Understanding e-auction use by procurement professionals- motivation, attitudes and perceptions-tassabehji2010

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Supply Chain Management: An International Journal
Understanding e-auction use by procurement professionals: motivation, attitudes and perceptions
Rana Tassabehji
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Rana Tassabehji, (2010),"Understanding e-auction use by procurement professionals: motivation, attitudes and perceptions",
Supply Chain Management: An International Journal, Vol. 15 Iss 6 pp. 425 - 437
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Research paper
Understanding e-auction use by procurement
professionals: motivation, attitudes and
perceptions
Rana Tassabehji
Downloaded by FLINDERS UNIVERSITY OF SOUTH AUSTRALIA At 08:32 05 February 2016 (PT)
University of Bradford School of Management, Bradford, UK
Abstract
Purpose – E-auctions have had a big impact on procurement over the past decade. Despite the benefits, there has been well documented resistance to
this procurement medium. There is a need to understand factors which influence motivation to use and attitude towards e-auctions, in order to facilitate
practitioners’ ability to develop and adapt e-auctions into an effective procurement tool. This paper seeks to address this issue.
Design/methodology/approach – A model of the inter-relationships between e-auction drivers is derived from an analysis of the literature. Data
from a sample of senior procurement professionals across several industry sectors were collected by online questionnaire and a structural equation
model was fitted using PLS.
Findings – The study reveals that e-auction use for procurement is motivated by building relationships with suppliers and not solely as a means of
optimising prices of goods and services. Where attitude towards e-auction use is negative, this is mainly driven by a strategic approach to procurement.
Originality/value – Nowhere in the extant literature has there been a study on the impact of how the organisational role of procurement by the
organisation impacts e-auctions use and attitudes. Furthermore, by distinguishing between motivations for using e-auctions and attitudes towards
them, procurement professionals are found to have a negative attitude to e-auctions, but at the same time their motivations for using them are
significantly linked to building relationships with their suppliers. This suggests that the potential of e-auctions as a powerful procurement tool is being
realised, but as yet has not been fully developed and implemented. The implications are that procurement managers should focus on developing the use
of e-auctions in a more strategic way to maximise both their effectiveness and the investment in them for the longer term.
Keywords Auctions, Procurement, Prices, Supplier relations
Paper type Research paper
that there is no real distinction between early and late adopters
of e-auctions in terms of benefits achieved (Schoenherr,
2008), and that past success influences favourable opinions of
them (Caniëls and van Raaij, 2009).
However, there is opposition as well as support for e-auctions
by business users. In direct response to the divergent attitudes
to e-auctions, an emerging stream of operations research
explores in more detail the computational issues and evolving
e-auctions forms (Rothkopf and Whinston, 2007). For
example, bidding practices in the field of e-sourcing
(Elmaghraby, 2007); advanced auction formats, such as
combinatorial auctions, and their application in
transportation (Caplice, 2007), machine scheduling
(Heydenreich et al., 2007), and pay-per-click advertising
(Feng et al., 2007); the effect of auction design parameters on
buyer surplus (Mithas and Jones, 2007); the impact of
collusion on sealed bid auctions (Sosic, 2007); and
transaction costs (bidder’s time) in completing the auction
(Kwasnica and Katok, 2007). This stream of research is
underpinned by a fundamental belief that the e-procurement
technology in general and e-auctions in particular, are here to
stay for the long term.
Despite this, tensions seem to remain between buyers who
are perceived to be enjoying the benefits of reduced costs and
increased competition, and suppliers where there is
resentment at the perceived destruction of long-term co-
Introduction
Much has been written about reverse electronic auctions
(e-auctions), and although reverse auctions are themselves not
a new concept, they have increased in prominence for
business-to-business users as a direct result of being made
more accessible, easy to use, easy to implement, and cost
effective by internet technology (Hannon, 2003). However,
the study of e-auctions is still in the early stages and there
remains a dearth of substantial empirical research and much
more to uncover. The introduction of e-auctions has presented
organisations with a need to review their purchasing processes
and relationships with their buyers/suppliers. Technology is
fast moving and as a consequence, there is a lag in terms of
organisations learning to implement and assimilate any new
technology into organisational processes and culture
(Tassabehji, 2003). Interestingly, recent research has found
The current issue and full text archive of this journal is available at
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Supply Chain Management: An International Journal
15/6 (2010) 425– 437
q Emerald Group Publishing Limited [ISSN 1359-8546]
[DOI 10.1108/13598541011080419]
425
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Understanding e-auction use by procurement professionals
Supply Chain Management: An International Journal
Rana Tassabehji
Volume 15 · Number 6 · 2010 · 425 –437
operative relationships and a feeling of being coerced to
participate in e-auctions (Tassabehji et al., 2006; Giampietro
and Emiliani, 2007). These tensions however are not new and
have been previously recognised in business-to-business
buyer-supplier relationships as being inevitable and a result
of differences in expectation or performance related to
pricing, which seems to have been heightened with the use of
e-auctions (Emiliani, 2003). Despite the acknowledged
importance of reverse e-auctions, few studies have examined
the determinants of their usage (Mithas et al., 2008). The
major objective of this paper is to address this gap.
The next section of this paper presents the major issues
impacting e-auction usage, distilled from a detailed review of
the literature specifically related to it. In addition to the type
of goods and services, motivation and attitude, all of which
are present in the e-auction literature, we introduce an
additional factor, the role of purchasing within the
organisation. This has been shown, in other contexts, to
impact the development and ability of procurement
professionals to do their jobs effectively (Tassabehji and
Moorhouse, 2008). A model based on these factors is
introduced and the related hypotheses are developed. This is
followed by a presentation of the methodology and data
analysis using PLS where the data collected from experienced
procurement practitioners are then fitted to a model, to
validate the hypotheses. The last section concludes with a
discussion of the results and their implications and a reflection
on the study’s limitations and suggestions for future research.
2
3
4
most appropriate supplier regardless of price and building
relationships with them (i.e. relationship-driven).
Types of goods and services. The importance of e-auctions
for purchasing strategic or commodity type goods and
services. The former are high value, customised and
complex, requiring detailed specifications, the latter are
low value impact, non-critical and commodity-like.
Role of procurement in organisations (strategic/
administrative), has been shown to impact the
effectiveness of purchasing professionals. We introduce
this factor to evaluate its impact on the motivation to use
and attitude towards e-auctions.
Attitudes to e-auctions are categorised as either negative
(anti-e-auctions) or positive (pro-e-auctions). The belief
that face-to-face negotiations are the most important
means of conducting procurement activities and that
e-auctions, cannot be used for building collaborative long
term relationships constitute an anti-e-auction attitude.
The belief that e-auctions yield greater benefits, increase
supplier value and are not damaging to relationships
constitute a pro-e-auction attitude.
These four factors will form the main constructs in this study.
The justification of these constructs and the interrelationships within and between them are developed further
from the literature in the following sections.
Motivation for e-auction use: price-driven
Economic theory has suggested that e-auctions have the
potential to improve value for money, allocate resources more
efficiently and provide transparency in terms of how contracts
are awarded (Soudry, 2004). Empirical studies and reports
from industry users have confirmed that some organisations
have achieved savings of between 10-40 per cent either
directly through product price reduction or transaction costs
(CIPS Update, 2003; Hartley et al., 2004; Tassabehji et al.,
2006). In a study of e-auction use by local government, 40 per
cent of savings were achieved as a result of better (lower)
prices, with 60 per cent of the savings realised by freeing staff
for more productive roles (Vowler, 2004).
Some argue that although gross savings might appear
beneficial, net savings are substantially less and that the
benefits of reverse e-auctions have been greatly overstated by
market makers and buyers (Emiliani and Stec, 2002a, 2004,
2005a). Nevertheless, the consensus of opinion from the
literature is that one of the major motivations for using
e-auctions is to optimise prices. More recently, Caniëls and
van Raaij (2009) found that when procurement professionals
were specialised in price competition, they tended to have a
more positive attitude to e-auctions. We therefore hypothesise
that:
Reverse e-auctions: the major issues
This section highlights and consolidates the major themes
emerging from the literature review on the implementation
and use of e-auctions in a business-to-business context. Some
of these views, from both practitioners and academics, are
variously in support of and against the implementation and
use of e-auctions. Mithas et al. (2008) see reverse e-auctions
as an “intriguing practice” where on the one hand they are
acknowledged to help gain efficiencies; while on the other
hand, they may endanger relationships between buyers and
suppliers and appear inconsistent with the trend of developing
strong relationships with fewer suppliers. These divergent
views have been attributed to the relative newness of
e-auctions and limited experience of their use, as well as
conflicting reports which prevail in the literature (Schoenherr
and Mabert, 2007). In a more recent study, Caniëls and van
Raaij (2009) found that the strongest predictor of a supplier’s
opinion of e-auctions is the supplier’s country of origin. Those
from developing countries had a more positive attitude to
e-auctions than those from developed countries, mainly
because the former were specialised in price competition and
the latter were aiming to compete on quality and innovation
capabilities. Country of origin notwithstanding, the same
study found price competition a fundamental motivation for
e-auction use (Caniëls and van Raaij, 2009). The major issues
that impact the use of e-auctions from the literature are
extracted and broadly categorised into four major factors,
summarised as:
1 Motivation for e-auction use by purchasing professionals.
Whether they are driven to use e-auctions in order to
achieve price optimisation and the lowest price (i.e. pricedriven) or whether e-auctions are used as an integral part
of the purchasing process which includes selecting the
H3a. Price driven e-auction use has a positive relationship
with pro-e-auction attitudes.
Motivation for e-auction use: relationship-driven
Despite the benefits, there is much criticism of the reverse
e-auction process, especially from the suppliers’ perspecitve.
Emiliani and Stec have published widely and report the
negative impact of e-auctions such as margin erosion, loss of
sales volume, lack of consideration for other factors such as
quality, service, and total costs (Emiliani, 2000, 2003, 2004;
Emiliani and Stec, 2001, 2002a, b, 2004, 2005a, b).
Underpinning these concerns is the pressure suppliers are
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Supply Chain Management: An International Journal
Rana Tassabehji
Volume 15 · Number 6 · 2010 · 425 –437
being put under and the consequent damage being done to
relationships with buyers. E-auctions have been found to be
divisive (Emiliani and Stec, 2004, 2005; Tassabehji et al.,
2006), where distrust is created as a result of e-auctions being
perceived as being unfair and an abuse of buyers’ power:
suppliers, we expect buyers to have pro-e-auction attitudes.
We therefore hypothesise that:
H3b. Relationship driven e-auction use has a positive
relationship with price driven use of e-auctions.
H3c. Relationship driven e-auction use has a positive
relationship with pro-e-auction attitudes
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Use of online auctions has led to suppliers realising there is a misalignment
of interests. This destroys relationships where suppliers view customers as
adversaries (Emiliani, 2003, p. 112).
Impact of types of goods and services on e-auction use
The discussion of type of goods and services in the e-auction
literature, has tended to focus on the two extremes of Kraljic’s
classification matrix of strategic and non-critical (commodity)
items. In this case we have also identified strategic items and
non-critical items as the two extremes of Kraljic’s purchasing
portfolio classification of goods and services. Much of the
reverse e-auction literature highlights the appropriateness of
e-auctions as a tool for purchasing commodity goods in
particular (Tassabehji et al., 2006). However, Schoenherr and
Mabert (2007) provide prescriptive evidence and direction for
supply managers to combat what they describe this common
“myth”. Purchasing practitioners have also demonstrated
that rather than being limited to commodity type goods,
e-auctions can also be used for complex services (Hatton and
Young, 2004). For instance, Hewlett Packard (HP) have used
reverse auctions as a negotiation tool where HP run some 2030 auctions in a day for non-tangible services (Prema, 2006).
Delta Airlines also have leveraged e-auctions for both direct
and indirect spend. In both cases the buyers prepare their
specifications carefully for the more complex items inviting
suppliers to presentations where the specifications and quality
of work required is made clear and suppliers are assessed
accordingly (Prema, 2006). Thus, e-auctions are not always
about the lowest price, and although mostly used for
commodity products and services, with support, e-auctions
could also be used for purchasing more complex and strategic
commodities (Schoenherr and Mabert, 2007). In a study by
Standing et al. (2006), they found that different types and
structures of e-marketplaces required different strategies,
technical features and are perceived differently by perspective
stakeholders. This means that e-auction adoption and use can
be motivated by relational, service and community strategies
in addition to economic benefits.
Having presented examples of the development and use of
e-auctions for purchasing more strategic goods and services,
one of the main drivers remains price optimisation. We
therefore expect a positive relationship between the type of
goods and services being purchased (whether strategic or
commodity) and the use of e-auctions to reduce the price of
these goods and services:
Where e-auctions are seen as a destructive “power based
bargaining tool”, measures such as voluntary codes of
conduct do not seem to have had an impact on buyer
regulation; increasing trust; or expanding the use of
e-auctions (Emiliani, 2006) and suppliers remain largely
opposed to their use. This is compounded when suppliers
suspect unscrupulous buyer practice to manipulate the prices
further downwards during the auction through: “phantom
bidding” (Kwak, 2002); the introduction of unqualified
suppliers (Kisiel, 2002; Hannon, 2003); or even supplier
collusion (Hannon, 2003). Although such supplier
perceptions of buyer behaviour are unsubstantiated they
seem to persist and even increase after participation in
e-auctions (Jap, 2003; Tassabehji et al., 2006). This negative
attitude towards e-auctions often results in a reluctance on the
part of suppliers to share cost savings and innovations with
buyers and a reduced willingness to help the buyer in any
potential future crises (Emiliani et al., 2004; Presutti, 2003;
Tassabehji et al., 2006) and a fear of being driven out of
business because of prices being too low (Hannon, 2003;
Tassabehji et al., 2006).
However, viewing e-marketplaces and e-auctions as purely
economic entities is an over-simplification of their purpose
(Standing et al., 2006). Schoenherr and Mabert (2007) found
that as e-auctions have become more widespread, they are no
longer seen as detrimental to buyer-supplier relationships. In
some instances, they are even seen to build relationships with
suppliers, as buyers work closely with their suppliers to ensure
they can use the e-auctions effectively. In their study,
Standing et al. (2007) found that e-auctions have been used
to help suppliers become more competitive by exposing their
process inefficiencies and then, with the support of the
buyers, enabling them to access global markets through the
wider participation in, and use of, e-auctions in a way that is
sustainable and beneficial to both parties in the longer term.
Other practitioners are reportedly using e-auctions to develop
closer collaborative relationships and a dynamic approach to
business and securing orders (Graham et al., 2001; Hirsch,
2005). Although the strategic intent of market making buyers
is primarily economic, secondary motives, including
relationship and community building, have been found to
be complementary to this (Standing et al., 2006). As
the majority of the literature highlighting the problems with
e-auctions emanates from the perspective of suppliers, in this
study, negative attitudes to e-auctions from a buyer
perspective are focussed largely on a preference for face-toface negotiations with suppliers and a belief that e-auctions do
destroy relationships with suppliers. We expect that rather
than being mutually exclusive, there is a synergy between
price and relationship driven e-auction use, where as well as
being used to optimise prices, e-auctions can also be used
to build relationships with suppliers. In this instance, where
e-auction usage incorporates relationship building with
H1a. Strategic goods and services have a positive
relationship with price-driven e-auctions use.
H1b. Commodity goods and services have a positive
relationship with price-driven e-auction use.
There is also emerging evidence that there is some
development in the use of e-auctions for maintaining and
building relationships with suppliers, but this seems to be
mainly for commodity goods and services (Schoenherr
and Mabert, 2007). Based on the literature and knowledge
of e-auctions, we intuitively believe that e-auctions and user
capabilities are not yet sufficiently developed to be able to
procure strategic goods and services in a way that can build
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Understanding e-auction use by procurement professionals
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Volume 15 · Number 6 · 2010 · 425 –437
and develop relationships with supply chain partners. Here,
we will test this premise and therefore hypothesise that:
to a “degradation of current capabilities and discouraging
developing new competencies” (Emiliani and Stec, 2002a,
p. 21). This is in direct opposition to the strategic role of
the procurement professional. However, the adoption of
e-auctions is considered a highly strategic venture (Standing
et al., 2007). We therefore expect that when the role of
procurement is perceived by the organisation to be a core
strategic function, purchasing professionals will tend to have a
negative attitude towards e-auctions. We therefore
hypothesise that:
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H1c. Commodity type goods and services have a positive
relationship with relationship-driven e-auction use.
Past success with e-auctions has been shown to impact
favourable opinions of them by procurement professionals
(Caniëls and van Raaij, 2009). Furthermore, for non-critical
items, the recommended purchasing strategy for this
particular quadrant of Kraljic’s portfolio is to ensure
efficient process (Caniëls and Gelderman, 2005). Since the
introduction of e-auctions improves the efficiency of the
purchasing process, already mentioned above, we expect that
purchasing non-critical items or commodity goods in this way
will impact positive buyer attitudes towards e-auctions:
H4a. When the role of procurement is perceived to be
strategic it has a positive relationship with proe-auction attitudes.
H4b. When the role of procurement is perceived to be
strategic, it has no relationship with anti-e-auction
attitudes.
H4c. When the role of procurement is perceived to be
administrative it has no relationship with pro-e-auction
attitudes.
H2a. Purchasing commodity goods and services has a
positive relationship with pro-e-auction attitudes.
Because the use of e-auctions for purchasing highly complex
and difficult to specify strategic items requires meticulous
preparation, training, dedication and attention to research
(Schoenherr and Mabert, 2007, 2008), at this stage, the
transaction costs still outweigh the benefits. We therefore
expect that there will be a negative attitude towards e-auctions
use for purchasing strategic items:
In a Delphi study of future supply chain management
strategies, sophisticated e-procurement systems, including
e-auctions, were predicted to be a critical part of future
developments. The use of this technology is expected not only
to eliminate transactions and reduce transaction costs, but
also to facilitate information sharing and promote
collaboration and integration between supply chain partners
(Croom, 2005; Ogden et al., 2005).
Thus price, is not the sole criterion for supplier selection by
strategic procurement professionals. Other trade-offs include
strategic, operational, tangible and intangible factors (Cebi
and Bayraktar, 2003; Kannan and Tan, 2003) such as
relationships between supplier selection and assessment,
which have a greater impact on a buying firm’s performance
(Kannan and Tan, 2003). In particular the ability to assess the
capability of suppliers has an impact on product quality and
competitive positioning. It is this assessment that must be
made by strategic purchasing professionals (Tassabehji and
Moorhouse, 2008). According to Kraljic (1983) the type of
goods and services being purchased requires a distinctive
purchasing approach. Caniëls and Gelderman (2005) have
modified the Kraljic matrix and formulated strategic
recommendations with an overall purchasing strategy for
each portfolio quadrant. In the case of non-critical items the
strategy is to ensure efficient processing and for strategic
items, it is to form partnerships with suppliers.
We posit that when the role of purchasing is perceived to be
strategic, then purchasing professionals use e-auctions to
develop and maintain relationships with suppliers and not
purely for price optimisation. Thus:
H2b. Purchasing strategic goods and services has a positive
relationship with anti-e-auction attitudes.
The role of procurement
The perception of the role of procurement in an organisation
has been shown to impact the development of procurement
professionals. The schism between whether the role of
procurement in an organisation is perceived to be
administrative/transactional or strategic, was found to be a
major factor in the effectiveness and proficiency of
professionals to do their jobs (Tassabehji and Moorhouse,
2008). Where the procurement role is considered to be
administrative, procurement professionals are seen mainly
operating as a non-value adding support function with no
input or involvement in the decision-making stages (Carter
et al., 2004; Cox et al., 2005). In this instance, we would
expect that when the role of procurement is perceived to be
administrative, there would be no impact on either positive or
negative attitudes to e-auctions, as the professionals would
only be involved when the e-auction had been finalised.
We therefore do not expect any relationships between
the administrative role of procurement and the attitudes to
e-auctions or motivations for its use.
The perception of the procurement role as strategic, means
that it is a core function with major strategic importance
(Humphreys, 2001; Paulraj et al., 2006) involving
management of strategic partnerships, alliances and supply
networks (Lamming et al., 2000; Handfield and Nichols,
2002; Knudsen, 2003). As such, procurement professionals
must develop a whole range of skills and capabilities,
including effective e-procurement process management, to
be able to add value as strategic purchasers (Tassabehji and
Moorhouse, 2008). When e-auctions are price-driven,
strategic procurement professionals perceive e-auctions to be
deskilling the purchasing process, as they are excluded from
the final decision which could potentially prove very
damaging (Hatton and Young, 2004). This ultimately leads
H5a. When the role of procurement is perceived to be
strategic it has no relationship with price driven
e-auction use.
H5b. When the role of procurement is perceived to be
strategic it has a positive relationship with relationship
driven e-auction use.
H5c. When the role of procurement is perceived to be
administrative it has no relationship with price-driven
e-auction use.
From these distinct points-of-view, we have developed
constructs for types of goods and services, motivation for
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Understanding e-auction use by procurement professionals
Supply Chain Management: An International Journal
Rana Tassabehji
Volume 15 · Number 6 · 2010 · 425 –437
e-auction use, organisational role of procurement and attitude
to e-auctions and have modelled the relationships accordingly.
participating had the appropriate knowledge and
information to provide useful ideas and insights and is
invaluable in ensuring a “good” final questionnaire (Remenyi
et al., 1998). It was felt that these potential respondents were
appropriate because such networks have been found to attract
individuals with a high provision of collective knowledge in an
area of interest to them (Contractor and Monge, 2002) – in
this case procurement. Although the respondents in the study
might not be representative of the wider procurement
professional and that non-random factors associated with
the sample’s composition could introduce factors inconsistent
with easy generalisability, this method facilitated the
attainment of a sample of sufficient size and diversity for
the study’s purposes (Geringer et al., 2002), which was to
understand attitudes towards reverse e-auctions. This data
collection strategy led to 109 usable responses and a response
rate of 34 per cent but caution has been taken when
interpreting these results. Two of the respondents were from
the public sector, and were subsequently discarded for the
sake of sample validity and consistency. Not only was this
response from the public sector disproportionately small, but
also because Murray (2001, 2009) identified a fundamental
difference in purchasing objectives and strategies pursued by
the public and private sector, where the latter are considered
to be “inappropriate and inadequate for local government
purchasing” (Murray, 2001, p. 99). Thus the focus of this
particular study is on procurement in the private sector. The
profile of our respondents was procurement professionals at
the senior management/director level who had an insight
into the strategic decision-making for purchasing including
e-auction adoption and would thus be well placed to make a
relatively well-informed assessment of the organisation’s
purchasing approach – whether strategic or administrative.
The respondents were qualified to answer questions about
decision-making leading to the adoption of e-auctions which
would include motivation, attitude and organisational
strategy. Although the sample used in this study was limited
The model
The conceptual model developed is presented in Figure 1.
This illustrates the fundamental aims of this paper that are to
investigate the impact of the type of goods and services (H1H2), motivations for e-auction use (price driven or
relationship driven) (H3) and the perceived organisational
role of procurement (strategic or administrative) (H4-H5) on
attitudes to e-auctions (anti or pro).
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Methodology
An online questionnaire based on the emergent issues collated
from the literature review above was developed and piloted
with two senior academics and a leading procurement
practitioner. The final version incorporated proposed
changes and is presented in the appendix. The survey
instrument contained questions measured by a five-point
Likert scale with the anchors “strongly disagree” (1) and
“strongly agree” (5) with a neutral point (3) to reduce nonresponses and artificially force extreme answers. Two leading
business oriented global networking sites, for professional
networking, were used to contact procurement professionals
who were at senior management or director level and thus had
the knowledge and expertise to answer the questions posed.
The overall population contained 324 procurement
professionals that fitted this profile and each practitioner
was sent a personalised email with a request for their
contribution to this study and an offer of a summary once it
had been completed. Moreover, the respondents were
promised anonymity and non-attribution of responses.
The pre-qualification process based upon experience in
purchasing at a senior management level and organisational
strategic decision making, ensured the individuals
Figure 1 Conceptual model for drivers of attitudes to e-auctions
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Understanding e-auction use by procurement professionals
Supply Chain Management: An International Journal
Rana Tassabehji
Volume 15 · Number 6 · 2010 · 425 –437
to procurement professionals, it provides useful information
to establish important determinants of e-auction use from a
buyer perspective, enabling future research to build
comparative models with suppliers and other stakeholders to
examine the issues from a number of different perspectives.
However a major limitation is that it is based solely on
procurement managers’ responses and may not represent the
views of other key decision makers within the organisation
(Murray, 2009).
The organisational profiles of the respondents are
summarised in Table I. The majority of respondents are
large or very large multi-national organisations which tended
to be in heavy industry sectors, such as mining/oil/chemicals
and manufacturing, but also consulting services.
A partial least squares (PLS) structural equation model was
fitted to the data to test the hypotheses represented in the
model (Figure 1) using SmartPLS2.03M (Ringle et al., 2005).
PLS was used because it is robust to non-Normality data, and
is especially suitable for small sample sizes, as in this case, and
when the sample size is at least 10 times greater than the
number of items impacting the most substantial construct in
the model (Barclay et al., 1995; Chin, 1998; Wilcox, 1998).
The hypotheses were tested using the significance of
corresponding path coefficients and all the tests for path
coefficients were based on t-values calculated using the
bootstrap facility where a total of 1,000 bootstrap re-samples
were used.
Table II Composite reliability and average variance extracted (AVE) for
latent constructs
AVE
The model developed was analysed and interpreted in two
stages, the assessment of the validity and reliability of the
measurement model, and the assessment of the structural
model (Chin, 1998; Hulland, 1999).
Measurement model
Internal item reliability is demonstrated by the composite
reliabilities where loadings of indicators on latent constructs
greater than 0.7 are considered sufficient to establish
Table I Respondent profiles based on organisational sector and size
%
22
20
19
13
11
8
4
2
1
Size of respondent’s organisation corporate turnover (£)
> 1 billion
> 249-500 million
> 49 -249 million
24-49 million
Less than 24 million
53
15
11
7
14
R2
Organisational role of procurement
Administrative
1
Strategic
0.6008
1
0.8169
Type of goods and services
Commodity
0.5980
Strategic
0.6108
0.8520
0.8241
Motivation for e-auction use
Price driven
0.7488
Relationship driven
0.6575
0.8562
0.8519
0.387
0.272
Attitude to e-auctions
Anti-e-auction attitudes
Pro-e-auction attitudes
0.8502
0.8216
0.164
0.322
0.7395
0.7007
reliability (Fornell and Larcker, 1981). In our case, from
Table II, composite reliability of constructs range from 0.8169
for to 0.8662. Convergent validity assessedpby examining the
average variance extracted measures ( AVE) for each
construct was greater than 0.5 (Fornell and Larcker, 1981).
Furthermore, the indicator variables loaded onto their
predicted latent constructs more highly than the other
constructs in all cases (Table III). From Table III, we can
see that the indicator loadings ranged from 0.6982 to 0.9369
which is considered good through to very good (Hair et al.,
2007).
Discriminant validity is evidenced by the square root of the
Average Variance Extracted (as in Table IV caption AVE) for
each construct being greater than its correlation with any of
the other constructs (Fornell and Larcker, 1981). For
adequate discriminant validity, the diagonal figures should
be significantly greater than the off-diagonal figures in the
corresponding rows and columns (Fornell and Larcker, 1981;
Hulland, 1999), as in this case presented in the matrix in
Table IV. The constructs are therefore validated and shown to
provide a good fit to these data.
Results and discussion
Sector of respondent’s organisation
Manufacturing
Mining/oil/chemicals
Professional services/consulting
Information technology/telecommunications
Pharmaceuticals and healthcare
Other (logistics; broadcasting, travel etc.)
Retail and leisure
Utilities
Banking and financial services
Composite reliability
The structural model
The fitted structural equation model is exhibited in Figure 2
and the results of the hypotheses tests are presented in Table V.
The research hypotheses are tested by assessing the direction,
strength and level of significance of the path coefficients (b)
estimated by PLS, as shown in Figure 2 and Table V.
As expected, the hypotheses that types of goods and
services being purchased influence motivation for e-auction
usage are supported in this study. The purchase of strategic
and commodity type goods and services influence the use of
e-auctions to drive down prices (H1a and H1b respectively)
are supported by the significant path coefficients (b ¼ 0.471
and b ¼ 0:198). However, the use of e-auctions to purchase
commodity type goods and services were also found to be
motivated by the objective of maintaining and building
relationships with suppliers (H1c, b ¼ 0:372).
The types of goods and services being purchased using eauctions were also found to influence purchasing
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Understanding e-auction use by procurement professionals
Supply Chain Management: An International Journal
Rana Tassabehji
Volume 15 · Number 6 · 2010 · 425 –437
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Table III Loadings of indicator variables onto latent constructs
Indicator variable
Organisational role of
procurement
Admin
Strategic
Attitude to e-auctions
Pro
Anti
Admin
Strat 1
Strat 2
Strat 3
Pro1
Pro2
Anti1
Anti2
ComG1
ComG2
ComG3
ComG4
StratG1
StratG2
StratG3
Price1
Price2
Rel1
Rel2
Rel 3
1
0.0364
0.1786
2 0.0763
2 0.06
2 0.028
0.0563
0.063
2 0.3416
2 0.0167
0.0732
0.0135
0.0929
0.1881
0.1137
0.0178
0.0493
2 0.0948
0.0641
2 0.0748
20.0569
20.1136
20.1486
20.0138
0.9369
0.7235
20.1027
20.3455
0.249
0.3087
0.3122
0.3959
0.2903
0.3084
0.3464
0.2462
0.3977
0.0827
20.0348
0.0696
0.0474
0.8889
0.6982
0.7245
20.1199
20.062
0.3132
0.2879
0.1135
20.0176
20.1208
20.0489
0.0552
20.2058
20.0631
0.1969
0.0429
0.3312
0.246
0.3005
Type of goods and
services
Commodity
Strategic
0.0696
0.3519
0.151
0.2647
2 0.2992
2 0.1086
0.8346
0.8846
2 0.1932
2 0.162
2 0.0657
2 0.2051
2 0.0553
2 0.2088
2 0.2535
2 0.0744
2 0.0227
0.1172
0.0726
0.1358
20.093
20.0471
0.0186
0.033
0.4683
0.2188
20.1519
20.2868
0.6982
0.7962
0.7345
0.8138
0.5689
0.253
0.5692
0.3132
0.2284
0.3582
0.2114
0.3082
0.1763
20.1356
20.0214
20.1012
0.4259
0.203
20.1333
20.2833
0.0422
0.4518
0.5639
0.5723
0.7345
0.7484
0.856
0.2606
0.4564
20.053
0.0482
0.1785
Motivation for e-auction use
Price driven
Relationship driven
0.0403
0.1584
0.1584
20.0227
0.4165
0.1533
0.0543
20.1307
0.0491
0.2032
0.2253
0.2992
0.2147
0.3723
0.3557
0.8387
0.8912
0.3445
0.2931
0.4873
20.0567
0.345
0.2165
0.2659
0.1029
20.0535
0.043
0.1841
0.3231
0.2184
0.1796
0.1645
0.1324
0.0653
0.0209
0.4965
0.3405
0.811
0.7749
0.8451
p
Table IV Cross correlation between latent variables and square root of average variance extracted ( AVE)
Organisational role of
procurement
1.
2.
3.
4.
5.
6.
7.
8.
Admin
Strategic
Commodity
Strategic
Price driven
Relationship driven
Pro-e-auction
Anti-e-auction
Type of goods and services
1. Admin
2. Strategic
3. Commodity
4. Strategic
1
0.0474
20.0930
0.1763
0.0403
20.0567
20.0569
0.0696
0.7751
20.0077
20.1220
0.1301
0.3649
20.1160
0.3476
0.7733
0.5620
0.3078
0.3695
0.4443
20.2611
0.7815
0.4236
0.0768
0.4057
20.2490
Motivation for e-auction
use
5. Price
6. Relationship
driven
driven
Attitude to e-auctions
7. Pro8. Antie-auction
e-auction
0.8653
0.4743
0.3792
20.0533
0.8371
20.2718
0.8109
0.0582
0.1386
0.8599
p
Notes: Cross correlation between latent variables (off diagonal); Square root of average variance extracted ( AVE) are shown in italics
( b ¼ 0:482, p , 0.01), demonstrating that purchasing
professionals are not purely motivated by e-auction use as a
blunt instrument for reducing prices, but purchasing
professionals are also motivated to use e-auctions to build
relationships with their suppliers.
When respondents perceived the role of procurement
within their organisations to be strategic, this was found to
influence negative attitudes towards e-auctions (H4a,
b ¼ 0:320) and no influence on positive attitudes (H4b,
b ¼ 0:072; p , 0.001). Although this seems counter intuitive,
it could be that as e-auction use is still in the early stages, the
benefits of price reduction and building relationships with
suppliers can be realised but are not yet considered by senior
management to be a “superior” mode of procurement or a
substitute for traditional means of procurement (face-to-face)
or for long term collaboration with suppliers. As expected,
professionals’ attitudes to e-auctions. Here, the hypothesis
that purchasing commodity goods and services by e-auctions
influences positive attitudes to e-auctions (H2a) and
purchasing strategic goods and services influences negative
attitudes to e-auctions (H2b) are also confirmed. This is a
common finding in the literature which is also confirmed in
this study.
Motivations for e-auction use by purchasing professionals
were found to influence attitudes to e-auctions. When eauctions are used to reduce price this impacts positive
attitudes to e-auctions (H3a, b ¼ 0:383) and when e-auctions
are used to maintain and build relationships with suppliers
this also impacts positive attitudes to e-auctions (H3c,
b ¼ 0:253). The positive relationship between e-auction use
for building and maintaining relationships with suppliers and
minimising prices (H3b) was found to be significant
431
Understanding e-auction use by procurement professionals
Supply Chain Management: An International Journal
Rana Tassabehji
Volume 15 · Number 6 · 2010 · 425 –437
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Figure 2 Final fitted model for attitudes to e-auctions
Table V Standardised path coefficients, bootstrap standard error and bootstrap t-values
Hypotheses
H1a. Strategic goods and services - > price driven
H1b. Commodity goods and services - > price driven
H1c. Commodity goods and services - > relationship driven
H2a. Commodity goods and services - > pro-e-auction attitude
H2b. Strategic goods and services - > anti-e-auction attitude
H3a. Price driven - > pro-e-auction attitude
H3b. Relationship driven - > price driven
H3c. Relationship driven - > pro-e-auction attitude
H4a. Strategic procurement no relationship with anti-e-auction attitude
H4b. Strategic procurement - > pro-e-auction attitude
H4c. Administrative procurement no relationship with pro-e-auction attitude
H5a. Strategic procurement - > price driven
H5b. Strategic procurement - > relationship driven
H5c. Administrative procurement no relationship with price driven
b Path
coefficient
Standard
error
t-value
0.4710
0.198
0.372
0.416
0.211
0.383
0.482
0.253
0.320
0.072
0.044
0.011
0.367
0.029
0.0739
0.0836
0.0625
0.0872
0.0933
0.0724
0.075
0.089
0.0531
0.0508
0.0458
0.0356
0.0706
0.0464
6.3602 * *
1.973 *
5.96 * *
4.8919 * *
2.2479
5.3166
6.4429
3.2004
6.0695
1.4212
1.0684 n.s.
0.3212 n.s.
5.2077
0.614 n.s.
Accept/reject
hypothesis
Accept
Accept
Accept
Accept
Accept
Accept
Accept
Accept
Reject
Reject
Accept
Reject
Accept
Accept
Notes: *Significant at p , 0.01; * *Significant at p , 0.001; n.s. ¼ non significant
significant (b ¼ 0:367; p , 0.001) than price reduction
(b ¼ 0:011; p , 0.01). Standing et al. (2007) found that the
adoption of e-auctions in a very large multi-national
Australian mining company with a history of innovative
procurement strategies, led to the development of hybrid
buyer-supplier models improving and harnessing relations
with local suppliers and not solely driven by prices. Thus in a
climate of technological advances, globalisation and mass
when the role of procurement within the organisation is
perceived by respondents to be purely administrative, it has
no significant impact on motivation or attitudes towards eauction use, as this is purely a role where the purchasing
process is administered exclusive of any decision making.
Interestingly, when the role of procurement is perceived to
be strategic within the organisation, motivations for using eauctions to build relationships with suppliers was more
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Understanding e-auction use by procurement professionals
Supply Chain Management: An International Journal
Rana Tassabehji
Volume 15 · Number 6 · 2010 · 425 –437
customisation, there are other criteria for supplier selection
commensurate with a strategic role of procurement. This
tends further to support the explanation that e-auctions have
not yet developed the degree of sophistication required to
enable them to be extensively used for building relationships.
However, the findings suggest that procurement professionals
are more motivated to use e-auctions to build relationships
rather than purely reduce prices.
As shown in Table II, types of goods and services
(commodity and strategic), the strategic role of procurement
and motivation for using e-auctions for building relationships
with suppliers explain a significant amount of variance in the
price driven motivation for using e-auctions (R2 ¼ 38:7 per
cent). The motivation for using e-auctions to build
relationships with suppliers is explained mainly by the
commodity type goods and services and the perception of
the procurement role as being a strategic (R2 ¼ 27:2 per
cent). Positive attitudes towards e-auctions are explained by
commodity type goods and services, motivation for e-auction
use (both price and relationship driven) which explains over
30 per cent of variation.
Negative attitudes towards e-auctions are explained by
fewer factors, namely the organisational perception of the
strategic role of procurement and also the strategic type of
goods and services (R2 ¼ 16:4 per cent).
Taken together, these results confirm the view in this study
that e-auctions are developing and emerging from the
perception of being purely a blunt instrument to reduce
prices of commodity goods. E-auctions are increasingly
perceived to be a tool that can be used to build relationship.
Although current attitudes to e-auctions from a strategic
perspective are negative, the fact that procurement
professionals, who see their role as being strategic, are
motivated to use e-auctions to build relationships, gives an
insight into the future potential and use of e-auctions as one
of the many tools in the e-procurement portfolio.
was found to influence negative attitudes to e-auctions which
suggests that e-auctions have not yet been assimilated or
accepted by senior procurement managers as making a
positive enough contribution in terms of strategic integration
and collaborative relationships with suppliers. It is the
contention here that this is a short to medium
term situation, which will change in the long term as
e-procurement in general and e-auctions in particular become
more widespread.
Consistent with Kraljic’s (1983) seminal work advocating
different procurement strategies for product portfolios, the
findings from this research show that buyers’ motivation for
using e-auctions differ according to the types of goods and
services being procured. Buyers who used e-auctions
motivated purely by price reduction, procured strategic as
well as commodity goods and services. This study also found
that buyers were motivated to use e-auctions for maintaining
and building relationships with suppliers and not exclusively
for reducing price. This was particularly prevalent when
purchasing commodity goods and services. These findings
are summarised in the matrix (Figure 3) which illustrates
e-auctions use for procuring goods and services, when the role
of procurement within the organisation is perceived by
procurement professionals to be strategic. Each of the axes
indicates the motivation of procurement managers for
purchasing the types of goods and services based on the
degree of importance of price reduction and developing
relationships with suppliers, respectively.
Overall, commodity type goods and services, price
reduction and use of e-auctions for building relationships
with suppliers all directly influence positive buyer attitudes to
e-auctions. Strategic goods and services to be procured and
organisational perception of procurement as strategic,
influence negative buyer attitudes to e-auctions.
One of the major implications for managers emerging from
this study is that those organisations perceiving procurement
as a purely administrative function, might not be capitalising
on the benefits of new procurement technologies with the
potential to improve efficiency, save costs and build
relationships with supply chain partners. What has emerged
from this study is that although there are still some
doubts about the use of e-auctions from a strategic
perspective, e-auctions are being used to procure a broader
and more complex range of goods and services, not purely
Conclusions, implications and limitations
By conducting an analytical review of the extant literature and
empirical studies, the main issues relating to e-auctions have
been deconstructed and modelled to gain a more in-depth
understanding of the complexities of e-auctions. The major
themes distilled from the literature form the constructs of our
model which are motivations for using e-auctions, attitudes
towards e-auctions, the type of goods and services being
purchased, and the organisational role of procurement, all
from the perspective of procurement professionals. The
model incorporates developed hypotheses to understand the
inter-relationships between the different factors identified.
Nowhere in the extant literature has there been a study on
the impact of how the role of procurement by the organisation
impacts e-auctions use and attitudes. This study found that
when the role of procurement in the organisation was
perceived to be purely administrative, this had no impact
whatsoever on decisions related to e-auctions and supports
the view in the literature that administrative procurement is
non-value adding and is purely a supportive organisational
function. However, when the organisational role of
procurement is perceived to be strategic, this was found to
influence motivation for e-auction use not only to optimise
price but more significantly, to build relationships with
suppliers. Despite this, overall, a strategic procurement role
Figure 3 Use of e-auctions when the organisational role of procurement
is perceived to be strategic
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Understanding e-auction use by procurement professionals
Supply Chain Management: An International Journal
Rana Tassabehji
Volume 15 · Number 6 · 2010 · 425 –437
commodities, a finding consistent with more recent studies. In
order to make the implications of this study more accessible to
practitioners, the findings about e-auction use already
summarised in Figure 3, have been applied to Krajlic’s
portfolio approach (Figure 4) which is arguably the best
established prescriptive tool in the field of purchasing and
supply management (Gelderman and Van Weele, 2003). In
their investigation of how procurement professionals apply the
portfolio approach, Gelderman and Van Weele (2003) modify
Krajlic’s matrix to reflect practitioners’ dynamic use of it.
Rather than presenting a simple standardised blue print for a
strategy, they identify movement within the matrix with
reflects the complexities, critical thinking and sophistication
of purchasing strategies and management. As purchasers
make a distinction between several possible purchasing
strategies with each of the matrix quadrants, so the decision
to use e-auctions can also be applied to achieve different
purchasing strategies. In Figure 4, when the role of
procurement is perceived to be strategic within the
organisation, then e-auctions can be used to either improve
purchasing process efficiency, or pool requirements to ensure
that supplier relationships are maintained and prices are
optimised, when the items being purchased are in the
broad category of non-critical/commodity items. For the
purchasing of strategic items, e-auctions are not deemed
appropriate. Although a specific distinction was not made
between leverage items, the findings have demonstrated that
e-auctions can be used to develop partnerships with suppliers
and exploit purchasing power to reduce price thus we expect
that there is potential for e-auctions to be used to purchase
leverage items. In the case of strategic and bottleneck items
where the purchasing strategy indicates a movement to the left
side of the matrix and finding alternative suppliers and solutions,
then e-auctions might be used to achieve these objectives. Future
research could investigate the effectiveness of e-auctions for
purchasing these other types of goods and services.
Overall, the implications for practitioners are that there is
much potential to experiment further with the development
and adaptation of e-auctions into the procurement process in
a more constructive way motivated by relationship building
with suppliers and not solely to reduce prices. By applying
Gartner’s Hype Cycle (Fenn et al., 2009), e-auctions seem to
be emerging from the “Slough of Disillusionment” into the
next phase of experimentation to understand the benefits and
practical application of the technology, in a way that will be
beneficial to the organisation and compatible with its
objectives. Senior procurement professionals must ensure
that new technology is evaluated, developed and adapted to
maximise its potential benefits.
The most obvious limitation of this study is the nature and
size of the sample. Although it is the intention of this study to
seek the views of enthusiastic and e-literate senior
procurement professionals, these findings are only
generalisable to this context. Another major limitation is
that the study is based solely on procurement managers
responses and may not represent the views of other key
decision makers within the organisation which might be
different (Murray, 2009). It is also limited to procurement
managers in the private sector and Murray (2001, 2009) has
already identified a difference between procurement strategies
and objectives in the public and private sector.
Here, buyer power was not included in the model as it is
implicit and explicit in the literature that the use of e-auctions
tend to be imposed by buyers who have power and
leverage over their suppliers encapsulated in the description
of e-auctions as a “power-based bargaining tool” (Emiliani,
2005; Tassabehji et al., 2006). The focus was to understand
and examine what the determinants for using e-auctions were
from the perspective of the buyers themselves, where buyer
power is implicit. However, Cox (1999) identifies a gap in the
supply chain literature where discussion of buyer-supplier
power and the different configurations and structures within
and between supply and value chains are limited. This is
considered critical in order that buyers can manage business
relationships appropriately in different circumstances of
transactional exchange (Cox, 2004). Future research could
use the power and relationship linkages identified by Cox
(2004) which range from buyer/supplier dominant arms
length relationships to supplier/buyer dominant collaborative
relationships in order to understand both suppliers and buyers
attitudes to e-auction usage and how effective a tool it is in
managing relationships between them in different sectors.
This study can be extended to include a wider range of
procurement professionals that might not be involved in
online business networking sites, to evaluate any differences in
attitudes or motivation for e-auction use. For instance,
examining the perceptions and motivations of the wider
organisational decision making unit and not only
procurement managers; exploring multiple perspectives
within public sector organisations including suppliers,
purchasers and politicians. Future research may also explore
in more detail the strategic implications of e-auctions and
evaluate their impact on an organisation’s key strategic
performance indicators as a longitudinal study.
Figure 4 Applying e-auction use to the Krajlic purchasing portfolio
matrix
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Rana Tassabehji
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Understanding e-auction use by procurement professionals
Supply Chain Management: An International Journal
Rana Tassabehji
Volume 15 · Number 6 · 2010 · 425 –437
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No. 4, pp. 346-59.
436
Understanding e-auction use by procurement professionals
Supply Chain Management: An International Journal
Rana Tassabehji
Volume 15 · Number 6 · 2010 · 425 –437
Appendix
Table AI Questionnaire
Downloaded by FLINDERS UNIVERSITY OF SOUTH AUSTRALIA At 08:32 05 February 2016 (PT)
How important are e-auctions for procuring the following goods and services:
Commodity goods and services
Facilities management, e.g. building maintenance, security, cleaning contracts etc.)
Group travel
Temporary staffing solutions (Interim contracts)
General IT hardware
Strategic goods and services
Core strategic items
Strategic consulting/professional services
Motivation for e-auction use
Price driven
Relationship driven
Reverse auctions are used mainly to achieve lower prices even with “important partners”
With reverse auctions, the cheapest price is always the deciding factor
We consider that reverse e-auctions are the first stage of negotiations where the seller offers us the maximum
price discount then we discuss the specifications in detail
An integral part of the reverse e-auction process is supplier engagement and assessment pre auction
An integral part of the e-auction process is weighting different supplier competencies pre auction to enable us to
choose the best supplier during the auction and not just the cheapest
Organisational perception of the role of procurement
Administrative role of procurement
The procurement role in our organisation is perceived as an administrative function that negotiates contracts
and raises purchase orders
Strategic role of procurement
The procurement role involves rationalising and forging stronger relationships with suppliers
The procurement role involves cross-cultural communication with suppliers
The procurement role is a strategic role within the organisation
Attitude towards e-auctions
Negative attitudes (anti)
Positive attitudes (pro)
Face to face negotiation is the most important means of conducting procurement activities
Reverse e-auctions are not used within collaborative partnership when building long term relationships
We achieve greater benefits with e-auction technology (e-auctions) than traditional negotiations
We achieve increases in supplier value which does not damage our trading relationship when using reverse eauctions
About the author
University of Bradford. Her research interests are in e-supply
chains, e-auctions, internet security and e-government where
she has published her research in international journals and
presented at international conferences. She is also a subject
referee for several international journals. Rana Tassabehji can
be contacted at: [email protected]
Rana Tassabehji is a Senior Lecturer at the University of
Bradford School of Management. She worked for several years
as a Consultant in the UK IT sector and as an International
Business Consultant, before returning to university.
She currently specialises in e-Business and IT at the
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