12 2 5 Result of Analysis and Interpretations
costs for circulatable resources is a challenge for organizations because when resourc-
es are more expensive the final product ends up costing more than the conventional
one. Since price is one of the main criteria in the buying decision for the consumer,
organizations are forced to either cross-subsidize their products or have customers
who are willing to pay more. For organizations, cross-subsidizing circular products
with other conventional products bears the risk of an overall reduced revenue. On
the other hand, if organizations do not cross-subsidize and offer circular products
at a higher price, they face the risk of low customer demand because of increased
prices. The organization in case Alpha decided to cross-subsidize in order to stay
competitive as its representative explained: “But right now that’s not the case and we
have to absorb those additional costs. And we have to absorb them because we have
to remain competitive and there are not enough people that are willing to pay more.”
The organization in case Delta was also able to reduce the price gap between theircircular and conventional products by choosing the materials used to make their
circular economy products carefully. A material which was developed specifically
for a circulatable product and is very expensive is compensated by several circulat-
able but cheap materials so that the end product can be sold at a reasonable price.
The second sub-category is the difficult selection and cooperation with supplierswhich increases the entrepreneurial efforts for organizations. To develop a circular
product or to ensure that a product only contains biodegradable substances it is
necessary to know what the materials themselves are made of. All suppliers have to
reveal their lists of ingredients. Since these lists are often kept as corporate secrets it
can be challenging to convince suppliers to participate. The entrepreneurial effort
of this sub-category lies in the time and cost-intensive work it takes to convince
suppliers or find new ones in case they are not willing to cooperate. The develop-
ment of a circular economy product is research intense. This leads to suppliers
terminating cooperation because they are not willing to invest the time and money
as described in case Beta. In this case, the development of a biodegradable product
took two years of research. Several suppliers were not willing to join the process
right from the very beginning. Others exited the process at a later point due to the
long development cycle. The CEO of case Beta described the situation as follows:
“It took some time until we found suppliers who were willing to cooperate on this.
Many suppliers weren’t willing due to the low production volumes we needed” (see
Appendix: German Quote 3).
The last sub-category is the delayed return on investment. The return on in-vestment is often delayed because the research and development processes are time
consuming and require a lot of support before the product can be released. The return
on investment is often not achieved in the first period after which the investment is
made. This is particularly a problem when products are durable because end of life