Contract & Procurement Management Report: Buyer-Seller Dynamics

This report delves into the core concepts of contract and procurement management, providing a comprehensive analysis of purchasing power, trust levels, and buyer-seller relationships. The report begins by defining purchasing power and its influencing factors such as inflation, supply, and interest rates, and examines its impact on organizational decision-making, particularly in the context of the oil industry, using Groupon Oil Company as a case study. It highlights how consumer behavior and collective purchasing power can influence pricing and market dynamics. The report then explores the three levels of trust—honesty, benevolence, and competence—and their significance in buyer-seller relationships, emphasizing how these factors affect customer loyalty and organizational strategies. Finally, the report references two academic papers that explore the origins of power in buyer-seller relationships and business relationship alignment. This report offers valuable insights into the complexities of business relationships, providing a solid foundation for understanding and managing contracts and procurement effectively.

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CONTRACT & PROCUREMENT MANAGEMENT
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Question one: Purchasing power analysis
The economic paradigm which indicates an organization’s or an individual’s ability to
purchase services or goods in the market is defined as the purchasing power. The very best way
that can measure purchasing power is to calculate the number of items that one single customer
or a buyer can purchase with a fixed dollar amount. It is important to note that there are several
factors which can influence purchasing power which are inflation, supply, and credit or interest
rates.
Purchasing power can effect change in an organization via collective business decisions.
First by consumers pooling their purchasing power, they can effect Groupon oil company
decision by gaining access to oil product at a lower cost; when the company raises the price of
oil, then few customers or buyers will buy thus decreasing the sales of the product. This impacts
price related decisions of Groupon Oil Company. This can be even worse once buyers aligns
their economic interest as consumers they form collective purchasing power as no oil product is
bought if Groupon Oil Company increases price of their products. In addition, by buyers pooling
their purchasing power they can unlock the ability of Groupon Oil Company.
On the other hand new start-ups oil companies such as Groupon have made a lot of profit
around the concept of purchasing power. In here the organization have aggregated consumer
demand so as to secure daily deals for their gleeful consumers (BYRNE, n.d )
Question two: The three levels of trust
Trust is a key concept in understanding buyer-seller relationships. Trust is defined as the
belief that one can be dependable and will honor their commitments. Researchers have found out
that there are three levels of trust which are honesty, benevolence, and competence. Those
individuals or customers who are honest, organizations tend to give them an upper hand when

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they need services. Example, in oil industry those customers who give truthful details are used
by the company when conducting market survey of their products. On the other hand honest
organizations such BG group oil company have increased their customers’ urge to continually
use company’s product without having to consider other competitor companies.
Benevolence is defined as the extent to which a trustee is believed to want to good to the
trustor besides offering ego-centric profit motive. Researchers also refers to benevolence as
reliability. By offering an organization being benevolent, buyers’ willingness to denote more
energy and time so as to maintain that good relationship with the company. On the other hand by
the buyer being reliable or benevolent it means that an organization cannot take any action such
as producing low quality products which may harm the buyers unknowingly (Ozkan-Tektas,
2014, p. 16).
Last level of trust is commitment which by Ozkan as a multidimensional construct of
representing buyer or seller intention to maintain that relationship between them. There are two
views of commitment which are behavioral and attitudinal. Affective commitment by a
telecommunication company led to buyer loyalty and always willing to be always associated
with the company’s product; builds special attachment to the customer (Ozkan-Tektas, 2014, p.
17).

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References
BYRNE, W., n.d . Purchasing Power Is Social Impact Power. [Online]
Available at: https://www.fastcompany.com/2679995/purchasing-power-is-social-impact-power
[Accessed 12th September 2019].
Ozkan-Tektas, O., 2014. The Effects of Opportunism and Trust on BuyerSupplier Relationship:
Do Commitment Types Matter?. International Journal of Business and Social Research , 4(9),
pp. 14-17.