasing Executives," Journal of Purchasing, (August) pp. 16-29.

Klass, Bertrand, (1961) "What Factors Affect Industrial Buying Decisions?" Industrial Marketing, XLVI (May) pp. 33-35.

Rao, C. P., and G. E. Kiser (1977) "Important Vendor Factors in Industrial and Hospital Organizations: A Comparison," Industrial Marketing Management (August) pp. 289-296.

Schatz, Sayre P., (1977) Nigerian Capitalism, (Berkeley, Calif.: University of California Press).

Sheth, Jagdish N., (1970) "Multivariate Analysis Techniques in Marketing," Journal of Advertising X (February), pp. 28-34.

Sheth, Jagdish N., (1973) "A Model of Industrial Buyer Behavior," Journal of Marketing, Vol. 37 (October), pp. 50-6.

Sheth, Jagdish N., (1975) "Buyer-Seller Interaction: A Framework," Proceedings of the Association for Consumer Research, (Winter) pp. 382-6.

Sheth, Jagdish N., (1977) "Recent Developments in Organizational Buying Behavior," in Arch G. Woodside et. al., (Eds.) Consumer and Industrial Buying Behavior, (New York: North Holland) pp. 17-34.

Webster, F. E., Jr., (1965) "Modeling the Industrial Buying Process," Journal of Marketing Research, Vol. 2 (November), pp. 370-76.

Webster, F. E., Jr. and Y. Wind, (1972) Organizational Buy ing Behavior (Englewood Cliffs, NJ: Prentice Hall).

Wind, Yoram and Robert J. Thomas, (1980) "Conceptual and Methodological Issues in Organizational Buying Behavior," European Journals of Marketing Vol. 14 (May-June), pp. 239263.

Zaltman, Gerald and Thomas Bonoma, (1977) Industrial Marketing Management Vol. 6 (June), pp. 53-60.

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Authors

C. P. Rao, University of Arkansas, USA
E. M. Krishna, University of Arkansas, USA
S. C. Mehta, National University of Singapore, Singapore



Volume

SV - Historical Perspective in Consumer Research: National and International Perspectives | 1985



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