Title: Factors influencing Coffee Growers’ Perception on Coffee Buyers Opportunism : A Case of Cof...
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Title: Factors influencing Coffee Growers’ Perception on Coffee Buyers Opportunism : A Case of Coffee Buyer – Seller Relationships in Tanzania. Outlines. Introduction Theoretical Perspective and hypothesis formulation Research Methodology and Operationalization of Variables

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Title: Factors influencing Coffee Growers’ Perception on Coffee Buyers Opportunism : A Case of Coffee Buyer – Seller Relationships in Tanzania.


  • Introduction

  • Theoretical Perspective and hypothesis formulation

  • Research Methodology and Operationalization of Variables

  • Data Assessment (Preliminary screening, Discriminant validity and Reliability).

  • Research Model (Regression Model)

  • Regression Assumptions

  • Regression Estimation and Hypotheses Testing

  • Managerial Implications, Limitations and Areas for further Research


Background information

  • Main coffee buyers in Tanzania-Primary societies/Associations (KNCU, MBOCU).

  • Complaints from farmers> buyers no longer offering incentives (fertilizers, insecticides, equipment(CPU) and credits).


Research Problem

  • Buyers characterized: lying>insincerity>undervaluation of products.

  • These behaviors>reflection of buyers’ opportunistic behavior (John 1984; Williamson 1985).

    Research Question

  • What is the key factor affecting suppliers’ perception on buyers opportunism?


Objective of the study

  • Enhance relationship to reduce perception on buyers opportunism.

  • Specifically how supplier specific development (investment) affect suppliers’ perception on buyers opportunism.

Theoretical Perspective

  • A good theory is the best tool in understanding/solving practical business issues (problems).

  • Transaction Cost Theory (Douma & Schreuder Ch. 8, 2011) >The founder: Ronald Coase>1937: ‘‘Why do firms exist?’’

  • What are Transaction Cost?

  • Control and monitoring costs (e.g. cost documentation)

  • Bargaining costs (e.g. haggling about terms of trade)

Theoretical Perspective…Ctd.

  • Transaction Cost is induced when SPI is deployed> It is not possible to avoid this cost>Challenge: Minimize them.

  • Basic assumptions> Bounded Rationality, Uncertainty/Complexity, Information Asymmetry and Opportunism.

  • Opportunism: ‘Self seeking with-guile’’ (Williamson 1975; p.6)>Take advantage upon a situation, charge unfair prices, reduce the original product quality.

Theoretical Perspective…Ctd.

  • Three Basic Elements> Specific Assets, Uncertainty/Complexity of Trade, Frequency or Volume of Trade.

  • Specific Assets: Investment of Buyer and /or seller in> specific knowledge>routines >machines >tools to serve a specific trade partner (Risky Investment)

  • SPI are sunk cost (irreversible).

  • Previous Studies on Opportunism>Focused on Suppliers Opportunism; no studies on Buyers Opportunism.

Research model





Hypothesized effect

Control Effect

Research hypothesis

Hints: Transaction-Specific Supplier Development (SUDEV)>‘‘a long term cooperative effort between a buying firm and its suppliers to upgrade the suppliers’’ (Bucklin and Sengupta 1993; Parkhe, 1993).

  • SUDEV (SPI)-reduce opportunism (Joshi, 1998).

  • making visit;> discuss issues for performance improvement with respect to grading of my coffee beans; >recognizing farmers’ business for achievements/performance in the form of awards;> providing farm businesses with training/education; >providing farm businesses with equipment or tools for improvement, >providing farmers with credit/capital (Krause and Ellram, 1997; Wagner, 2006).

  • H1: There is a negative association between transaction-specific supplier development and buyer opportunism.

Research methodology

Empirical research setting : Coffee industry in Tanzania

  • Cross sectional research design

    Cross sectional research design (Malhotra and Birks, 2006).

  • Questionnaire Instrument

    Developing and reviews of questionnaire (adapting items)=>Translation- 2 ways and validation

  • Sample Size, Data collection procedures and technique

    More than 400, 000 smallholders.=>Sample=123 each=>Key informants=>Finding the farmer for more than five years=>Personal interview

Operationalization of variables

Constructs are operationalized as latent variables and all variables are measured as reflective scales> Variables were operationalized by question items with 7 points likert scale.

  • The question items for opportunism were adapted from Gundlach et al., (1995); Skarmeas et al., (2002) and Provan and Skinner, (1989).

  • While question items for Specific Supplier Development (SUDEV) were adapted from Krause (1999) and Ghijsen et al., (2009).

Discriminant Validity

  • Discriminant Validity: Exploratory Factor Analysis (Table 1.1) Rotated Component Matrix Extracted Principal Component Analysis. Rotated Method: Varimax with Kaiser Normalization. Rotation converged in 3 iterations


  • Reliability: Correctness or exactness>internal consistency >Cronbach alpha (Table 1.2).

Regression Model (Research Model)

Regression analysis

  • Statistical tool used to describe relationship between dependent and independent variables> bivariate (simple)>multivariate (multiple).

    Regression Model (Research Model)

    OPPOR = bo +b1REDURA +b2SALESVOL +b3SUDEV+ ԑ

Regression assumptions and Estimation

Regression assumptions:

  • Multicollinearity (Correlation Matrix: OPPOR & SUDEV, REDURA)

  • Collinearity (Tolerance>0.10, Variance Inflation Factor (VIF)<10)

  • Normality (Histogram & Normal P-P Plot of Standardized Residual)

  • Homoscedasticity (Scatter Plot)

    Regression estimation:

  • OLS > to estimate parameters of our regression model (Table 1.3)

R2adj=.26 F (7, 65) = 4.54 p<.001 Values for REDURA and SATIS are mean centered scores

**p<.05 t- values greater than 1.64 are significant at 0.05 one tail

***p<.01 t-values greater than 2.33 are significant at 0.01 one tail

Hypothesis Testing

Hypothesis 1:

  • supported by coefficient term, b3 = -0.31, t value = -2.67, p ≤0.01.

Discussion, Managerial Implications, Limitations and Areas for Further Research


  • Training on :picking>pulping>washing,>fermentation>washing>drying.

  • Investment on: Machines (CPU)/Tools> Provision of Capital/Credit

  • Personnel visits to help improve on suppliers performance.

  • Invite farmers>discuss>performance improvement>grading of coffee beans.

Managerial Implications, Limitations and Areas for Further Research…Ctd.

Managerial Implications

  • Lays out foundation on>stakeholders (buyers) >reduce opportunism.

  • Frequent communication and well established reporting system>SMS & telephone calls.

  • Establishment of training centers: seminars, establishing farms for training

  • increasing follow-up

  • Frequently>inviting farmers to discuss issues>on performance improvement with respect to grading system of coffee.

Managerial Implications, Limitations and Areas for Further Research…Ctd.

  • Providing farmers with equipment or tools for improvement.

  • Providing farmers with credit/capital.

  • Buyer Organizations should cooperate with supplier when deployment of SUDEV is appropriate/profitable.

    Limitations and areas for further research

  • Analyses only coffee industry

  • Cross sectional design

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