Business logic in buyer-seller relationships
Seppo Leminen
Keywords
Channel relations, Interaction,
Telecommunications industry
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]
[ 660 ]
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
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.
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 (GroÈnroos, 1994),
or that the service and goods quality models
should be integrated (GroÈnroos and
Gummesson, 1985; GroÈnroos, 1993).
The current issue and full text archive of this journal is available at
http://www.emerald-library.com/ft
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.
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. HaÊkansson, 1982; AlajoutsijaÈrvi, 1996)
and the packaged product business logic (e.g.
HaÊkansson, 1982; Turnbull and Valla, 1989).
Seppo Leminen However, this does not mean that the
Business logic in buyer-seller interaction and network approaches could
relationships
not describe the service business logic.
Management Decision The inclusion of service business logic (see
39/8 [2001] 660±665
e.g. GroÈnroos, 1990a) would widen the
understanding of buyer-seller relationships
in the interaction and network approaches.
Thus, GroÈnroos and Gummesson (1985, p. 8)
point out that ``concepts and models
developed for service firms may also be
useful for industrial firms''. Further,
GroÈnroos (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, GroÈnroos (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.
GroÈnroos, 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.
HaÊkansson, 1982; AlajoutsijaÈrvi, 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;
GroÈnroos, 1979, 1990a). The service
marketing approach defines services as
consisting of tangible and intangible
products (GroÈnroos, 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 co-
ordinated 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
[ 661 ]
Seppo Leminen longer buyer-seller relationship. This also
Business logic in buyer-seller involves how the buyer and the seller take
relationships care of the delivered system after the project
Management Decision is finished, or how the different projects are
39/8 [2001] 660±665
linked together.
3, 4 Interactions in relationship and
business logic
As described earlier, the business logic is
partly discussed in the four approaches.
HaÊkansson 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
[ 662 ]
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 buyer-
seller 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
Seppo Leminen ellipses. The business logic axis is located in
Business logic in buyer-seller the bottom left-hand corner.
relationships The relationship continues in the service
Management Decision business logic and the packaged product
39/8 [2001] 660±665
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
Figure 2
Business logic, composite level, and time
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 buyer-
seller 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 buyer-
seller 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
[ 663 ]
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.
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2 How could the business logic described in
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[ 665 ]