Purchasing in power asymmetry - A study of vaccine procurement for developing countries

The purpose of this study was to increase the understanding of, and develop a model to explain, interrelations between purchasing strategies carried out by buyers within vaccine supply chains for developing countries and their buyer-supplier power structure. In the humanitarian aid context, availability of required goods (e.g. health related products) at the right time and place is of vital importance to the survival of recipients. For some aid products, buyers have to compete with several others with often, higher purchasing power. Other aid products, with relatively low demand, are usually unattractive for global manufacturers to produce. In addition, historically, developing countries and humanitarian organizations have been considered less powerful compared to their business suppliers. This has resulted in scarcity of supply for some products such as vaccines. With such requirements, ensuring a functioning market can be a complex process. Consequently, the question raised is how organizations and developing countries as buyers can absorb such constraints from the environment, and how they can affect the environment to achieve better availability of affordable products. So, in this study, purchasing strategies carried out by buyers of vaccines were studied, and their effects from, and impact on buyer-supplier power structures examined. The aim was to investigate the interrelation between these strategies and the power structure of buyers relative to their suppliers. A multiple case study design was applied. Seven cases representing different buyers and different purchasing strategies were selected. Cases represent three main sample groups of developing country buyers, humanitarian organizations, and industrial country buyers. Within the first sample group, countries self-purchasing and countries purchasing through humanitarian organizations were selected. Data was gathered using a combination of methods and from primary and secondary sources. The person(s) responsible for planning or procurement of vaccines for each case were interviewed (i.e. interviewed or in written form). Responses were triangulated with a combination of secondary data. Individual case analyses were combined to find patterns and deviations across cases. Findings were matched with theoretical suggestions to infer conclusions. Based on findings from the study a model is developed. In the developed model, it is proposed that buyers practice purchasing strategies in response to buyer-supplier power attributes and in line with overall organizations (or in this context country) strategy. Buyers plan an overall purchase strategy reflecting the organization / country strategy (Nollet et al. 2005). On the other hand, buyers plan and practice purchasing strategies in line with constraints rising from buyer-supplier power structures (Pfeffer and Salancik, 2003) to either absorb, attempt to change, or adapt to constraints. In turn, these practiced purchasing strategies impact power attributes, contributing to new and possibly changed power structures. Other external factors also impact II buyer-supplier power attributes and hence, power structures. Consequently, buyers have to set strategies according to changed buyer-supplier power attributes. From the results of the study we found that for a supply market with only few producers like that of vaccines, strategies that maintain or enforce such concentration are not advisable. Two examples found in this study are in practice of competitive bidding and pooling demand, which can limit the number of suppliers that can win contracts. It is more probable for suppliers with higher production capacities and higher experience to win contracts in practice of these strategies compared to new or smaller suppliers. Buyers are hence recommended to practice purchasing strategies that give way to new market entries, to have higher alternative sources of supply in the long run. Results of the study propose that in situations of high power imbalance between developing country buyers and their suppliers, it is unlikely for the buyer to attempt to change the power structure. It was observed that in such situations, buyers tend to tap into the purchasing process of intermediaries such as humanitarian organizations focusing on vaccine procurement. Based on the findings, we also proposed, that strategies aimed at securing funding and increasing legitimacy of working with humanitarian organizations positively impact the power structure for this group of buyers. (Less)