The impact of purchasing policy on electronic markets and electronic heirarchies

Abstract Markets and heirarchies are two mechanisms used by organizations to coordinate steps through the value chain. For the last twenty years information technology has been used to enhance both of these coordination structures. It has been suggested (Malone et al.) that the improvement of information technology price/performance will have a more profound effect on markets leading to an increase in transactions coordinated by markets. This paper investigates the feasibility of electronic markets in light of the purchasing policy dictated by corporate strategy. Specifically, we will discuss principles of purchasing which would impede or prevent the adoption of electronic markets. We have supplemented our discussion with results from a market research survey which sought impressions of issues involved with an electronic market.