Reverse electronic auctions and industrial buying behaviour:
case studies in the telecommunication industry

Abstract: Industrial purchasing stands for more than half of the whole economic
activity in industrialized countries. Reverse electronic auction (REA) is an
electronic procurement tool proven to make the traditional purchasing
situation more efficient and to create substantial price reductions. Hence
its usage is increasing rapidly and the way it distresses suppliers have
created a vast concern in sales and market related activities.

In relying on the notion that the sell-side of organisations can be aided by
knowledge of buying activities this topic has been carried out by a
combinatorial view of REAs and the well-anchored area: industrial buying
behaviour. Thus the formulated research problem is to investigate how the
buying behaviour when using reverse electronic auctions can be described in
the telecommunications industry. This is conducted by investigating the
buying process, buying center and the most important choice criterions when
procuring through REAs.

In order to investigate this area, one case study has been done at an early
adopter of REA in the global telecommunication industry, namely Vodafone
Group Plc. Another case study was conducted at Ericsson, one of the leading
suppliers of telecom equipment, which has implemented REAs as a part of
their everyday sourcing activities.

The findings offer a framework integrating traditional buying behaviour with
current REA theories. An emerged buying process when procuring through REAs
and a somewhat less extensive buying center is presented. When investigating
the choice criterions, it is found that price is not as important as
expected. Rather, the effect of ‘price compression’ is defined and
identified as a major finding of REAs. Concluding this thesis guidelines are
provided for the activities that sales and marketers thoroughly should
recognize for successful REA participation.