Bargaining Power and Information Technology in Afrcan-European Business Relationships

doi:10.1016/j.emj.2004.09.014

European Management Journal Vol. 22, No. 5, pp. 573–587, 2004

� 2004 Elsevier Ltd. All rights reserved.

Printed in Great Britain

0263-2373 $30.00

Bargaining Power andInformation Technologyin African–EuropeanBusiness Relationships:Case of the Dutch FlowerAuctions

MAYEN CUNDEN, University of South Africa, Johannesburg

ERIC VAN HECK, Erasmus University, Rotterdam

This article addresses the emergence of African–European business relationships. Its focus is onthe role of bargaining power and information tech-nology and its impact on the different stakeholdersin (electronic) markets (sellers, market maker, buy-ers). Information technology is seen as an enablingtechnology that facilitates reaching a wider cus-tomer base (called reach) and providing a channelfor increased customer services (called richness).The central question is how African suppliers cancreate bargaining power by means of informationtechnology and therefore enter and improve theirposition in European markets. Research is carriedout in the flower industry. In this industry Africanflower growers create competitive advantage anddevelop business relationships with European buy-ers (wholesalers, retailers). In this article we inves-tigate three flower markets (Tele Flower Auction,FloraHolland Auction, and Aalsmeer Auction), therole of African flower growers, and the use andimpact of information technology in these markets.The results of our research show that there are pot-entials for African flower growers to enter the Euro-pean flower markets and to increase their positionof bargaining power. A first potential is using andimplementing information technology for theaccess to new and large European markets. Africanflower growers use information technology to

European Management Journal Vol. 22, No. 5, pp. 573–587, October 2004

streamline transaction processes and lower transac-tion costs. A second potential is related to the qual-ity and specificity of the produced flower products.Information technology can remove the qualityuncertainty of products and can provide rich infor-mation services to buyers. The results in the flowerindustry suggest that information technology pro-vides opportunities for the African producers toexpand the reach and richness of their productand service offerings, thus creating economic value.� 2004 Elsevier Ltd. All rights reserved.

Keywords: Africa, Bargaining Power, DutchFlower Auctions, European Markets, InformationTechnology

Introduction

In this article the business relationship between Afri-can and European businesses are analysed and dis-cussed. Ruigrok and Van Tulder (1995) contendthat supplier-buyer relationships were typically ana-lysed in terms of this market setting, which MichaelPorter subsequently added to (in the Five-ForcesModel (Porter, 1985)) by emphasising the importanceof the relative positions of suppliers and buyers in

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AFRICAN–EUROPEAN BUSINESS RELATIONSHIPS

terms of bargaining relations amongst the stakehold-ers in a network, such as the Dutch flower businessnetwork. Ruigrok and Van Tulder (1995) further con-tend that Porter’s model fails to expose the full dyna-mism of the network and instead propose analternative framework incorporating bargainingpower as a central explanatory mechanism. Kambiland Van Heck (2002) develop several key insightsabout the role of Information Technology (IT) forbusiness relationships in markets. The first insightis that ‘‘electronic markets are not technologicalinteractions supported by humans. . . [but] . . .humaninteractions supported by technology’’. This salientinsight marks the critical distinction that accountedfor the failure of electronic markets in the 1990s.Thus, irrespective of the medium used to conductbusiness (be it personal contact or cyberspace), hu-mans make markets and are consequently at the coreof its functioning. This social context to marketstherefore makes the effects of human behaviour crit-ical, both in the design and ultimate use of the trad-ing mechanism. A second insight identified byKambil and Van Heck (2002) is that trade contextprocesses such as product representation, regulation,risk management, influence, and dispute resolutionare important for the overall success of electronicmarkets. The trade context processes incorporate[stakeholder] influence as a defining factor. Theinfluence processes define how market participantsinfluence each other, build and maintain trust inthe market place and establish bargaining power.Bargaining power then becomes fundamental to theestablishment and enforcement of feedback and rat-ings systems. These systems together function as areputation mechanism designed to increase trust insupplier-buyer relationships, by the establishmentof rules of conduct and the enforcement thereof, cre-ating a specific market setting. ‘‘Markets are real orvirtual meeting places where buyers, sellers andintermediaries meet to exchange or transfer propertyrights from one party to another’’, Kambil and VanHeck (1998).

According to Afuah and Tucci (2001), the choice oftransactions that are performed over the Internet isa function of the nature of the knowledge on whichtransactions rest and of the type of people whoundertake the transactions. Humans, it is said, areconditioned by bounded rationality. Bounded ration-ality imposes limitations through the neurophysio-logical human capabilities (such as the ability toreceive and process information without error) andthrough language, which refers to the inability ofpeople to articulate their knowledge or feelings insuch ways that permit them to be understood by oth-ers. Similarly, when that knowledge is articulatedand transmitted well enough, the recipient may stillnot understand it. So given these limitations of com-municating over the Internet, it begs the question ofhow market participants conduct meaningful busi-ness in terms of interacting socially and articulatingtheir preferences.

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Koppius (2002) refers to a number of factors that af-fect the exchange process, one of which is the degreeto which buyers and sellers know and trust eachother. This degree of familiarity must surely origi-nate in the behaviour of market participants towardeach other; shaped by the participants exercisinginfluence and bargaining power. This then createsthe social conditions necessary within thebusiness network for the seller to be willing to investin a relationship with the buyer and vice-versathrough a medium facilitated by informationtechnology.

This article puts emphasis on the questions:

1. How does the adoption of IT enable the African growerto influence the behaviour of the market maker and cre-ate bargaining power in the context of the Dutch flowerbusiness network?

2. How do market participants influence each other?3. How do market participants establish bargaining

power?4. What competitive strategies might the African grower

adopt to enable reaching a wider customer base and pro-vide a richness of offering in customer service?

This article aims:

v To describe bargaining power and stakeholderinfluence at play in the context of the Dutchflower business network;

v To derive competitive strategies for the Africangrower in terms of reach and richness.

The answers to the above questions are sought in acase study approach, of three empirical settingsnamely Tele Flower Auction, FloraHolland Auction,and Aalsmeer Auction. The case studies provide abasis upon which theoretical propositions are formu-lated and generalized (so called analytic generaliza-tion). The cases combine a full electronic auctionmechanism (Tele Flower) with the mixed auctionmechanisms (traditional and electronic auctioning)of FloraHolland and Aalsmeer, all of which representdifferent points of entry for African growers into theEuropean flower business network. The choice ofcase settings also embraces the characteristics of acooperative in which growers are the owners of theauction house (FloraHolland and Aalsmeer) versusa non-cooperative market maker such as Tele Flowerauction.

This article is divided into three main sections. First,a literature review of bargaining power and the roleof IT in business relationships is developed into aconceptual framework, complemented with fivepropositions. Second, the empirical setting in theflower industry with research method and data willbe explained. Third, an empirical analysis of threecases in the flower industry will be performed. Les-sons learned are formulated.

pean Management Journal Vol. 22, No. 5, pp. 573–587, October 2004


Literature Review and Conceptual

Framework

Bargaining Power

Ruigrok and Van Tulder (1995) systematically ana-lyse the role of influence and bargaining power innetworks of business relationships. ‘‘Influence isapplicable to a situation where individual A affectsindividual B, without B subordinating his wishes tothose of A. . . That is to say, A has influence overB’’ (Ruigrok and Van Tulder, 1995, p. 68–69). Anexample of an influence relationship may be dis-cerned in the car parts industry where gearboxesmay be considered to be of high strategic importance.If the car manufacturer uses a single supplier as thesource of this strategic component then the supplier’sinfluence over the manufacturer is defined to behigher than vice-versa. Thus the higher the relativeindependence and the larger the size of suppliers,the more market makers will be forced to strike coa-litions with their suppliers. A central element in thebargaining process is the concept of power, wherepower is defined as the ability of individual A tomake individual B do something that individual Bwould not otherwise have done, (Ruigrok and VanTulder, 1995). Power is also clearly distinguishedfrom influence. Influence denotes a situation inwhich individual A affects individual B over themaking of a decision but individual B retains thepower finally, to decide.

The act of doing business makes it difficult to deter-mine exactly why and how market participants exer-cise power. But bargaining certainly fashions thecompetitive strategies of participants. Contemporaryeconomic theory, as reported by Ruigrok and VanTulder (1995), advocates, that ‘‘the economy isguided not only by the search for gain, but also bythat for power’’. Michael Porter’s well-known FiveForces Model lists bargaining power of suppliersand bargaining power of buyers as two of the fivecompetitive forces that determine an industry ormarket’s profitability. And according to Ruigrokand Van Tulder (1995, p. 64), Porter ‘‘regards the rel-ative positions of suppliers and buyers in terms ofbargaining relations, emphasising the importance ofother than simply market-driven motives in a com-petition strategy’’.

Information Technology

Information technology and especially the Internet hasbrought about two major changes in the conduct ofbusiness: (1) It has significantly reduced the cost ofdoing business; (2) It has established complex relation-ships between organizations and their stakeholders.

The Internet-enabled technology comprising ad-vanced client–server architectures, globally diffused


hypermedia clients, low-cost communication infra-structure and platform independent software havenot only extended the traditional market mecha-nisms into the electronic realm, but also in areaswhere no market mechanisms have existed. TheInternet makes it possible for the bidders and sellersto now gather electronically via newsgroups, emaillists and WebPages thus reducing the transactioncosts associated with travelling to physical market-places. ‘‘With its open standards, relatively low entrybarriers and low cost of communication, the Internetmakes gathering people in one place a lot cheaper. . . .Electronic bidding removes a large part of the trans-action costs . . . ’’ (Koppius and Van Heck, 2002). It istherefore no longer necessary for the sellers and buy-ers to physically gather in one place.

‘‘Technological progress and the proliferation of glo-bal hyper-media communication infrastructureshave enabled numerous players to not only extendtraditional market mechanisms into the electronicrealm, but also to use auctions in new applicationareas where previously no market mechanisms havebeen employed’’ (Klein, 1998).

Electronic markets are most useful when they are di-rectly able to match buyers and sellers (Turban et al.,2004). Electronic markets serve to reduce searchcosts, thus allowing consumers to find sellers offer-ing lower prices. In the long run, this may reducemargins for sellers yet it may also lead to an increasein the number of transactions that do take place,according to Turban et al. (2004). The impact of ITon markets may be seen in the economic advantagesgained. For example, for a given quantity of produc-tion Q, producers can either use a certain amount oflabour or invest in more automation. The lower theamount of labour needed, the higher the requiredIT investment (Turban et al., 2004). However the im-pact of IT, as illustrated below, shifts the productionfunction from L1 to L2, thus lowering the amount oflabour or capital needed to produce the same pro-duction quantity, Q. The firm’s transaction cost isalso shifted from position T1 to position T2. The illus-tration below implies that the role of IT and elec-tronic commerce makes it possible to have lowtransaction costs with smaller firm size and muchlower transaction costs when the firm size increases(Turban et al., 2004) Figure 1.

‘‘Another economic impact of Electronic Commerceis the trade-off between the number of customers acompany can reach (called ‘reach’) and the amountof interactions and information services they can pro-vide to customers (called ‘richness’)’’ (Turban et al.,2004, p. 61). The trade-off is defined in that the morecustomers a producer wants to reach, the fewer theservices provided to them. However, the two con-cepts are not mutually exclusive and the firm mayseek to increase its reach whilst at the same time pro-vide richness in terms of superior customer service.Providing such services by the adoption of IT

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Reach (a) Generic Curve

Without IT

With IT

Richness

Figure 2 Reach versus Richness (Adapted from Tur-ban et al., 2004) originally developed by Evans andWurster (2000)

ITCapital Cost Cost

L2 L1 L2 L1Without IT Without IT

With IT With IT

Labour Size

(a) Production Function (b) Transaction cost

Figure 1 The Economic Impact of IT (Adapted from Turban et al., 2004)


(richness of communication) indeed provides theproducer with the ability to increase the number ofcustomers reached, as shown above in Figure 2,adapted from Turban et al. (2004), originally deve-loped by Evans and Wurster (2000).

Conceptual Framework

The following conceptual framework depicts thepotential influence that the African growers may as-sert over the market makers given the adoption of ITwhich provides for increased bargaining power ena-bling wider reach in customer markets toward select-ing the right buyer and successfully concluding atransaction, see Figure 3.

Achieving the objective of concluding profitabletransactions does not necessarily ensure a successfulbusiness network. However, achieving the objectivesagainst the confluence of all participant interests,

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does. The winning formula must therefore incorpo-rate stakeholder influence and bargaining powerwithin the social institution of the market.

Based on the literature review we formulate the fol-lowing propositions:

Proposition 1. More bargaining power of the Africangrower leads to more influence on the market maker in thenegotiation process.

In the electronic markets’ literature, the adoption ofIT has largely been conceptualized to equate to areduction in transaction costs. However the adoptionof IT does incur higher investment capital costs,whilst lowering the labor costs of a firm. Automationfurther allows the firm or grower to increase the rich-ness of communication by channeling more informa-tional services to the buyer, thus reducing the effectof quality uncertainty in the product. Hence, wehave:

Proposition 2. The adoption of IT by the African growersfacilitates the ability to have higher influence over themarket maker.

Different stakeholders have different goals and inter-ests in a market where the market is representative ofa socially constructed consensus, ‘‘that is constantlyrenegotiated among stakeholders with different lev-els of power’’ (Kambil and Van Heck, 1998). Henceeach stakeholder develops unique competitive strat-egies to achieve those goals, and for the Africangrower, economic value is measured in terms ofattaining a greater geographical reach or reachingmore customers and providing a richness in informa-tion and customer services designed to conclude suc-cessful trade agreements.

Proposition 3. The more influence that the Africangrower has over the market-maker, the greater is thegeographical reach to buyers.


P1

P3 P4 P5

P2

Potential to reach right buyer

Geographical reach to buyers

Profitable transactions concluded

Bargaining power of African growers

Influence on market maker

Adoption of IT by African growers

Figure 3 The Conceptual Framework


The link to the buyer of a product remains one ofthe most important informational ‘‘glues’’ in thebusiness world and is probably the most pervasivebasis of competitive advantage in any consumer-focused business. ‘‘The strategy is to build intothe consumers mind a deep and locked-in relation-ship: richness that forecloses reach’’ (Evans andWurster, 2000, p. 99). Thus, having reached a se-lect market, a particular buyer is targeted with awealth of informational and customer value. Hencewe have:

Proposition 4. The further the geographical reach, thehigher is the potential to select the right buyer.

Of course if a grower and buyer fail to come to anagreement over the product being traded it wouldmean lost profits for both parties. Trade would nottake place unless it were advantageous to both par-ties. Thus it is best to strike as good a bargain as one’sbargaining position permits, however by overreach-ing one’s profit earning capacity, no bargain is struckand a trade that could have been advantageous toboth parties does not come off at all. And so thisleads us to:

Proposition 5. Selecting the right buyer leads to success-ful and profitable trade agreements.

The bargaining theory espoused by Raiffa (1982),where bargaining is analyzed in terms of: who,why, what, where, when and how forms the bedrockagainst which Ruigrok and Van Tulder (1995) devel-op their dependency continuum scale as a yardstickto assess the relative bargaining positions of marketparticipants.

For example, power is defined as the central elementin the bargaining process, however it is difficult topoint out how and why firms exercise power. Thuswhen the questions on technology, business practicesand quality control are used to measure how poweris exercised in the relationship between the market-maker and a grower, for instance, technology has tra-ditionally been used by large and technologicallyleading firms to impose the trajectory of global


restructuring upon other firms (Ruigrok and VanTulder, 1995).

Big firms dominate subcontractors by tighteningquality requirements and threatening to turn to alter-native suppliers/growers. For example, grower rat-ing is a measure of quality control. However, thehigher the quality control the more dependent thegrower becomes on the market-maker. (Ruigrokand Van Tulder, 1995).

Research Methods and Data

Measuring Bargaining Power

This article provides an analysis of bargaining powerin the Dutch flower auctions, based on the frame-work presented by Ruigrok and Van Tulder (1995).The framework provides a basis for systematic anal-ysis of the stakeholders involved in the auctions andthe nature of their interactions and bargainingprocesses. Ruigrok and Van Tulder (1995) furtherpropose a scale of dependencies ranging fromdependent to interdependent to independent posi-tions of the stakeholders in relation to each other asa measure of the impact on bargaining power be-tween the stakeholders. Accordingly, the unit ofanalysis is identified as the ‘network’ having the fol-lowing characteristics: (1) It is relatively stable andthe stakeholders do not meet accidentally; (2) Stake-holder interaction is aimed at the exchange of goods;(3) There is a system of values governing theinteraction.

The auction is recognised as the core firm on the ba-sis that:

1. It generates exceedingly high sales.2. As the principal stakeholder it has a high degree

of independence gained through its control ofthe core technology, and in exercising its financialmuscle.

3. It has direct access to domestic and foreign mar-kets/customers.

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4. It manages the value chain.5. It demonstrates a high commitment to accomplish

the vision of the network.6. It uses leading edge technology.

This article focuses on the core firm’s relationshipwith its suppliers and wholesalers/retailers, i.e. therelationships within the value chain. Whilst the rela-tionship between the core firm and its workers is alsodefined to occur within the value chain, this dimen-sion has no impact on the stakeholder inter-relation-ship aspect.

Ruigrok and Van Tulder (1995) propose a scale to beused as a qualitative yardstick to assess the relativebargaining power within a network, as reproducedin Figure 4. Influence, as defined in Section 2, entailsthe effect that A has over B in the making of a deci-sion, yet it is B that has the power finally to decide.However the actual process of how power is exer-cised is interpreted in the outcome of a bargainingrelation between the auction and the African grower,given that the act of doing business does not permit aplayer to talk openly about its business strategy ofplaying off one player against another. It may alsobe reasonably assumed that a grower would not vol-untarily manoeuvre himself into a position in whichthe auction largely dictates to him. However, shouldthe bargaining process create such a dependency ofgrower on the auction, it can only be attributed tothe auction occupying a stronger bargaining positionthan the grower (Ruigrok and Van Tulder, 1995). Thebargaining position may be seen as the source ofpower, however power may be exercised from auc-tion to grower and grower to auction irrespectiveof the dependency relation. Thus power is largelyshaped by the respective influence each player hasover the other. The illustration (Figure 4) combinesthe elements of power and influence on a continuum,which shows the relative bargaining positions ofplayers (auctions and growers) towards each other.The upper categories refer to the dependency

Position of African Grower

INDEPENDENT INDEPENDENT INTERDEPENDWITHINFLUENCE

[----------------------------] [---------------------------] [--------

Attitude of Auction or Market Maker:

COOPERATION COMPLIANCE COALITIONORCOMPETITION

Figure 4 A Continuum of Dependency Relations in a NetwSource: Ruigrok and Van Tulder, 1995

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relations in the Dutch flower business network andthe lower categories refer to the auction’s attitudeor strategy to the African grower. Based on thesedimensions of dependency and influence, Ruigrokand Van Tulder (1995) distinguish six bargainingattitudes, namely: cooperation or, competition, com-pliance, coalition, direct control and structural con-trol. An understanding of these attitudes of themarket maker becomes key to the African grower’sinternationalization strategy.

Scale of Dependency

The scale of dependency (See Figure 4) is used as aqualitative yardstick to assess the relative bargainingpatterns within the Dutch flower auctions (a specificmarket setting), as relationships between the auctionmaker and growers, as well as the relationship be-tween auction maker and buyers, which in both casesthe auction maker is identified as the core firm.

The bargaining configuration organized around theauctions gives the auctions the option of adopting abargaining attitude such as cooperation or competi-tion based on the bargaining position of the Africangrower and against which the African grower mustin turn fashion his own strategy. Ruigrok and VanTulder (1995) assert that cooperation often implies‘‘competition by other means’’ and that genuinecooperation can only be defined as emerging be-tween independent players. Ruigrok and Van Tulder(1995) further assert that both the auctions and grow-ers would shift on the continuum (as described inFigure 4), toward positions of interdependence. Thiswould mean that each player gradually takes into ac-count the situation and objectives of the other andwhich would make their cooperation less voluntary.

A less dependent African grower can use the interde-pendent relationship with the auction as a source ofpower in bargaining over an issue. However, Rui-

ENT DEPENDENT DEPENDENTWITH WITHOUTINFLUENCE INFLUENCE

-------------------------] [-----------------------------]

DIRECT STRUCTURALCONTROL CONTROL

ork



grok and Van Tulder (1995) contend that interde-pendence cannot exist if one player has more influ-ence over the other. Clearly it can be seen that theAfrican grower is positioned between interdepend-ence and dependent without influence.

Interdependence implies that the African grower andDutch auction have substantial and equal influenceover each other’s activities. Ruigrok and Van Tulder(1995) contend that the type of agreement concludedby two interdependent players is referred to as a coa-lition. We have seen firstly, that there exist no formalcontractual agreements between the Dutch auctionsand the African growers, and secondly there existsno strategy of the auctions to exclude an Africangrower from participating in the Dutch flower busi-ness network, as is the general aim of a coalitionagreement. Also coalition partners may hold eachother hostage and that certainly is not the case inthe relationship between the African growers andthe Dutch auctions.

The right hand side of the scale presents two distinctpositions where the African grower is dependent onthe auction, yet the possibility exists for it to still ex-ert some influence over the auction. An Africangrower who is ‘dependent with influence’ may endthe relationship albeit at a high cost. There it becomesimportant, that on the basis of this limited freedom,for the African grower to seek to influence the behav-iour and actions of the Dutch auctions.

The Dutch auctions have equal opportunity of choicesas does the African grower who is dependent oninfluence, should problems be experienced in therelationship, in addition to exercising ‘structural con-trol’. Structural control refers to the exercise of powerby the auctions to get the African grower to do whathe [the grower] does not want to do, and also to exer-cise that power to influence, shape and determine theAfrican grower’s very wants (Ruigrok and Van Tul-der, 1995). Structural control represents the most sub-tle form of exercising power, which traditionaltheories hold only shows up in cases of actual conflict.However, Ruigrok and Van Tulder (1995), quotingSteven Lukes, describe the situation of preventingsuch conflict from arising in the first place, as ‘‘themost effective and insidious use of power’’.

It must be noted however that the dependency scaleshows the relative bargaining positions of the auc-tions and African growers at a given instant and thatthese positions may shift over time.

Selected Flower Auctions

For the analysis of bargaining power and the role ofIT three flower market makers were selected. The fol-lowing criteria were used for selection. Firstly, the se-lected markets had to have a strong businessrelationship with African growers. Secondly, the


flower markets had to have differences in IT use.One market– Tele Flower Auction –is a completeelectronic auction. The other two auctions are Flora-Holland and Aalsmeer Auction are a combination oftraditional and electronic auctions. Thirdly, the threeauctions differ in terms of ownership. FloraHollandand Aalsmeer Auction are owned by grower cooper-atives. Tele Flower Auction is a privately ownedcompany not specifically owned by growers.

Tele Flower AuctionFrom 1984, the East African Flower (EAF) Company,which is comprised of a group of east African grow-ers located in Kenya, Tanzania, Zimbabwe and Zam-bia and supplied flowers (such as roses, carnations &statices) directly to the Dutch Flower Auctions. Theflowers were air freighted from Africa to The Nether-lands for sale and distribution via the Dutch Flowerauctions. Around late 1994, the Dutch Rose Growerswho owned the Dutch flower auctions decided toprohibit EAF growers from using the Dutch flowerauctions to market their flowers. This restrictionwas to take effect on 01 November 1995. In a counter-point move, the EAF developed and set up an alter-native flower auction mechanism, specifically tomarket cut-flowers grown in Africa. This resultedin the creation of Tele Flower Auction (TFA)–http://www.tfa.nl—in 1994, which is now housedon the Noorddammerweg in Amstelveen. TFA hasjust one shareholder.

TFA envisaged beginning operations with 150 buy-ers, but actually started with 75 buyers. Today buy-ers on the TFA number 180. In March 1994, TFAfaced stiff competition from the traditional Dutchauctions. Internally, the company was faced withoperational difficulties in training the employees(who typically fell in the 35–40 year age bracket) incomputer usage. For example, employees were notfamiliar with the use of function keys such as theALT-key and the use of the computer as a mediumto conduct business required a paradigm shift inindividual thinking that was not easily achieved.Also, up until mid 2002, only companies registeredwith the Chamber of Commerce in Holland couldparticipate in the TFA auction mechanism. This re-quired participating companies to be physicallybased in Holland. This ruling is now being revisedand companies based in countries such as Germany,UK, France, and Belgium are allowed to participatein the TFA auction, by electronic means, but onlythrough the Dutch exporter. This means that the for-eign buyer may only purchase flowers off the TFAsystem through an intermediary, that intermediarybeing the Dutch export company. The requirementof the Dutch exporter as intermediary between theTFA and foreign buyer saw the exporter being trans-formed simply into a transporter of the goods pur-chased on auction. TFA did not want to involveitself in customs, transportation and related logisticsissues. Hence the need arose for the export compa-nies who carry this responsibility.

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http://www.tfa.nl


Currently 90% of flowers are sourced from Africawith 75% stemming from Kenya alone, the locationpoint of 150 supplier farms. Other African suppliersof flowers are Tanzania, Zimbabwe and Zambia.Ethiopia remains a potential source of growers forthe future.

TFA functions as an independent entity. It managesalso its own supply, in having a farm in Kenya ofabout 200 hectares. TFA values loyalty in the growersand honors such relationships. Growers have indi-vidual choice of markets in which to sell their pro-duce, but choose to do business with TFA of theirown volition. TFA is attentive to farmers’ concerns,having an ear to the ground, and do not play offgrowers against each other.

FloraHolland AuctionFloraHolland is a cooperative auction network—http://www.floraholland.nl. Of the 8200 suppliers,4500 are members of the cooperative. Suppliers selltheir products via 26 auction clocks and the Interme-diary Office, which operates nationally across TheNetherlands. FloraHolland has several auction loca-tions, each with its own culture and position in themarket, totalling approximately 3000 employees. In2002, FloraHolland recorded total sales of EUR 1.9bil-lion. Thus FloraHolland represents a significant linkto the world market for the African growers.

FloraHolland has earmarked a strategy for growththat is distinguished by a continuous close collabora-tion with its members and other partners in thechain, as a key feature of its operations. There are fiveauction locations in the FloraHolland stable, namely,Naaldwijk, Rijnsburg, Bleiswijk, Zon and Eelde. Theintermediary office handles direct sales away fromthe clocks and concerns itself with futures and daytrade and is active at all auction locations.

Each of the auction locations has its own coveragearea and sales market, tailored to the needs of a par-ticular buyer and/or grower. Growers are based inEurope, Africa, Israel, South America and Asia. Theauctioning of flowers is open to international buyers,with 75% of cut flowers being exported. It is also pos-sible to buy from a distance. Buyers who choose thismethod (so-called ‘‘Kopen Op Afstand’’) can buy atall FloraHolland clocks, from the comfort of theirhomes or workplaces.

30% of flowers sold on FloraHolland auctions aresourced from outside of the Netherlands. 15% is im-ported from Africa. With respect to the South Africangrowers, flowers are currently sourced from ProteaDu Cap, a consortium formed by fourteen producersof proteas and other indigenous fynbos. These flow-ers are grown naturally, only in Cape Town.

LivingGold is a SA company which represents a jointventure between Gold Fields SA and the Interna-tional Development Corporation (IDC) of SA. It is

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to debut the (exclusive) auctioning of nine new vari-eties of the SA rose, through FloraHolland Auction.FloraHolland agents, based in South Africa currentlyact as a conduit between the grower and FloraHol-land auction. The agent exports the flowers directlyfrom SA to FloraHolland. Flexibility and loyalty ingrowers are viewed as positive traits for businessdevelopment. Growers are paid on a commission ba-sis. FloraHolland auctions 100% of the flowers sup-plied by its African growers.

Aalsmeer AuctionThe Aalsmeer Flower Auction (VBA)—http://www.vba.nl–like FloraHolland is also a cooperativeenterprise, and is the largest covered trade centrein the world. It auctions a daily volume of approxi-mately 20 million flowers and 2 million plants fromsome 7000 suppliers/growers located globally. Flow-ers and pot plants are exported daily throughout theworld, comprising some 50,000 transactions. As such,it provides a central marketplace for the buying andselling of floricultural products.

As a cooperative VBA is jointly owned by 3500 Dutchmember growers. The growers appoint a board ofnine from among their ranks to determine the gen-eral policy. VBA has its origins in the turn of the20th century, when Aalsmeer growers joined forcesas a reaction to the power of the middlemen. Thisled to the formation of two separate auctions, Blo-emenlust and Central Aalsmeer Auction (CAV),which eventually merged into what is today knownas VBA.

Sales turnover achieved through its 1300 buyers andapproximately 2000 workforce, totalled over 1.5bil-lion euro in the year 2002. The growers, as coopera-tive members, are obliged to sell their entireproduct via the auction. A percentage of the growers’sales profit pays for the building and staff costs. Buy-ers are not members, but are required to be regis-tered in the computerised administration system.

Fifteen percent of roses auctioned through Aalsmeerare sourced from Africa. The supply of red roses ishowever regulated by the auction house. Growersare advised via electronic means (e-mail) as to supplyplanning and demand growth. Growers are requiredto submit an electronic based file detailing their sup-ply planning, on a weekly basis. The auction houseuses this information to regulate the supply of roses.Kenya represents the biggest import country for Aals-meer. Of the flowers sourced in Africa, 50% is obtainedfrom Kenya, with other countries such as South Africa,Zambia, Tanzania, Ethiopia and Mozambiqueaccounting for the remainder. The file is Excel basedand in free format. It details the quantity and varietyof roses to be supplied by the grower. Here the growerdeals directly with Aalsmeer auction. No middlemeninvolvement is called for. IT serves to enable directcommunication between Aalsmeer and the growers.Aalsmeer facilitates the process of the grower reach-


http://www.floraholland.nl

http://www.vba.nl

http://www.vba.nl


ing a wider end market, for example, 95% of flowersgrown in Africa end up in Europe, but China presentsitself as a viable market for African growers, as theChinese New Year coincides with high productionlevels of flowers in Africa to meet that demand. Aals-meer always welcomes new products. Growers whoare able to supply high quality rare product consist-ently are introduced to prospective buyers by the auc-tion house. Aalsmeer assists such growers withmarketing and promotion initiatives.

Data Collection

Data was collected through personal interviews withemployees of Tele Flower Auction, FloraHollandAuction, and Aalsmeer Auction. The validity of thisapproach to conducting an empirical inquiry intocontemporary phenomena is underscored by the spe-cific contextual conditions related to this study, i.e.the Dutch flower auctions. In addition to the tech-nique described above, evidence was also sourcedfrom the various auction and grower websites, previ-ous research and its theoretical proposition so thatinvestigative data may converge in a triangulationfashion, thus enhancing the validity of this method-ology. For a more thorough explanation of the re-search methods and techniques used, we refer toCunden (2004).

Analysis of Empirical Data

African Growers Dependent on Influence

This section presents a view of the stakeholder inter-action in terms of bargaining relations, from the per-spective of the African grower, within the Dutchflower business network. ‘‘The interaction within anetwork can only be fully understood if one takesinto account the power relations between the constit-uent parties’’, (Ruigrok and Van Tulder, 1995, p. 64).Ruigrok and Van Tulder (1995) identify five typesof bargaining relationships between the core firm(auction) and its relations with (1) its suppliers(growers), (2) its workers, (3) its distributors (whole-salers), (4) its financiers and (5) its government(s), ofwhich the first is the subject of this article and thecrux of analysis. Hence the analysis of the relation-ship between the auctions and the growers is basedon the six organizing questions formulated by Raiffa(1982).

According to Dosi et al. (1988) a better bargainingposition is derived from having and exercising morepower, which in turn derives from a technologicallyleading position with respect to other players in theindustry. Technologically leading companies are ableto produce new products using innovative technolo-gies, which endows them with more power. In thisway, these companies are able to reduce the pros-


pects for new entrants and influence the creation ofsubstitutes (Ruigrok and Van Tulder, 1995). Thismay be seen in TFA’s initiative to establish its ownfarm in Kenya for the cultivation of roses by use ofinnovative technologies. The results of the use ofthese innovative technologies influence the Africangrowers to adopt similar techniques, so as to remaincompetitive.

In all three cases, the auctions, like all big companiesusing innovative technologies, position themselves inthe core of the flower business network. This positioncarries the advantage of control over the supply anddistribution of flowers, as well as allowing the auc-tions to play a leading role in the creation of addedvalue (Ruigrok and Van Tulder, 1995). Depictingthe export value of cut flowers from Kenya, Zimba-bwe and Zambia respectively, shows over 90% ofthe exports is destined for the Dutch flower businessnetwork, thus implying a dependency of the Africangrower on the auction houses. In terms of the charac-teristics of a core firm (Ruigrok and Van Tulder,1995), it is clearly evident that the auctions have thegreater power (over growers) in the Dutch flowerbusiness network. Their high sales figures serve assine qua non for other factors as described by Ruigrokand Van Tulder (1995) such as:

v Their high degree of independence from otherstakeholders means it will always play a leadingrole and if it should give up this role, for what-ever reason, it will always try to regain control.

v The auctions in having direct access to foreignend markets and customers control the distribu-tion of the flowers. For example FloraHollanduses the Intermediary Office for importing anddistributing the auction’s direct sales away fromthe clocks and on behalf of the African growers,who do not have access to these buyers.

v The independence of the auctions is also seen intheir control over strategic competencies, suchas in the provision of the daily statistical dataregarding sales of African grower products.The African growers are dependent on the auc-tions for this information. This information inturn is crucial to the grower’s planningactivities.

v The auctions also play a leading role in the man-agement of the internal value chain (for exam-ple, the provision of air-freight facilities byTele Flower Auction in Kenya), and the internallabour process of growers (for example, by stip-ulation of MPS accreditation).

v The auctions’ ability to determine the rules ofthe game (for example in terms of grower rating,stipulation of quality controls and accreditation)influence other stakeholders such as the Africangrowers, but also establishes their independencefrom the growers.

v A core company is also a user-producer, mean-ing that it not only produces new products but

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is also a leading user of new technologies. This isclearly evident in the case of Tele Flower Auc-tion, which uses new technologies to experimentand produce its own supply of roses in Naiva-sha, Kenya.

Thus it may be seen that the Dutch flower businessnetwork functions as a bargaining configurationorganized around the auctions, and consisting ofgrowers, distributors or wholesalers and buyerswho are directly or indirectly engaged in the produc-tion and distribution of flowers internationally. Inaddition, this bargaining configuration is regulatedby a governance regime, which refers to the institu-tional setting and social relations amongst stakehold-ers as sources of influence.

Ruigrok and Van Tulder (1995) contend that, moreand more, market makers look for long-term plan-ning horizons in their relations with growers andan indication of this phenomenon is the single-sourcing agreement, as opposed to the multiple-sourcing agreement which traditionally served toplay off one grower against another. However ouranalysis reveals that the relationship between Afri-can growers and market makers is devoid of anyformal contractual agreements, yet many growersare indeed contracted. In the absence of such for-mal agreements, it may be seen that quality controlthen becomes the instrument of contractual agree-ment: the higher the level of quality control bythe market maker, the more dependent will theAfrican grower become. Tightening quality controlrequirements rather than threatening to turn to acheaper grower, allows market makers to dominatethe African growers. This is because quality controlassumes that the growers’ entire production processmust be continuously monitored to maintain highlevels of quality. Grower rating is also anotherpowerful measure of quality control. In such a rela-tionship the market maker regularly evaluates thegrowers, and determines an overall rating whichtells both parties how growers measure up againsteach other. Growers who pass the test receive aquality award enabling preferred grower status. Inthis way the market maker not only influences thegrower, but achieves a position of dominance overthe grower.

The African grower in terms of bargaining position is‘dependent with influence’ in his relations with theDutch auction maker. In summary, the dependencyscale illustrates the following possible relationshipsas bargaining configurations between the Dutch auc-tions and the African growers:

v Independent: The two players do not interact, orif they do, only marginally, and thus do notexert any influence over each other. Clearly thisis not the case in our analysis.

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v Independent with influence: The balance ofinfluence shifts in favour of the African grower.This marks the only instance in which the auc-tion maker may be driven to act differently thanit would otherwise have done (yet in doing so itmaintains its independence). Our analysisreveals no such instance to have occurred.

v Interdependence: Both the African grower andDutch auction maker have equal influence overthe other. Again by analysis this implies a coali-tion, which does not hold true.

v Dependent on influence: The Dutch auctionmaker clearly becomes the stronger partner.The African grower is truly dependent on theDutch auction maker. Our analysis reveals thisto be true.

v Dependent without influence: The Africangrower has lost all possibility of influencingthe Dutch auction maker. This situation is alsorevealed by our analysis to be untrue.

In interpreting the bargaining positions of the Afri-can growers with respect to the scale of dependency,Ruigrok and Van Tulder (1995) caution that the fol-lowing points must be taken into consideration:

1. Positions of the African grower are subject to con-stant change due to the various types of deals thatmay be transacted between the grower and themarket maker.

2. A position on the continuum is at the same timethe outcome of the previous bargaining processand the starting point of a future or next bargain-ing process. The effect of future deals impact thepower relationship and cause shifts in bargainingpositions.

3. Intervening variables from outside the Dutchflower business network may influence the bilat-eral relationship, as the use of power does not takeplace in an economic or political vacuum.

4. The scale offers no conclusive yardstick to positionall dimensions of interaction and at times bargain-ing positions may be somewhat arbitrary andwould require motivation.

Electronic Auctions with Higher Reach andRichness

An automated negotiation phase, in which prices aredetermined and contracts closed, represents the coreof the auction. It is within this core element thatstakeholder relationships are forged and driven byinformation services. The ‘‘richness’’ in the informa-tion services provided becomes crucial in determin-ing the number of participants and their levels ofinterest. Clear and distinct information about tradeobjects and trade rules prevent friction during andafter the auction. However, it is the role and qualityof that information which shape the stakeholder rela-



tionships. This relationship in turn influences thephysical logistics of the trade objects. The flowersare only moved after being sold. However, currentlyall flowers are transported to the Netherlands forevaluation before auctioning begins.

The physical shipment of the flowers directly to thebuyers would certainly improve the efficiency ofthe flower auctions. Such a capability can only bebuilt on a high level of trust that is achieved fromrelationship building between the suppliers/growersand the Dutch wholesalers.

Lessons Learned

Based on the analysis of the bargaining power posi-tion and the use of IT, five propositions in the threecases were analyzed, see Table 1.

The analysis shows that proposition 1 and 5 were inall three cases present, see Table 1. In Table 1 YESindicates that the proposition was present in the spe-cific case, and NO indicates it was not. The analysisindicates that with regard to:

v Proposition 1: That in all three cases Africangrowers try change their relationship with theflower auctions and work towards an interde-pendence relationships.

v Proposition 2: The adoption of IT does notalways lead to more influence. The FloraHollandcase shows that IT adoption has only a limitedeffect on influence.

Table 1 A Comparative Analysis of the Propositions per C

Tele Flower Auction

Proposition 1 YES

More bargaining power leads to

more influence.

African growers adopt strategy

Proposition 2 YES

Adoption of IT leads to

more influence.

Tracking and tracing to preven

loss of products in transit and t

make the auctions

more accountable for such loss

Proposition 3 NO

More influence, the greater is the

geographical reach.

The market maker is positioned

and the buyer as intermediary.

Proposition 4 NO

More reach, the higher the

potential to

select the right buyer.

The market maker controls all

Proposition 5 YES

Selecting the right buyer

leads to profitable

trade agreement.

Selection of the right buyer is a

would lead to mutually success


v Proposition 3: The TeleFlower Auction and Flo-raHolland Auction cases show that the marketmaker (the auctioneer) might use its position torestrict the direct access of growers to buyers.The Aalsmeer Auction shows that influence isincreasing when electronic access is providedby the auction to link growers and buyersdirectly, for example via electronic brokeragesystems.

v Proposition 4: The TeleFlower Auction and Flo-raHolland Auction cases show that the marketmaker controls the relationship and stimulatesgrowers to use the auction without buildingdirect relationships between growers and buy-ers. Therefore there is a lower potential to reachthe right buyer.

v Proposition 5: All three cases show that provid-ing ‘rich’ information will create more profitabletransactions.

The analysis of the propositions leads to a refined setof hypotheses and therefore a refined conceptualframework, see Figure 5.

H1: The adoption of IT by African growers leads to the re-moval of quality uncertainty in products and provides a‘rich’ informational service.

The adoption of IT by African growers will enable aplatform upon which real-time quality of informa-tion regarding the product could be made availableto the auctions as well as buyers. Quality uncertainty,which refers to the absence of knowledge pertainingto the quality of the flower, is thus eliminated. In

ase Study Auction

FloraHolland Auction Aalsmeer Auction

YES YES

to shift from ‘dependent with influence’ to ‘interdependence’.

NO YES

t

o

es.

The use of IT is limited

to a communication

function and supply of

reports. Does not

extend reach to buyers.

Will provide African growers

with access to the Florinet

network and VBA Trade Plaza.

NO YES

between the grower Access to Primeur, show

cases (MVA) and trade fairs.

NO YES

access to buyers. Investment in IT will provide

access to KOA and VBA

Trade Plaza buyers.

YES YES

chieved through the provision of ‘richness’ in information that

ful and profitable transactions.

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H1

H2 H3

H4 H5 H6

H7 H8

Potential to reach the right buyer

Geographical reach to buyers

Profitable transactions concluded

Bargaining power of African growers

Influence on market maker

Adoption of IT by African growers

Removal of quality uncertainty. Provides rich informational service.

Figure 5 The Refined Conceptual Framework


improving the quality of information, a ‘rich’ infor-mational service is provided to the online buyer.

H2: The removal of quality uncertainty provides for a‘rich’ informational service which leads to more bargain-ing power for the African grower over the Dutch auctionmaker.

The removal of quality uncertainty in the productsand the provision of a ’rich’ informational service isachieved through the adoption and use of IT. Thiscreates the opportunity for the African grower to be-come a ‘‘user-producer’’ of technology, enabling astatus of a better bargaining position. A user-pro-ducer is able to produce new varieties of qualityproducts enabled by use of innovative technologiesthat endow them with greater power over market de-mands and therefore a better bargaining position.

H3: The removal of quality uncertainty provides for a‘rich’ informational service, which leads to a greater geo-graphical reach to buyers.

Buyers typically want to see the quality of products,which they purchase on auctions. Hence by remov-ing the uncertainty around quality of flowers andproviding more detailed information on the product,growers will be able to reach a wider expanse of buy-ers, who are connected via the Internet. The removalof product quality uncertainty builds trust in therelationships enabling access to a wider end-market.

H4: More bargaining power for the African growers leadsto the ability to exercise a greater influence over the Dutchmarket maker.

The analysis of the case studies using, the depend-ency continuum of Ruigrok and Van Tulder (1995),

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clearly shows the direction of shift from dependenceto interdependence for the African growers. Thisshift in bargaining position is proportionally corre-lated to a shift in the power of influence. Hence a bet-ter bargaining position creates the scope forexercising greater influence over the market maker.

H5: More influence on the market maker leads to a greatergeographical reach to buyers.

The market maker is positioned as the intermediarybetween the African growers and the buyers. Thusin order to reach more buyers it would be necessaryfor the African growers to exercise more influenceover the market maker, toward creating opportuni-ties for greater promotional exposure by influencingthe choice of products used in, for example, show-cases and trade fairs as organized by the marketmakers.

H6: The greater is the geographical reach, then the greateris the potential to reach the right buyers.

African growers and in particular South Africangrowers export a specific variety of cut-flowerswhich flourish only in certain regions of the world,such as fynbos, which endows such growers with a‘natural’ competitive advantage. However theadvantage is only realized in finding the appropriatebuyer of the specific variety of flower. Hence thegreater the geographical reach to buyers the morelikely is the potential to reach the right buyers.

H7: A greater geographical reach to buyers creates thepotential for profitable transactions to be concluded.

Roses are the primary export of African growers.Thus the quality of the roses becomes a deciding



factor in their purchase and the wider the customermarket the greater the likelihood it is for each roseto be sold at a profit.

H8: The potential to reach the right buyer enables profita-ble transactions to be concluded.

The competitive advantage provided in being thesource of rare flowers for sale might only be realizedif the right buyer is found, for not all buyers seek therare products. The bouquet comprising various flow-er varieties is usually the primary object of purchase,or the rare flowers are purchased in very small quan-tities to be used as accompaniment to a bouquet ofroses. Thus reaching the correct buyers enables a saleand profitable transaction to be concluded. Profitmargins must remain large enough, however, to al-low a grower to invest in new machinery and to fundresearch and development for a new generation ofproducts along directions projected by the marketmaker (Ruigrok and Van Tulder, 1995).

Opportunities and Challenges for the AfricanGrowers

The question for African growers is: what competi-tive strategies might be adopted? According to theUnited Nations Conference on Trade and Develop-ment (UNCTAD) study of E-Commerce for develop-ing countries (UNCTAD, 2003): ‘‘The production andexport of agricultural commodities from developingcountries deserve attention because of the centralrole that these commodities play in the economiesof those countries’’ (Chapter 6: Marketing Develop-ing-Country Agricultural Exports via the Internet,p153). The report advocates the adoption of IT, as a‘‘window of opportunity for improving the market-ing of agricultural products in developing coun-tries’’. The report concludes that the Internet andthe consequent adoption of new information technol-ogies achieved through improved efficiencies holdsmany significant benefits for farmers in the agricul-ture industry of the developing countries. It furtheridentifies that the adoption of IT leads to more infor-mation access and attributes some of the underlyingproblems to farmers’ lack of access to market infor-mation, resulting in their inability to bargain effec-tively. The results of this article empiricallyillustrate the analysis of the UNCTAD report. The re-sults of this study show the importance of the follow-ing factors that African growers have to take intoaccount when improving their business position.

Quality UncertaintyThere are currently 180 buyers on the TFA system, ofwhom only 4 purchase their flowers by physicalinspection, that is, these 4 buyers prefer not to useIT. A possible reason for this is advocated by Turban(2004), who suggests that customers have cognitivedifficulty accepting products that they have neverseen, especially from an unknown vendor. Turban


(2004) refers to this cognitive difficulty as qualityuncertainty, and attributes the skepticism of buyersto purchase products, especially when they cannotfeel or see the product, to issues of trust. Thus byadopting IT, growers will uncouple the qualityuncertainty from the purchase process and enhancetrust in the buyer relationship.

Emergence of Grower AssociationsThe Dutch floriculture sector is characterised by anincreasing differentiation in demand and qualitycontrol. A possible response from growers is the for-mation of a Growers’ Association that allows flowerexporters to group together and adopt a poolingstrategy, where pooling entails the combination ofvarious growers’ (members’) produce into a singleexport consignment. This presupposes a distinctionbetween heterogeneous and homogeneous growers’associations. The advantage of these associations isthat they are strong in terms of the counteractingpower of the growers collectively. However thispower by association must be traded off againstself-selection and the pursuit of individual strategiesas heterogeneous associations may frustrate highquality growers due to the policy of uniform treat-ment of members, whereas the converse holds truefor homogeneous growers’ associations (Hendrikseand Bijman, 2001).

Quality and Consistency of ProductionQuality and consistency in production present prob-lems for the African growers, especially for thoseoutside of Kenya. Some competitive strategies alsoadvocated in the study by Kaiser Associates (2000)propose the following strategies to eliminate theproblems experienced:

v Innovate with niche product strategy.African growers must be the leaders in indige-nous African foliage and floricultural products.For example, the fynbos of the Cape representsa competitive advantage for South Africangrowers, as this type of flower is grown onlyin the Cape region.

v Introduce international standards.This would require bringing in experts to teachquality improvements. For example, instead ofblindly following the experimental techniquesof FloraHolland, African growers could find itless costly competitive to use Multiflora as a testfor standards, and high quality auction. Growersshould all adopt a standard quality certificationaimed at improving phyto-sanitary conditions.

v Preferential freight agreements with localairlines.African growers as a common group should lob-by their Government for support, in strikingdeals with the national airlines. Indeed the na-tional airlines of the AU countries could facili-tate quicker transport of flowers thus retaininga high quality of product for longer periods oftime.

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v Pooling volumes (to achieve economies of scale).Within the AU flower industry, growersshould pool their products and may also usethe pooling process to create a unique Africanbouquet as the end product. Smaller growersshould pool products with other agriculturalproducts, to lower costs of transportation. MostAfrican growers outside of Kenya do not pro-duce the volumes to charter a plane as Kenyadoes.

v Investment in research and training.Establish permanent funding mechanism andjoint initiatives with international institutions.The key is to establish a permanent link to theoutside world for technical expertise. Joint Ven-tures represent the way forward. Universitiesshould offer degree courses aimed at agricul-tural training for flowers and cultivation of un-iquely African products. Adopt internationalexchange programmes.

Conclusions

Research Problem

The main research question is stated as:

How does the adoption of IT enable the African grower toinfluence the behaviour of the market maker and createbargaining power in the context of the Dutch flower busi-ness network?

The adoption of IT leads to the removal of qualityuncertainty, where quality uncertainty refers to theabsence of knowledge pertaining to the quality ofthe flower. The adoption of IT further provides thepotential for growers to improve on the richness ofthe informational services regarding their prod-ucts—more detail on the cultivation and harvestingof the product is provided in addition to a qualityassessment. This leads to a shift in the bargainingposition of African growers as analysed using thedependency continuum of Ruigrok and Van Tulder(1995), from a position of dependence tointerdependence.

An interdependent position allows the Africangrower the ability to strike a coalition with the mar-ket maker, from a position of equal influence, to-wards opening up more opportunities to reaching awider end or customer market. The adoption of ITmay also precipitate a shift toward a bargaining posi-tion of ‘independent with influence’. For example ITwould facilitate ease of operations for the grower inthe area of research and development ventures. Thusit may establish the necessity for the market maker tocooperate with the grower. For the grower, achievingthe position of ‘independent with influence’, marks

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the only instance in which the market maker maybe influenced into adopting a course of action solelydetermined by the grower.

The pattern-matching logic gained in comparing threeindependent empirically based patterns together witha predicted one, and for which the patterns coincide,achieves internal validity, whereby certain conditionsare shown to independently lead to other conditions.Case studies, (as used within the methodologicalframework of this article), ‘‘like experiments are gen-eralizable to theoretical propositions and not to popu-lations and universes’’, Yin (1994).

The theoretical approach of this article begins withthe trade context processes developed by Kambiland Van Heck (2002) as a key insight into successfulelectronic markets. In particular the influence factorof the trade context process was singled out for anal-ysis. The dependency model of Ruigrok and Van Tul-der (1995) was then used to determine the bargainingposition, as the measure of the influence Africangrowers exert over the market maker in the Dutchflower business network. The dynamic role of ITand the use of bargaining power as leverage for theAfrican growers to exert influence in the Dutch flowerbusiness network was then evaluated in terms of thetrade-off between reach versus richness, as originallydeveloped by Evans and Wurster (2000).

Suggestions for Further Research

There are several suggestions for further research onthe impact of bargaining power and IT on African–European business relationships.

First, in this research, hypotheses have been sug-gested. These hypotheses need to be tested. Thiscould be realized by performing a large-scale re-search of African growers and European flower buy-ers. As a result it could be possible to makestatements, based on statistics, about whether theproposed hypotheses are valid or not.

Secondly, further research is envisaged in the area ofthe impact of IT to remove the dependency relation-ship on the market maker and to use IT to provide aricher informational service aimed at increasing thegeographical and economic reach of the grower. Thisdesign-oriented research can come up with new de-signs with richer informational services that will im-prove the position of African business in general andthe African growers in particular.

According to Ruigrok and Van Tulder (1995), most‘‘observations on international economic interde-pendence contain interesting elements but have beenformulated at such general levels of abstraction thattheir use and interpretation is far from self-evident. . . [and that] none of the interdependencyapproaches have ever been elaborated into a coher-



ent set of hypotheses’’. This argument therefore con-cludes that the dependency relationship is a phe-nomenon requiring further research and study, andthat it does not provide a ready-made set of conclu-sions regarding the nature and dynamics of the rela-tionship between African growers and Dutch flowerauctions.

Mainstream research into electronic markets focusespredominantly on direct changes in IT and conse-quent reduction in transition and search costs (Kopp-ius, 2002). Hence the scientific contribution made inthis article is achieved in terms of the social contextof the exchange process and its impact on electronicmarket success. Consequently, it provides a basis fordeveloping collaborative e-business strategies forAfrican companies embarking on newer forms ofelectronic commerce.

References

Afuah, A. and Tucci, C.L. (2001) Internet Business Modelsand Strategies. McGraw-Hill, Irwin, New York.

Cunden, M. (2004) The dynamic role of IT and the use ofbargaining power as leverage for African Growers toexercise influence in the Dutch Flower Businessnetwork, University of South Africa (Thesis).

Dosi, G., Freeman, C., Nelson, R., Silverberg, G. and Soete,L. (1988) Technical Change and Economic Theory. PinterPublishers, London.

Evans, P. and Wurster, T.S. (2000) Blown to Bits: How the NewEconomics of Information Transforms Strategy. HarvardBusiness School Press, Boston, Massachusetts.

MAYEN CUNDEN,University of SouthAfrica, School of BusinessLeadership, P.O. Box1409, Sunninghill, 2157,Sandton, South Africa. E-mail: [email protected]

Mayen Cunden is a grad-uate of the School ofBusiness Leadership, Uni-versity of South Africa.

His research interests focus on the social implicationsof IT-enabled technologies for the African globaltrader.


Hendrikse, G.W.J., Bijman, W.J.J. (2001) On the emergenceof growers’ associations: self-selection versusmarket power, ERIM Report Series Research inManagement.

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Kambil, A. and Van Heck, E. (1998) Reengineering theDutch flower auctions: a framework for analyzingexchange organizations. Information Systems Research9(1), 1–19.

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Ruigrok, W. and Van Tulder, R. (1995) The Logic ofInternational Restructuring. Routledge, London.

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Erasmus University’s Rotterdam School of Manage-ment. His research concentrates on electronic marketsand IT-enabled business networks.

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Bargaining Power and Information Technology in Afrcan-European Business Relationships

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Transcript of Bargaining Power and Information Technology in Afrcan-European Business Relationships