This document summarizes an academic article that examines power and interdependence in buyer-supplier relationships using Kraljic's purchasing portfolio approach. The study develops constructs to measure buyer dependence, supplier dependence, relative power, and total interdependence. It then surveys 250 purchasing professionals to assess power and interdependence across the four quadrants of Kraljic's matrix. The results provide empirical evidence on how power balances differ depending on a product's profit impact and supply risk classification. A notable finding is supplier dominance in the strategic quadrant, indicating partnerships are often not symmetrically balanced as previously thought.
In reference to an AAP article dated (1st May 2012) use fundamental methods & tools of macroeconomics to answer questions regarding RBA interest rate assessment strategy, the connection between rising unemployment & decreasing inflation & the effect lower interest rates will have on Australia major macroeconomic objectives.
Journal of financial and quantitative analysis financial innovation, market...Claudineia Kudlawicz
This paper investigates how financial innovation affects asset prices when participation in financial markets is endogenous. It introduces a two-period model where agents face costs to participate and receive heterogeneous incomes based on macroeconomic risk factors. The paper finds that financial innovation 1) encourages more participation which reduces risk premiums, 2) spreads price effects across markets through new participants' diversified portfolios, and 3) can lead to both entry and exit of investors, creating non-degenerate participation turnover. Simulations suggest innovation lowers equity premiums and differentially impacts returns based on factors, while potentially increasing or decreasing interest rates.
This document summarizes a research paper that presents a mathematical model of a decentralized supply chain with two suppliers and two competing retailers. The paper investigates the sourcing and pricing strategies of the two retailers under conditions of uncertain supply and supply disruptions. It reviews related literature on competition within and between supply chains. The paper then introduces a new model where the retailers face stochastic demand that depends on prices and service levels. The model accounts for the probability of supply disruptions at each supplier. Optimal order quantities and equilibrium pricing and service strategies for the retailers are then derived.
This document discusses identifying the determinants of stock price movements. It summarizes previous literature that found stock prices were too volatile to be explained solely by changes in expected future dividends. The authors argue that there is an inability to distinguish whether expectations of future dividend growth or future excess returns are the primary driver of stock price movements. They show that stock prices exhibit long-run persistence, but neither dividend growth nor excess returns exhibit low-frequency movements. As a result, the data cannot distinguish between models where one or the other is the main determinant of stock prices. The relative importance assigned to dividends versus excess returns in explaining stock price volatility depends on the assumptions made about which variable is stationary.
The document summarizes three hypotheses about what investors consider when purchasing shares of common stock: dividends, earnings, or both dividends and earnings. It tests these hypotheses by analyzing stock price, dividend, and earnings data from four industries in 1951 and 1954. When testing a model that included both dividends and earnings as factors, the results were inconsistent and conceptually weak. A model based on the hypothesis that investors consider dividends performed better, with the dividend coefficient representing the required rate of profit and the retained earnings coefficient representing the value placed on growth. However, some of the retained earnings coefficients were unexpectedly low or negative. In conclusion, the dividend hypothesis better explained stock price variations but the results still indicated room for improvement in understanding the
The ability of current statistical classifications to separateservices and ma...Ian McCarthy
This paper explores the performance of current statistical classification systems in classifying firms and, in particular, their ability to distinguish between firms that provide services and firms that provide manufacturing. We find that a large share of firms, almost 20%, are not classified as expected based on a comparison of their statements of activities with the assigned industry codes. This result is robust to analyses on different levels of aggregation and is validated in an additional survey. It is well known from earlier literature that industry classification systems are not perfect. This paper provides a quantification of the flaws in classifications of firms. Moreover, it is explained why the classifications of firms are imprecise. The increasing complexity of production, inertia in changes to statistical systems and the increasing integration of manufacturing products and services are some of the primary and interrelated explanations for this lack of precision. We emphasise, however, that such classification problems are not resolved using a ‘technical fix’. Any statistical classification method involves a number of tradeoffs.
The structure of the nigerian banking sector and its impact on bank performanceAlexander Decker
The document discusses the structure of the Nigerian banking sector and its impact on bank performance. It analyzes data from 2001-2010 to evaluate the relationship between banking sector structure and explanatory variables on performance. The findings show that the Nigerian banking sector has an oligopolistic structure and that market concentration positively impacts bank profitability, suggesting concentration is a major determinant of profitability in Nigeria. The structure and performance of banks may be improved by allowing market-induced consolidation in the sector.
In reference to an AAP article dated (1st May 2012) use fundamental methods & tools of macroeconomics to answer questions regarding RBA interest rate assessment strategy, the connection between rising unemployment & decreasing inflation & the effect lower interest rates will have on Australia major macroeconomic objectives.
Journal of financial and quantitative analysis financial innovation, market...Claudineia Kudlawicz
This paper investigates how financial innovation affects asset prices when participation in financial markets is endogenous. It introduces a two-period model where agents face costs to participate and receive heterogeneous incomes based on macroeconomic risk factors. The paper finds that financial innovation 1) encourages more participation which reduces risk premiums, 2) spreads price effects across markets through new participants' diversified portfolios, and 3) can lead to both entry and exit of investors, creating non-degenerate participation turnover. Simulations suggest innovation lowers equity premiums and differentially impacts returns based on factors, while potentially increasing or decreasing interest rates.
This document summarizes a research paper that presents a mathematical model of a decentralized supply chain with two suppliers and two competing retailers. The paper investigates the sourcing and pricing strategies of the two retailers under conditions of uncertain supply and supply disruptions. It reviews related literature on competition within and between supply chains. The paper then introduces a new model where the retailers face stochastic demand that depends on prices and service levels. The model accounts for the probability of supply disruptions at each supplier. Optimal order quantities and equilibrium pricing and service strategies for the retailers are then derived.
This document discusses identifying the determinants of stock price movements. It summarizes previous literature that found stock prices were too volatile to be explained solely by changes in expected future dividends. The authors argue that there is an inability to distinguish whether expectations of future dividend growth or future excess returns are the primary driver of stock price movements. They show that stock prices exhibit long-run persistence, but neither dividend growth nor excess returns exhibit low-frequency movements. As a result, the data cannot distinguish between models where one or the other is the main determinant of stock prices. The relative importance assigned to dividends versus excess returns in explaining stock price volatility depends on the assumptions made about which variable is stationary.
The document summarizes three hypotheses about what investors consider when purchasing shares of common stock: dividends, earnings, or both dividends and earnings. It tests these hypotheses by analyzing stock price, dividend, and earnings data from four industries in 1951 and 1954. When testing a model that included both dividends and earnings as factors, the results were inconsistent and conceptually weak. A model based on the hypothesis that investors consider dividends performed better, with the dividend coefficient representing the required rate of profit and the retained earnings coefficient representing the value placed on growth. However, some of the retained earnings coefficients were unexpectedly low or negative. In conclusion, the dividend hypothesis better explained stock price variations but the results still indicated room for improvement in understanding the
The ability of current statistical classifications to separateservices and ma...Ian McCarthy
This paper explores the performance of current statistical classification systems in classifying firms and, in particular, their ability to distinguish between firms that provide services and firms that provide manufacturing. We find that a large share of firms, almost 20%, are not classified as expected based on a comparison of their statements of activities with the assigned industry codes. This result is robust to analyses on different levels of aggregation and is validated in an additional survey. It is well known from earlier literature that industry classification systems are not perfect. This paper provides a quantification of the flaws in classifications of firms. Moreover, it is explained why the classifications of firms are imprecise. The increasing complexity of production, inertia in changes to statistical systems and the increasing integration of manufacturing products and services are some of the primary and interrelated explanations for this lack of precision. We emphasise, however, that such classification problems are not resolved using a ‘technical fix’. Any statistical classification method involves a number of tradeoffs.
The structure of the nigerian banking sector and its impact on bank performanceAlexander Decker
The document discusses the structure of the Nigerian banking sector and its impact on bank performance. It analyzes data from 2001-2010 to evaluate the relationship between banking sector structure and explanatory variables on performance. The findings show that the Nigerian banking sector has an oligopolistic structure and that market concentration positively impacts bank profitability, suggesting concentration is a major determinant of profitability in Nigeria. The structure and performance of banks may be improved by allowing market-induced consolidation in the sector.
This document is a study guide for an economics final exam covering four units: the fundamental economic problem, factors of production and economic systems; microeconomics concepts including demand, supply, and market structures; government finances including taxes and expenditures; and macroeconomics topics such as GDP, business cycles, unemployment, and monetary policy. It provides definitions, concepts and terms to review for the exam across these units in economics.
This document examines the effect of macroeconomic variables (exchange rate, treasury bill rate, and inflation rate) on sectoral share price indices in Sri Lanka from 2008 to 2012. Multiple regression analysis found that the macroeconomic variables explained over 50% of the variation in share prices for all sectors except telecom. Exchange rate and inflation rate generally had a significant negative and positive effect respectively on share prices, while treasury bill rate had a mostly negative but weaker effect. Inflation rate tended to be the most influential macroeconomic variable for most sectors.
This document summarizes a study that assesses competition in the Indian banking sector. The study uses the Panzar-Rosse H-statistic method to analyze competition using panel data from 36 banks over the period 1994 to 2009. The key findings are:
1) The H-statistic has increased since 1994, indicating an improvement in the degree of competition in the Indian banking sector.
2) Equity capital, as a control variable, influences the level of competition.
3) Analyzing competition allows policymakers to design liberalization measures, financial products, and business models to further enhance competition in banking.
This document summarizes a study examining what factors determine firm size across industries and countries. The study finds that countries with more efficient judicial systems tend to have larger firms. When accounting for institutional differences, richer countries or those with more developed capital markets do not necessarily have larger firms. The strongest relationship is that industries with low physical capital intensity have larger firms in countries with more efficient judicial systems, supporting theories that emphasize legal protection of "critical resources" like intellectual property.
This document discusses modeling the relationship between corporate debt and equity returns over the credit cycle using a regime switching model. It first provides background on theories of the debt-equity relationship and evidence that their returns often diverge. It then introduces the concept of a "leverage clock" where debt and equity risk premiums move together in some parts of the credit cycle but diverge in others. The document outlines previous attempts at regime switching models to capture this cycle but notes limitations. It aims to develop a new model to identify historical credit cycle regimes and predict future monthly transitions between states.
This document proposes the "Equity Surplus Theory" or "purple sky model". It summarizes existing models like Porter's competitive strategies and the red/blue ocean models. It argues that focusing on customers' underlying value systems, rather than just value offered, can lead to "uncontested loyalty" where competition is irrelevant. By deeply understanding and targeting specific value systems, firms can avoid "comparative myopia" and create sustained competitive advantage through "equity surplus" derived from uncontested loyalty within the market. Future work is needed to test this conceptual model and extract a complete typology applicable across industries.
This document discusses customer loyalty and satisfaction leading to successful marketing outcomes through increased sales, brand appeal, and strong customer relationships. It also examines analyzing consumer markets through understanding influences on consumer behavior like social factors, cultural groups, and motivation. Finally, it explores global markets and the opportunities and challenges of tapping into developing international consumer bases while ensuring marketing strategies are adapted to different cultural and regulatory environments.
Fund performance persistence and competition keswanibfmresearch
This document summarizes a study that examines how competition within a sector affects mutual fund performance persistence at the sector level in the UK market. The study uses data on UK unit trusts from 1991-2001 that includes annual returns, assets, and sector classifications. Several variables are constructed to measure competition within each sector, such as the number of funds, proportion of mature funds, and concentration of assets. The main finding is that performance persistence is higher in sectors where concentration of assets under management is higher, indicating less competition is associated with greater persistence. This suggests the degree of persistence exhibited by a sector's funds depends on how competitive that sector is.
Research Paper: Returns of Merger and Acquisition activities in the Restauran...neha singh
This study examines returns from merger and acquisition activities in the restaurant industry between 1985 and 2005. It finds that target companies experience significant positive returns, consistent with other research. However, bidding company returns are close to zero and not statistically significant. This may be due to high competition in the restaurant industry, which pressures companies to be more aggressive bidders, lowering their returns. While M&As aim to generate synergies, some are motivated by management self-interest and hubris, and long-term post-acquisition performance must be examined to determine M&A success rates.
11.factors causing reversed bullwhip effect on the supply chains of kenyan firmsAlexander Decker
This study examined factors that cause supply chain variability, known as the reverse bullwhip effect, along the supply chain of Kenya Pipeline Company. The researchers conducted interviews and collected data through questionnaires from 5 depots along the supply chain. The findings suggested that capacity constraints were a major factor contributing to supply chain inefficiencies. Specifically, the downstream storage capacity was much larger than the upstream utilization capacity, limiting product flow to end sale points. The conclusion was that the supply chain was inefficient due to challenges related to capacity and government intervention. Recommendations included strategies to adjust capacity, upgrade equipment, add manpower and machine hours, and reduce disruptive government intervention.
The document summarizes the literature on the resource-based view (RBV) of strategy. Some key points:
1) The RBV sees a firm's resources and capabilities as the source of competitive advantage, rather than its industry positioning. Resources are heterogeneously distributed between firms and can lead to performance differences.
2) The literature on RBV is diverse, covering topics like organizational structures, managerial competence, technologies, and core competences. A central theme is that resources determine strategy options and long-term success more than external environment changes.
3) Core competences that are rare, valuable, and difficult to imitate are important strategic assets. Management skills in developing, deploying, and
The literature review draws on the mainstream corporate governance literature in finance as its base and highlights the differences in motives between real estate and non-real estate related merger activity.
This document summarizes a paper that revisits the "dividend puzzle" - the question of why companies pay dividends despite theoretical arguments for dividend irrelevance. The paper examines several theories for why dividends may be relevant, including taxes, asymmetric information, and agency costs. It also discusses share repurchases as an alternative way to distribute cash. While research provides some support for various explanations, the dividend puzzle remains unresolved. Solving it may depend on understanding how different market imperfections uniquely affect individual firms.
Factors determining capital structure a case study of listedAlexander Decker
This document summarizes a research study that examined the factors determining capital structure of listed companies in Sri Lanka from 2002 to 2006. The study used a sample of 50 companies and analyzed the relationship between capital structure (leverage) and factors like tangibility, size, growth, profitability, liquidity and dividend payout. The results found that size, growth and profitability were statistically significant determinants of capital structure for Sri Lankan companies. The factors together explained 77% of the variation in capital structure.
Brennan, Niamh M., Daly, Caroline A. and Harrington, Claire S. [2010] Rhetori...Prof Niamh M. Brennan
This exploratory study extends the analysis of narrative disclosures from routine reporting contexts such as annual reports and press releases to non-routine takeover documents where the financial consequences of narrative disclosures can be substantial. Rhetoric and argument in the form of impression management techniques in narrative disclosures are examined. Prior thematic content analysis methods for analysing good and bad news disclosures are adapted to the attacking and defensive themes in the defence documents of target companies subject to hostile takeover bids. The paper examines the incidence, extent and implications of impression management in ten hostile takeover defence documents issued by target companies listed on the London Stock Exchange between 1 January 2006 and 30 June 2008. Three impression management strategies – thematic, visual and rhetorical manipulation – are investigated using content analysis methodologies. The findings of the research indicate that thematic, visual and rhetorical manipulation is evident in hostile takeover defence documents. Attacking and defensive sentences were found to comprise the majority of the defence documents analysed. Such sentences exhibited varying degrees of visual and rhetorical emphasis, which served to award greater or lesser degrees of prominence to the information conveyed by target company management.
While exploratory in nature, this paper concludes with suggestions for future more systematic research allowing for greater generalisations from the findings.
An integrated model_for_ the_design_of_agile_supply_chainsDr Lendy Spires
This document summarizes an integrated model for designing agile supply chains. It discusses how lean production paradigms focused on eliminating waste have been effective in cost-driven markets, while agile paradigms emphasizing quick response are better for availability-driven markets. The document proposes that lean and agile approaches can be combined advantageously and presents a model integrating manufacturing and logistics to enable both cost-effective and agile supply chains.
An integrated model_for_ the_design_of_agile_supply_chainsDr Lendy Spires
This document summarizes an integrated model for designing agile supply chains. It discusses how lean production paradigms focused on eliminating waste have been effective in cost-driven markets, while more volatile markets require agile approaches focused on availability. The document proposes ways to combine lean and agile strategies, and introduces a model integrating manufacturing and logistics to enable agile enterprises. It analyzes how market qualifiers and winners change over time, driving transitions between lean and agile approaches.
An integrated model_for_ the_design_of_agile_supply_chainsDr Lendy Spires
This document summarizes an integrated model for designing agile supply chains. It discusses how lean production paradigms focused on eliminating waste have been effective in cost-driven markets, while agile paradigms emphasizing quick response are better suited to availability-driven markets. The document proposes that lean and agile approaches can be combined advantageously and presents a model integrating manufacturing and logistics to enable both cost-effective and agile supply chains.
An integrated model_for_ the_design_of_agile_supply_chainsDr Lendy Spires
This document discusses strategies for integrating lean and agile paradigms in supply chain design. It outlines key differences between lean and agile approaches, such as predictable vs volatile demand. The document proposes several ways to integrate the paradigms, including: 1) Applying lean to top 20% of products and agile to bottom 80% based on Pareto analysis; 2) Using a decoupling point to apply lean upstream and agile downstream; 3) Separating demand into predictable "base" and unpredictable "surge" components and applying different strategies to each. The goal is to design cost-effective and responsive hybrid supply chains.
This document discusses theories of corporate capital structure and presents a regression model to test whether firms have target debt ratios. It finds that:
1) Firms appear to have target debt ratios that depend on firm characteristics, consistent with the tradeoff theory of capital structure.
2) Firms only partially adjust their debt ratios each year to close the gap between their actual and target ratios. The typical firm closes about one-third of the gap per year.
3) This partial adjustment model provides a better fit for the data than alternatives like the pecking order theory or market timing theory, which cannot explain why firms would revert to a target debt ratio. However, these theories still have some explanatory power.
The document discusses improving cash flow studies used in property valuations. It focuses on two key areas: [1] increasing consistency in cash flow models by standardizing structure and eliminating incorrect formulas, and [2] improving accuracy of input data, especially for key uncertain variables, through better selection processes drawing on probability distributions, sensitivity analysis, and simulation. The case study examined demonstrates how changes to both model structure and input variables can significantly impact outcomes, highlighting the need for standardized, well-structured models and accurate, carefully selected data inputs.
This document is a study guide for an economics final exam covering four units: the fundamental economic problem, factors of production and economic systems; microeconomics concepts including demand, supply, and market structures; government finances including taxes and expenditures; and macroeconomics topics such as GDP, business cycles, unemployment, and monetary policy. It provides definitions, concepts and terms to review for the exam across these units in economics.
This document examines the effect of macroeconomic variables (exchange rate, treasury bill rate, and inflation rate) on sectoral share price indices in Sri Lanka from 2008 to 2012. Multiple regression analysis found that the macroeconomic variables explained over 50% of the variation in share prices for all sectors except telecom. Exchange rate and inflation rate generally had a significant negative and positive effect respectively on share prices, while treasury bill rate had a mostly negative but weaker effect. Inflation rate tended to be the most influential macroeconomic variable for most sectors.
This document summarizes a study that assesses competition in the Indian banking sector. The study uses the Panzar-Rosse H-statistic method to analyze competition using panel data from 36 banks over the period 1994 to 2009. The key findings are:
1) The H-statistic has increased since 1994, indicating an improvement in the degree of competition in the Indian banking sector.
2) Equity capital, as a control variable, influences the level of competition.
3) Analyzing competition allows policymakers to design liberalization measures, financial products, and business models to further enhance competition in banking.
This document summarizes a study examining what factors determine firm size across industries and countries. The study finds that countries with more efficient judicial systems tend to have larger firms. When accounting for institutional differences, richer countries or those with more developed capital markets do not necessarily have larger firms. The strongest relationship is that industries with low physical capital intensity have larger firms in countries with more efficient judicial systems, supporting theories that emphasize legal protection of "critical resources" like intellectual property.
This document discusses modeling the relationship between corporate debt and equity returns over the credit cycle using a regime switching model. It first provides background on theories of the debt-equity relationship and evidence that their returns often diverge. It then introduces the concept of a "leverage clock" where debt and equity risk premiums move together in some parts of the credit cycle but diverge in others. The document outlines previous attempts at regime switching models to capture this cycle but notes limitations. It aims to develop a new model to identify historical credit cycle regimes and predict future monthly transitions between states.
This document proposes the "Equity Surplus Theory" or "purple sky model". It summarizes existing models like Porter's competitive strategies and the red/blue ocean models. It argues that focusing on customers' underlying value systems, rather than just value offered, can lead to "uncontested loyalty" where competition is irrelevant. By deeply understanding and targeting specific value systems, firms can avoid "comparative myopia" and create sustained competitive advantage through "equity surplus" derived from uncontested loyalty within the market. Future work is needed to test this conceptual model and extract a complete typology applicable across industries.
This document discusses customer loyalty and satisfaction leading to successful marketing outcomes through increased sales, brand appeal, and strong customer relationships. It also examines analyzing consumer markets through understanding influences on consumer behavior like social factors, cultural groups, and motivation. Finally, it explores global markets and the opportunities and challenges of tapping into developing international consumer bases while ensuring marketing strategies are adapted to different cultural and regulatory environments.
Fund performance persistence and competition keswanibfmresearch
This document summarizes a study that examines how competition within a sector affects mutual fund performance persistence at the sector level in the UK market. The study uses data on UK unit trusts from 1991-2001 that includes annual returns, assets, and sector classifications. Several variables are constructed to measure competition within each sector, such as the number of funds, proportion of mature funds, and concentration of assets. The main finding is that performance persistence is higher in sectors where concentration of assets under management is higher, indicating less competition is associated with greater persistence. This suggests the degree of persistence exhibited by a sector's funds depends on how competitive that sector is.
Research Paper: Returns of Merger and Acquisition activities in the Restauran...neha singh
This study examines returns from merger and acquisition activities in the restaurant industry between 1985 and 2005. It finds that target companies experience significant positive returns, consistent with other research. However, bidding company returns are close to zero and not statistically significant. This may be due to high competition in the restaurant industry, which pressures companies to be more aggressive bidders, lowering their returns. While M&As aim to generate synergies, some are motivated by management self-interest and hubris, and long-term post-acquisition performance must be examined to determine M&A success rates.
11.factors causing reversed bullwhip effect on the supply chains of kenyan firmsAlexander Decker
This study examined factors that cause supply chain variability, known as the reverse bullwhip effect, along the supply chain of Kenya Pipeline Company. The researchers conducted interviews and collected data through questionnaires from 5 depots along the supply chain. The findings suggested that capacity constraints were a major factor contributing to supply chain inefficiencies. Specifically, the downstream storage capacity was much larger than the upstream utilization capacity, limiting product flow to end sale points. The conclusion was that the supply chain was inefficient due to challenges related to capacity and government intervention. Recommendations included strategies to adjust capacity, upgrade equipment, add manpower and machine hours, and reduce disruptive government intervention.
The document summarizes the literature on the resource-based view (RBV) of strategy. Some key points:
1) The RBV sees a firm's resources and capabilities as the source of competitive advantage, rather than its industry positioning. Resources are heterogeneously distributed between firms and can lead to performance differences.
2) The literature on RBV is diverse, covering topics like organizational structures, managerial competence, technologies, and core competences. A central theme is that resources determine strategy options and long-term success more than external environment changes.
3) Core competences that are rare, valuable, and difficult to imitate are important strategic assets. Management skills in developing, deploying, and
The literature review draws on the mainstream corporate governance literature in finance as its base and highlights the differences in motives between real estate and non-real estate related merger activity.
This document summarizes a paper that revisits the "dividend puzzle" - the question of why companies pay dividends despite theoretical arguments for dividend irrelevance. The paper examines several theories for why dividends may be relevant, including taxes, asymmetric information, and agency costs. It also discusses share repurchases as an alternative way to distribute cash. While research provides some support for various explanations, the dividend puzzle remains unresolved. Solving it may depend on understanding how different market imperfections uniquely affect individual firms.
Factors determining capital structure a case study of listedAlexander Decker
This document summarizes a research study that examined the factors determining capital structure of listed companies in Sri Lanka from 2002 to 2006. The study used a sample of 50 companies and analyzed the relationship between capital structure (leverage) and factors like tangibility, size, growth, profitability, liquidity and dividend payout. The results found that size, growth and profitability were statistically significant determinants of capital structure for Sri Lankan companies. The factors together explained 77% of the variation in capital structure.
Brennan, Niamh M., Daly, Caroline A. and Harrington, Claire S. [2010] Rhetori...Prof Niamh M. Brennan
This exploratory study extends the analysis of narrative disclosures from routine reporting contexts such as annual reports and press releases to non-routine takeover documents where the financial consequences of narrative disclosures can be substantial. Rhetoric and argument in the form of impression management techniques in narrative disclosures are examined. Prior thematic content analysis methods for analysing good and bad news disclosures are adapted to the attacking and defensive themes in the defence documents of target companies subject to hostile takeover bids. The paper examines the incidence, extent and implications of impression management in ten hostile takeover defence documents issued by target companies listed on the London Stock Exchange between 1 January 2006 and 30 June 2008. Three impression management strategies – thematic, visual and rhetorical manipulation – are investigated using content analysis methodologies. The findings of the research indicate that thematic, visual and rhetorical manipulation is evident in hostile takeover defence documents. Attacking and defensive sentences were found to comprise the majority of the defence documents analysed. Such sentences exhibited varying degrees of visual and rhetorical emphasis, which served to award greater or lesser degrees of prominence to the information conveyed by target company management.
While exploratory in nature, this paper concludes with suggestions for future more systematic research allowing for greater generalisations from the findings.
An integrated model_for_ the_design_of_agile_supply_chainsDr Lendy Spires
This document summarizes an integrated model for designing agile supply chains. It discusses how lean production paradigms focused on eliminating waste have been effective in cost-driven markets, while agile paradigms emphasizing quick response are better for availability-driven markets. The document proposes that lean and agile approaches can be combined advantageously and presents a model integrating manufacturing and logistics to enable both cost-effective and agile supply chains.
An integrated model_for_ the_design_of_agile_supply_chainsDr Lendy Spires
This document summarizes an integrated model for designing agile supply chains. It discusses how lean production paradigms focused on eliminating waste have been effective in cost-driven markets, while more volatile markets require agile approaches focused on availability. The document proposes ways to combine lean and agile strategies, and introduces a model integrating manufacturing and logistics to enable agile enterprises. It analyzes how market qualifiers and winners change over time, driving transitions between lean and agile approaches.
An integrated model_for_ the_design_of_agile_supply_chainsDr Lendy Spires
This document summarizes an integrated model for designing agile supply chains. It discusses how lean production paradigms focused on eliminating waste have been effective in cost-driven markets, while agile paradigms emphasizing quick response are better suited to availability-driven markets. The document proposes that lean and agile approaches can be combined advantageously and presents a model integrating manufacturing and logistics to enable both cost-effective and agile supply chains.
An integrated model_for_ the_design_of_agile_supply_chainsDr Lendy Spires
This document discusses strategies for integrating lean and agile paradigms in supply chain design. It outlines key differences between lean and agile approaches, such as predictable vs volatile demand. The document proposes several ways to integrate the paradigms, including: 1) Applying lean to top 20% of products and agile to bottom 80% based on Pareto analysis; 2) Using a decoupling point to apply lean upstream and agile downstream; 3) Separating demand into predictable "base" and unpredictable "surge" components and applying different strategies to each. The goal is to design cost-effective and responsive hybrid supply chains.
This document discusses theories of corporate capital structure and presents a regression model to test whether firms have target debt ratios. It finds that:
1) Firms appear to have target debt ratios that depend on firm characteristics, consistent with the tradeoff theory of capital structure.
2) Firms only partially adjust their debt ratios each year to close the gap between their actual and target ratios. The typical firm closes about one-third of the gap per year.
3) This partial adjustment model provides a better fit for the data than alternatives like the pecking order theory or market timing theory, which cannot explain why firms would revert to a target debt ratio. However, these theories still have some explanatory power.
The document discusses improving cash flow studies used in property valuations. It focuses on two key areas: [1] increasing consistency in cash flow models by standardizing structure and eliminating incorrect formulas, and [2] improving accuracy of input data, especially for key uncertain variables, through better selection processes drawing on probability distributions, sensitivity analysis, and simulation. The case study examined demonstrates how changes to both model structure and input variables can significantly impact outcomes, highlighting the need for standardized, well-structured models and accurate, carefully selected data inputs.
07. the determinants of capital structurenguyenviet30
This document summarizes a research paper that investigates how firms in capital market-oriented economies (UK, US) and bank-oriented economies (France, Germany, Japan) determine their capital structures. Using panel data and regression analysis, the paper finds that firm size and tangibility of assets increase leverage, while profitability, growth opportunities, and share price performance decrease leverage in both types of economies. However, the impacts of some determinants vary between countries depending on differences in institutions and traditions. The paper also finds that firms have target leverage ratios but adjust to them at different speeds across countries.
30 YEARS OF MERGERS AND ACQUISITIONS RESEARCH RECENT ADVANCES AND FUTURE OPP...Rhonda Cetnar
This document summarizes recent research on mergers and acquisitions from the past 30 years. It discusses three primary streams of research that have focused on strategic fit between acquiring and target firms, organizational fit, and the acquisition process itself. While research has provided insights into these areas, failure rates of M&As have remained high. The document reviews recent advances in the different research streams but notes opportunities remain to develop a more holistic understanding of M&A performance and consequences through future research.
This document summarizes a 1964 study by Irwin Friend and Marshall Puckett examining the relationship between stock prices, dividends, and retained earnings. The study finds that in growth industries, retained earnings have a relatively greater impact on stock prices than in non-growth industries. It also finds that the customary view that dividends have a stronger effect than retained earnings is invalid, as the results varied across industries and years. The study concludes there is little basis for believing dividends universally have a stronger impact than retained earnings, and that the appropriate payout ratio depends on firm-specific factors like profitability and risk.
Volatile markets call for alternative Business ModelsAshish Singla
The document discusses how the credit crisis has affected financing in the power industry. It notes that for over a decade, the power industry had broad access to cheap capital from various investors. However, the credit crisis has virtually dried up this capital or made it extremely expensive, especially for merchant power generators. While utilities still have relatively stable access to financing due to their regulated nature, merchant generators face much higher costs due to being riskier. The crisis has also led to permanently higher debt costs across the power industry due to deleveraging on Wall Street.
Similar to Caniels and gelderman 2007 imm 36(2) (20)
Navigating the world of forex trading can be challenging, especially for beginners. To help you make an informed decision, we have comprehensively compared the best forex brokers in India for 2024. This article, reviewed by Top Forex Brokers Review, will cover featured award winners, the best forex brokers, featured offers, the best copy trading platforms, the best forex brokers for beginners, the best MetaTrader brokers, and recently updated reviews. We will focus on FP Markets, Black Bull, EightCap, IC Markets, and Octa.
The Steadfast and Reliable Bull: Taurus Zodiac Signmy Pandit
Explore the steadfast and reliable nature of the Taurus Zodiac Sign. Discover the personality traits, key dates, and horoscope insights that define the determined and practical Taurus, and learn how their grounded nature makes them the anchor of the zodiac.
Industrial Tech SW: Category Renewal and CreationChristian Dahlen
Every industrial revolution has created a new set of categories and a new set of players.
Multiple new technologies have emerged, but Samsara and C3.ai are only two companies which have gone public so far.
Manufacturing startups constitute the largest pipeline share of unicorns and IPO candidates in the SF Bay Area, and software startups dominate in Germany.
Taurus Zodiac Sign: Unveiling the Traits, Dates, and Horoscope Insights of th...my Pandit
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Caniels and gelderman 2007 imm 36(2)
1. Industrial Marketing Management 36 (2007) 219 – 229
Power and interdependence in buyer supplier relationships:
A purchasing portfolio approach
Marjolein C.J. Caniels *, Cees J. Gelderman 1
¨
Faculty of Management Sciences (MW), Open University of the Netherlands (OUNL), P.O. Box 2960, 6401 DL Heerlen, The Netherlands
Received 27 September 2004; received in revised form 4 July 2005; accepted 3 August 2005
Available online 23 September 2005
Abstract
Power and interdependence are generally considered to be important concepts for understanding buyer – supplier relationships. Yet, empirical
research on power and interdependence in buyer – supplier relationships is still limited. Power and interdependence issues also play an important
role in Kraljic’s portfolio approach, which is increasingly used by purchasing practitioners for managing different supplier relations and
developing appropriate purchasing strategies. In this paper, the concepts of power and interdependence have been quantified for each quadrant of
the Kraljic portfolio matrix, using data from a comprehensive survey among Dutch purchasing professionals. Several hypotheses have been tested
and the findings largely confirm the theoretical expectations. The observed supplier dominance in the strategic quadrant of the Kraljic matrix is a
notable finding, which indicates that even satisfactory partnerships are dominated by the supplier. Therefore, the presumed power symmetry of
buyer – supplier relationships in the strategic quadrant seems no longer valid.
D 2005 Elsevier Inc. All rights reserved.
Keywords: Buyer – supplier relationships; Power and interdependence; Purchasing portfolio approach; Kraljic matrix; Purchasing strategies
1. Introduction models using other classification dimensions (e.g. Bensaou,
1999; Olsen & Ellram, 1997; Van Stekelenborg & Kornelius,
Purchasing portfolio models have received much attention 1994). However, the fundamental assumption of all portfolio
in recent literature about professional purchasing. Not only did models seems to be the occurrence of differences in power and
Kraljic’s seminal paper in the Harvard Business Review in dependence between buyers and suppliers (Dubois & Pedersen,
1983 have a broad influence on professional purchasing (see 2002). Kraljic (1983) does not explicitly deal with issues of
the evidence of Gelderman, 2003; Kamann & Bakker, 2004), it power and dependence. However, some of his recommendations
has also inspired many academic writers to undertake further obviously refer to the power structure (Fexploit power_). Others
research into portfolio models (e.g. Bensaou, 1999; Croom, are aimed at reducing the dependence on suppliers (Fdiversify_).
2000; Dubois & Pedersen, 2002; Dyer, Cho, & Chu, 1998; Moreover, Kraljic (1983: 112) stated that the general idea of the
Gelderman & Van Weele, 2002, 2003; Lilliecreutz & Ydres- portfolio approach is to ‘‘minimize supply vulnerability and
kog, 1999; Nellore & Soderquist, 2000; Olsen & Ellram, 1997; make the most of potential buying power’’. Therefore, power
Wagner & Johnson, 2004; Wynstra & ten Pierick, 2000; and dependence play a significant part in the Kraljic approach.
Zolkiewski & Turnbull, 2002). Although power and dependence are generally considered
Kraljic’s model classifies a firm’s purchased intermediate important for the understanding of buyer –supplier relation-
goods into four categories on the basis of two dimensions: (1) ships (e.g. Cox, 2001; Frazier & Antia, 1995), it seems that
profit impact and (2) supply risk. Recent adaptations and they are still often overlooked factors in conceptual and
refinements of Kraljic’s model have led to alternative portfolio empirical studies (e.g. Cox, 2001; Maloni & Benton, 2000).
Little is known about the exact way in which power and
dependence in buyer – supplier relationships enter the Kraljic
* Corresponding author. Tel.: +31 45 5762724; fax: +31 45 5762103.
E-mail addresses: marjolein.caniels@ou.nl (M.C.J. Caniels),
¨
matrix (Dubois & Pedersen, 2002; Gelderman & Van Weele,
kees.gelderman@ou.nl (C.J. Gelderman). 2003). Moreover, the few portfolio models that do discuss
1
Tel.: +31 45 5762590; fax: +31 45 5762103. power and dependence issues in relation to portfolio matrices
0019-8501/$ - see front matter D 2005 Elsevier Inc. All rights reserved.
doi:10.1016/j.indmarman.2005.08.012
2. 220 M.C.J. Caniels, C.J. Gelderman / Industrial Marketing Management 36 (2007) 219 – 229
¨
generally focus on the strategic quadrant only (Wagner & Kraljic’s approach includes the construction of two portfolio
Johnson, 2004). Buyer –supplier relationships in this quadrant matrices. The first matrix classifies a firm’s purchased products
can be characterized as strategic partnerships. However, many on the basis of two dimensions: profit impact and supply risk.
studies have acknowledged that not all supplier relationships Each dimension has two possible values: Flow_ and Fhigh_. The
can or should be strategic partnerships (e.g. Gadde & Snehota, resulting 2 Â 2 matrix consists of four quadrants (see Table 1).
2000; Wagner & Johnson, 2004). In fact, firms are found to Depending on the category, Kraljic identifies certain Fmain
benefit from entering into a variety of relationships with tasks_ for the firm in the interaction with its supplier. He also
different suppliers (e.g. Bensaou, 1999; Lilliecreutz & Ydres- identifies the required information and the decision level in
kog, 1999). Therefore, undertaking research into power and organizations per category.
dependence in all four quadrants of the matrix for all The main purpose of Kraljic’s approach is to identify
relationship types is critically important. strategic items. The second Kraljic matrix focuses on this
The aim of this paper is to empirically test hypotheses that can category. This matrix shows the relative power position of the
be deduced from the literature on power and dependence with company in the corresponding supply markets. Three general
respect to all quadrants of the Kraljic purchasing portfolio purchasing strategies are distinguished, depending on the
matrix. In order to do this we have defined the concepts of power balance of power in the buyer – supplier relationship: exploit
and dependence in terms of buyer’s and supplier’s dependence. (in case of buyer dominance), balance (in case of a balanced
Subsequently, we have developed constructs for buyer’s relationship), and diversify (in case of supplier dominance).
dependence as well as supplier’s dependence. The empirical Note that Kraljic does not pay much attention to strategic
analysis is founded on a survey among 250 purchasing aspects of product categories other than the strategic items.
professionals. On the basis of the survey data we have assessed Other scholars have filled this gap (e.g. Bensaou, 1999; Elliott-
power and interdependence in buyer –supplier relationships for Shircore & Steele, 1985; Lilliecreutz & Ydreskog, 1999; Olsen
all quadrants of the Kraljic matrix. In general terms this study & Ellram, 1997; Syson, 1992; Van Weele, 2000). They refined
contributes to a better understanding of the (perceived) power the original matrix and elaborated on the Fmain tasks_ for
and interdependence in buyer – supplier relationships. bottleneck, non-critical and leverage items. In addition, they
The organization of the paper is as follows. In Section 2 a formulated strategic recommendations, resulting in one overall
brief overview of the Kraljic approach is given and, on the basis purchasing strategy for each cell/category.
of recent literature, we will identify hypotheses with respect to Although power and interdependence issues underpin these
power and dependence for each quadrant. In Section 3 the survey purchasing strategies, they are not explicitly discussed in any
design and the constructs for the key variables are presented. The of the studies referred to above. Yet, the purchasing strategies
results of the survey are shown in Section 4. Section 5 will for each of the Kraljic quadrants give rise to hypotheses on the
conclude and give suggestions for further research. importance of power and dependence in the Kraljic matrix. In
Section 2.3 we will revisit these strategies and connect them to
2. Conceptual background the power and interdependence balance.
2.1. The Kraljic matrix 2.2. Power and interdependence
Kraljic (1977, 1983) introduced a comprehensive portfolio Firms always depend, to varying extents, on their trading
approach as a tool for professional purchasers. With the help of partner. Early studies on dependence focused on the effects for
the portfolio matrix, professional purchasers could optimize the the buyer of its dependence on the supplier, without taking into
use of capabilities of different suppliers (Nellore & Soderquist, account the supplier’s dependence (e.g., El-Ansary & Stern,
2000) and thereby effectively manage suppliers. Currently, 1972). More recent studies have incorporated dependence from
Kraljic’s matrix is widely used by purchasing professionals. the perspective of the buyer as well as the supplier (Buchanan,
Especially in Western Europe the Kraljic approach has received 1992; Geyskens, Steenkamp, Sheer, & Kumar, 1996; Kumar,
large-scale recognition and has attained an increasing degree of Sheer, & Steenkamp, 1995). In other words, dependence is
adoption. Lamming and Harrison (2001) stated that Kraljic’s mutual.
matrix remains the foundation for purchasing strategies of many Mutual dependence and power are closely related concepts.
organizations across sectors. In a survey of Dutch companies The buyer’s dependence on the supplier is a source of power for
Boodie (1997) found that 44% of the responding purchasing
managers used the Kraljic matrix for formulating purchasing
strategies. No less than 80% of industrial companies that operate Table 1
on a mass production basis use it. Several years later, Bos, Van The Kraljic purchasing portfolio model (modified from Kraljic, 1983: 111)
der Heijden, Goedhart, and Notermans (2005) reported in a Profit impact Supply risk
similar study that portfolio usage was increased to 61%. In the Low High
course of time the Kraljic approach has entered many textbooks High Leverage items Strategic items
on purchasing and supply management. Gradually Kraljic has Exploitation of purchasing power Diversify, balance, or exploit
gained acceptance in other countries, notably in the USA, Low Non-critical items Bottleneck items
Canada and Northern Europe. Efficient processing Volume assurance
3. M.C.J. Caniels, C.J. Gelderman / Industrial Marketing Management 36 (2007) 219 – 229
¨ 221
the supplier, and vice versa. A well-known definition is that the possesses much power, it is not likely that either side is going
relative power of an organization over another is the result of the to use it. The risk of retaliation is often considered as being too
net dependence of the one on the other. If A depends on B more high (Ramsay, 1996). In addition, when total interdependence
than B depends on A, then B has power over A (Pfeffer, 1981). is high, both partners are faced with high exit barriers
Similarly, Bacharach and Lawler define relative power as ‘‘the (Geyskens et al., 1996).
dependence of one party compared to the dependence of the From the above can be concluded that the literature makes a
other party’’ (1981: 65). Likewise, Dickson (1983) states that clear difference between the concepts of (1) relative power,
the power of one party over another is a function of relative which is the result of interdependence asymmetry; and (2) total
dependence. Anderson and Narus (1990) also use the term power, which is the result of full interdependence of both parties
relative dependence to refer to the difference between a firm’s on each other and which is commonly referred to as total
dependence on its partner and its partner’s dependence on the interdependence. However, empirical research on the impact of
firm. The primary consequence of relative dependence is relative power and total interdependence on buyer – supplier
indicated as power. relationships is scarce. To be able to fill this void, both concepts
Buchanan (1992) conceptualized power-dependence imba- were defined in terms of buyer’s and supplier’s dependence (cf.
lances in buyer –supplier relationships as the difference in Bacharach & Lawler, 1981; Pfeffer, 1981). In this study, the
value that buyers and sellers attach to the relationship. In buyer’s relative power will be measured as the difference
asymmetric relationships, the most independent partner dom- between supplier’s dependence and buyer’s dependence. Sim-
inates the exchange. Balanced relationships refer to domination ilarly, the supplier’s relative power will be measured as the
of neither party (Buchanan, 1992). Kumar et al. (1995) use the difference between buyer’s dependence and supplier’s depen-
term interdependence asymmetry in this respect, which is dence. This conforms Pfeffer’s (1981: 99) viewpoint that the
defined as the difference between the two partner’s levels of relative power of one social actor over another is the result of the
dependence. Symmetrical interdependence exists when parties net dependence of the one on the other. In accordance with
are equally dependent on each other. Bacharach and Lawler (1981: 61), total interdependence in a
Buyer – supplier relationships that are characterized by relationship will be measured by ‘‘the sum of the parties’
asymmetric interdependence are believed to be deficient because dependence on one another’’.
the independent partner experiences high power and might be
attempted to exploit it (Anderson & Weitz, 1989; Frazier & 2.3. Hypotheses on relative power and total interdependence in
Rody, 1991; Geyskens et al., 1996). McDonald (1999) states in the Kraljic matrix
this respect that power imbalances within a buyer –supplier
relationship can lead to unproductive partnerships. In the long In Section 2.1 we referred to purchasing strategies for each
term the position of the weaker party will be eroded too much of the four Kraljic quadrants. These strategies will be used to
and the partnership will be destroyed. Anderson and Weitz point characterize the relation between the Kraljic quadrants and the
out that ‘‘imbalanced channel relationships are characterized by power-dependence balance in buyer – supplier relationships
less cooperation and greater conflict’’ (1989: 312). However, (see also Van Weele, 2000).
note that an unbalanced relationship does not automatically Strategic products 2 represent a considerable value to the
involve actual misuse of power (Provan & Gassenheimer, 1994). organization in terms of a large impact on profit and a high
Power can provide an effective coordination of exchange supply risk. Examples are engines and gearboxes for automo-
relationships, as the distribution of power has become legitimate bile manufacturers, turbines for the chemical industry and
over time (Frazier & Antia, 1995). Maloni and Benton (2000) bottling equipment for breweries. Often strategic products can
found empirical evidence, which indicates that power asymme- only be purchased from one supplier (single source), causing a
try can be used as a tool to promote supply chain integration and significant supply risk. In order to counterbalance this risk,
to induce high levels of performance. firms will aim at building a partnership relationship with its
Various researchers have argued that a comprehensive view supplier (Elliott-Shircore & Steele, 1985). The mutual trust and
of the interdependence of a dyadic relationship should include commitment that comes with the intensified relationship is
not only interdependence asymmetry (or relative power), but likely to reduce the supply risk to a minimum. A close and
also total interdependence (or total power), for example lasting cooperation with suppliers will lead to improvements in
Bacharach and Lawler (1981), Frazier and Antia (1995), product quality, delivery reliability, lead times, product devel-
Gundlach and Cadotte (1994), Geyskens et al. (1996), Kumar opment, product design, and it will lead to cost reduction
et al. (1995). Total interdependence refers to the intensity of a (Hadeler & Evans, 1994; Tuten & Urban, 2001). This situation
relationship. A high level of total interdependence is an can be characterized as one with balanced power. Buyers and
indicator for a strong, cooperative long-term relationship in suppliers are both heavily involved in the partnership, therefore
which both parties have invested. Mutual trust and mutual
commitment will characterize those relationships (Geyskens et 2
al., 1996). Besides this loyalty towards the other partner and Although Kraljic (1983) identified three strategies for this quadrant (exploit,
balance and diversify), our discussion will be limited to the balance strategy,
the accompanying desire to continue the relationship, there is which is in accordance with the approach adopted by many others, e.g. Elliott-
an alternative motivation for both firms to keep the partnership Shircore and Steele (1985), Hadeler and Evans (1994), Olsen and Ellram
intact. In the case that both parties know that the other party (1997), and Van Weele (2000).
4. 222 M.C.J. Caniels, C.J. Gelderman / Industrial Marketing Management 36 (2007) 219 – 229
¨
mutual dependence is expected to be high. Total interdepen- Table 2
dence is high as well, since the relationship is very intense. Expectations on basis of the literature with respect to relative power and total
interdependence in the Kraljic matrix
Hypothesis 1a. The strategic quadrant of the Kraljic matrix is Profit Supply risk
characterized by balanced power. impact Low High
Hypothesis 1b. In the strategic quadrant of the Kraljic matrix High Leverage items Strategic items
Buyer dominated: BD < SD Balanced power: BD = SD
total interdependence is higher than in each of the other
Moderate level of High level of interdependence:
quadrants. interdependence: (BD + SD) in (BD + SD) in the strategic
the leverage quadrant < (BD + SD) quadrant > (BD + SD) in each
Bottleneck products have a moderate influence on the
in the strategic quadrant and of the other quadrants
financial results of a firm, however, they are vulnerable with (BD + SD) in the leverage
regard to their supply. Suppliers have a dominant power position quadrant > (BD + SD) in the
for these products (Kempeners & van Weele, 1997). The non-critical quadrant
purchasing strategy is therefore primarily focused on assurance Low Non-critical items Bottleneck items
Balanced power: BD = SD Supplier dominated: BD > SD
of supply, if necessary even at additional cost. Keeping extra
Low level of interdependence: Moderate level of
stocks of the materials concerned or developing consigned stock (BD + SD) in the non-critical interdependence: (BD + SD)
agreements with suppliers are examples of this strategy. Firms quadrant < (BD + SD) in each in the bottleneck
can make a risk analysis to determine the most important of the other quadrants quadrant < (BD + SD) in the
bottleneck products and the consequences hereof. Contingency strategic quadrant and
(BD + SD) in the bottleneck
planning might be a possibility for dealing with unexpected bad
quadrant > (BD + SD) in the
situations. Since the buyers and suppliers are not highly involved non-critical quadrant
in the relationship, total interdependence in this quadrant is Note that BD refers to buyer’s dependence and SD denotes supplier’s
expected to be lower than in the strategic quadrant. dependence.
Hypothesis 2a. The bottleneck quadrant of the Kraljic matrix is
characterized by supplier dominance. From a purchasing point of view, these items cause only few
technical or commercial problems. As a rule of thumb routine
Hypothesis 2b. In the bottleneck quadrant of the Kraljic matrix products require 80% of the purchasing department’s time, while
total interdependence is higher than in the non-critical they often represent less than 20% of the purchasing turnover.
quadrant. The handling of these products requires a purchasing strategy
In general leverage products can be obtained from various aimed at reducing the logistic and administrative complexity
suppliers. These products represent a relatively large share of the (Olsen & Ellram, 1997). Systems contracting is generally
end product’s cost price in combination with a relatively low advised as the way of doing business with suppliers of routine
supply risk. As a consequence, this segment is buyer dominated products (Elliott-Shircore & Steele, 1985; Kempeners & van
(Kempeners & van Weele, 1997). The buyer has many possibilities Weele, 1997). The main idea is to enhance purchasing power by
and incentives for negotiation, since small percentages of cost standardization and bundling of purchasing requirements. The
savings usually involve large sums of money (Olsen & Ellram, routine character of the transaction implies that the mutual
1997). At the same time the supply risk is minimal. These dependence between buyers and suppliers is balanced. Total
characteristics justify an aggressive approach to the supply market interdependence is low, since the buyer’s dependence and the
(e.g. Van Weele, 2000). Frequently, a purchasing strategy on the supplier’s dependence will both be quite low.
basis of principles of competitive bidding is pursued. Since Hypothesis 4a. The non-critical quadrant of the Kraljic matrix
suppliers and products are interchangeable, there is no need for is characterized by balanced power.
long-term supply contracts. In general, a coordinated purchasing
approach is adopted that has the form of a centrally negotiated Note that it is not necessary to propose a separate hypothesis
umbrella agreement with preferred suppliers. Call-off orders are about total interdependence in the non-critical quadrant. The
then placed as an administrative formality. The buying power is combination of hypotheses 1b, 2b and 3b makes a separate
actively used to get better deals with interchangeable suppliers. hypothesis redundant.
Total interdependence is expected to be moderate. Although the In sum, the quadrants in the Kraljic matrix correspond to four
supplier’s dependence is expected to be high, the buyer’s basic power-and-dependence positions. Table 2 gives an
dependence is expected to be quite low. overview of our expectations for the balance of power and the
level of total interdependence in each of the four quadrants.
Hypothesis 3a. The leverage quadrant of the Kraljic matrix is
characterized by buyer dominance. 3. Methodology
Hypothesis 3b. In the leverage quadrant of the Kraljic matrix
3.1. Survey design, sample and response
total interdependence is higher than in the non-critical quadrant.
Non-critical products usually have a small value per unit. The hypotheses were tested in a survey among 250
Many alternative suppliers can be found for these products. purchasing professionals. For this purpose we translated each
5. M.C.J. Caniels, C.J. Gelderman / Industrial Marketing Management 36 (2007) 219 – 229
¨ 223
of the purchasing strategies discussed in Section 2.3 into (NEVI) in three stages. Purchasing professionals were speci-
comprehensive descriptions of real-life situations (scenarios). fically targeted with this survey. Purchasing professionals
The description of the four scenarios is given in Table 3. undertake negotiations with suppliers on a daily basis. There-
The survey adopts a repeated measures design, i.e. respon- fore, they have vast experience, expertise and insight into the
dents had to evaluate a series of identical questions for each of power and dependency issues in the relationship with their
the four scenarios from their own perspective, i.e. the suppliers. In the first two stages, the questionnaires were sent out
perspective of the buyer. The distinct advantage of using a by postal mail. The last stage consisted of an electronic mailing.
repeated measures design instead of other experimental designs In each round only those respondents were addressed that had
is that the potential bias caused by individual differences among not responded to an earlier mailing. Tests on the likelihood of a
groups of respondents is taken away. Each of the respondents has non-response bias indicated no statistical significant differences
to answer all questions in each of the four scenarios. Therefore, between the first wave and the second wave of respondents.
specific characteristics of the respondents, such as I.Q., A total number of 248 responses were received, resulting in a
education and motivation, do not differ across the four groups response rate of 21.5% (248 / 1153). Questionnaires that were
that reply to the questions in each scenario. In sum, by adopting a completed for less than 90% were declared invalid. Hence, a
repeated measures design, variability among groups of respon- total of 10 reactions were discarded due to incomplete
dents is removed from the error term, which makes the design information. In addition, all responses were removed that scored
more powerful than randomized designs (Stevens, 2001). on average less than 3 for recognition on a 5-point Likert scale.
A potential drawback of the adopted research method is that In this way, another 22 responses were omitted, resulting in an
respondents might not be able to fully visualize themselves in the effective response rate of 18.7% (216 / 1153). This can be
proposed descriptions, resulting in unreliable answers. This considered as quite satisfactory for an industrial mail survey in
shortcoming was countered by including an entry for recognition Europe (Erdogan & Baker, 2002; Frohlich, 2002), especially
of the scenario, i.e. respondents were asked to assess the degree when we take into account that the questionnaire was very long.
in which they recognize the described situation. In the analysis of Whereas Yu and Cooper (1983) have shown that an optimal
the data, we removed the survey results for respondents with low response is received on questionnaires that contain 40 to 50
scores on Frecognition_ from the database. In this way we items, the questionnaire contained 8 pages with 175 items in
ensured the validity of the results. total.
The survey procedure included a pilot study aimed at
enhancing the reliability and the validity of the questionnaire. 3.2. Developing constructs for buyer’s and supplier’s
The pilot study entailed discussions with six purchasing dependence
professionals in four manufacturing companies in the Nether-
lands. Several issues were discussed during these interviews, In Section 2.2 we have explained that relative power and
such as the clarity of the questionnaire items, the recognizability total interdependence were defined in terms of buyer’s and
of the scenarios, the time needed to fill in the questionnaire and supplier’s dependence (cf. Bacharach & Lawler, 1981; Pfeffer,
issues for further improvement of the items. On account of the 1981). There is no general consensus in the literature on how
pilot study several improvements have been made in the these two concepts should be operationalised. We have
description and layout of the questionnaire items, response examined relevant academic contributions to the literature to
options and scenarios. derive several aspects of organizational dependence that could
The final questionnaire has been administered to 1153 be used to operationalise buyer’s dependence and supplier’s
members of the Dutch Association of Purchasing Management dependence.
Table 3
Description of the scenarios corresponding to the Kraljic quadrants
Scenario Characterization Corresponding Kraljic quadrant Scenario description
1 Maintain partnership Strategic quadrant Consider a product with a high purchasing risk and a high financial value. You consider
the supplier as an important partner with whom a satisfactory strategic relationship exists.
The performance of the supplier is excellent. Both parties have an interest in continuing
the relationship and the parties have a good mutual understanding.
2 Keep safety stocks Bottleneck quadrant Consider a product with a relative low financial value, but a high purchasing risk. Your
firm is vulnerable regarding the supply of one supplier. You try to ensure a constant
supply by keeping high stocks.
3 Partner of convenience Leverage quadrant You have a very favorable negotiating position with this product. The purchasing risk is
low, while the product has a relatively high financial value. Negotiations are fierce. You
let those suppliers prevail that offer the lowest price while guaranteeing quality and
prompt delivery. Competitive bidding is one of your tactics. You only allow short-term
contracts.
4 Pooling of requirements Non-critical quadrant Consider a product that has a relative low financial value and a low purchasing risk. The
product is not very critical for your company, but still it has to be purchased. You choose
to buy the product as a part of a package of similar products from a certain supplier. In this
way it is possible to have only one supplier for several products.
6. 224 M.C.J. Caniels, C.J. Gelderman / Industrial Marketing Management 36 (2007) 219 – 229
¨
Jacobs (1974) introduces two concepts from economic alternative suppliers and low switching costs between suppliers
theory to describe dependence, namely Fessentiality_ and are much more important to the buyer than the relative amount of
Fsubstitutability_. He points out that it is of primary importance money that is involved. Hence, we have excluded Ffinancial
to the concept of dependence whether A can do without B magnitude_ from the construct of buyer’s dependence and
(essentiality of a resource) or whether other sources are included it in the supplier’s dependence construct.
available (substitutability of the resource). Scholars in Re- There is a difference in the perspective of buyers and
source Dependence Theory refer to Fessentiality_ as Fthe suppliers with regard to the second component of dependence
importance of a resource_, which is said to be determined by as well. The criticality of a resource refers to the degree in which
(1) the relative financial magnitude of the resource and (2) the the organization is able to continue its business processes in the
criticality of the resource (Pfeffer & Salancik, 1978). On the absence of the resource. In essence, however, the concept is two-
other hand, substitutability can be subdivided into (1) the fold in nature. On the one hand it refers to a need for
availability of alternative sources and (2) the level of relation technological expertise of the partner, on the other hand it
specific investments (i.e. the costs involved with switching points to issues of logistical indispensability (Cagliano, Caniato,
between suppliers) (e.g. Bourantas, 1989). & Spina, 2002). The need for technological expertise is critical
In addition to these conceptual studies, several empirical for both parties, buyer and supplier. In an industrial context,
studies pay attention to the concept of organizational depen- companies rely more and more on technologically advanced
dence. Most of these studies regard organizational dependence (key) suppliers. From the supplier’s perspective a similar
as an explanatory variable instead of trying to find the factors argument holds. Companies increasingly need the critical
that have an influence on it. The few studies that try to explain expertise and specialized knowledge of their (industrial)
the factors that influence organizational dependence (e.g. customers. Logistics-based dependence, on the other hand, is
Nooteboom, de Jong, Vossen, Helper, & Sako, 2000; Sriram, less an issue to the supplier than it is to the buyer. The buyer is
Krapfel, & Spekman, 1992) find similar factors as indicated by mainly interested in receiving the goods in a way that is
the conceptual studies above. In all empirical studies logistically compatible with its own production system. In
Fimportance_ and Fsubstitutability_ determine dependence, contrast, the supplier will deliver the goods in any logistic way
whereby importance is found to have a positive relationship that is required, as long as the buyer will pay for it. The buyer’s
with dependence and substitutability is found to have a negative main concern is the correct delivery of the goods, whereas the
relationship. The empirical studies do not provide decisive supplier’s main concern is of a financial nature. On the basis of
answers concerning the statistical significance of the dimensions these considerations we have redefined the concept of resource
of dependence. Only some tentative empirical evidence can be criticality in the construct of supplier’s dependence to solely
found that importance and substitutability are significantly include the need for the buyer’s technological expertise. The
related to dependence. construct for buyer’s dependence includes the logistical
In summary, the analysis of conceptual and empirical studies indispensability of the supplier, in addition to the need for a
shows that organizational dependence contains four key supplier’s technological expertise.
characteristics: With respect to the availability of alternative sources and
switching costs the dependence positions of buyers and suppliers
(1) the financial magnitude of the exchanged resources; are symmetrical. The buyer depends as much on the supplier as
(2) the criticality of the resources; the other way around. Both buying and supplying organizations
(3) the availability of alternative sources; invest in the relationship with their trading partner. When the
(4) switching costs, incurred when replacing a trading supplier develops and uses dedicated equipment assigned
partner. exclusively to one customer this will result in high switching
costs if the relationship deteriorates. On the other hand, buying
With these characteristics in mind we have set up organizations also face relation specific investments, making
constructs for buyer’s dependence and supplier’s dependence significant investments in suppliers.
as follows. For obvious reasons the overall dependency on the other
The Resource Dependence Theory posits a positive re- party is also included in both variables, the construct of buyer’s
lationship between the (financial) magnitude of a resource and dependence and the construct of supplier’s dependence. Table 4
the mutual dependence of the trading partners. It is reasonable to
assume that the first characteristic of organizational dependence,
Table 4
the relative financial magnitude of transactions, particularly Aspects that compose buyer’s dependence and supplier’s dependence
relates to supplier’s dependence. In the view of the supplier, a
Construct Buyer’s dependence Supplier’s dependence
relatively important buyer (in terms of financial magnitude of the
transaction) will have a very powerful position in negotiations, Aspects Logistical indispensability Financial magnitude
(items) Need for supplier’s Need for buyer’s
causing the supplier to be dependent on the buyer. For the buyer technological expertise technological expertise
the financial magnitude of the transaction with a certain supplier Availability of alternative Availability of
is much less crucial for it’s dependence position. If switching suppliers alternative buyers
costs are low, the buyer will not experience any dependence on Switching costs buyer Switching costs supplier
the supplier. Therefore, factors such as the availability of Overall buyer’s dependence Overall supplier’s dependence
7. M.C.J. Caniels, C.J. Gelderman / Industrial Marketing Management 36 (2007) 219 – 229
¨ 225
Table 5 4. Results
Reliability analysis: Cronbach’s alphas
Construct A comprehensive view of the dyadic nature of buyer –
Category in the Kraljic matrix Buyer’s dependence Supplier’s dependence supplier relationships should include the assessment of (1) the
Strategic quadrant 0.64 0.74 difference between buyer’s and supplier’s dependence (net
Bottleneck quadrant 0.61 0.76 dependence) which corresponds to the relative power of each
Leverage quadrant 0.64 0.69 party; and (2) the sum of buyer’s and supplier’s dependence
Non-critical quadrant 0.67 0.72
(total interdependence) which indicates the intensity and
development phase of the relationship between parties.
summarizes the aspects of buyer – supplier relationships that Note that the repeated measure design of the survey was
pertain to buyer’s dependence and supplier’s dependence. Note accounted for when analyzing the data. We used Estimated
that each aspect was measured by a corresponding item in the Marginal Means (EMMEANS) in SPSS (General Linear
questionnaire, using a 5-point Likert scale. Model-repeated measures) for the comparisons of the means
in different scenarios. Bonferroni adjustments were made to
3.3. Validity analysis control for Type I errors (Tabachnick & Fidell, 2001).
Table 6 shows the average score for the construct variables
A reliability analysis using Cronbach’s alpha was performed supplier’s dependence and buyer’s dependence in the four
to ensure the internal consistency of the items that constitute scenarios. The last two columns in Table 6 show the resulting
each construct as shown in Table 4 (Cronbach, 1951). Table 5 findings for the power balance and total interdependence. Note
presents the results of the reliability analysis. The table shows that column 3 indicates the relative power position of the buyer,
the values of Cronbach’s alpha for each of the four Kraljic i.e. the difference between supplier’s dependence and buyer’s
quadrants. The coefficients of Cronbach’s alpha are all higher dependence. Therefore, a negative sign for the power balance
than 0.60, indicating an acceptable internal consistency and shows that the supplier dominates the relationship, whereas a
reliability of the constructs. positive sign points to buyer dominance. Total interdependence
Additional correlation analysis in each quadrant showed that (last column in Table 6) is measured by the sum of buyer’s
items that should be related, are strongly correlated, indicating dependence and supplier’s dependence. On a scale that runs
convergent validity. In addition it was found that items that from +2 (minimal interdependence) to +10 (maximum interde-
theoretically should not be related, did not correlate (discri- pendence) we consider values below 5 as low, between 5 and 7 as
minant validity). moderate and above 7 as high.
Furthermore, we used explanatory factor analysis (principal Several points emerge from Table 6. Column 1 in Table 6
components analysis with varimax rotation) to identify a shows a relatively high buyer’s dependence on the right hand
possible underlying factor structure (see the table in the side of the Kraljic matrix (bottleneck and strategic quadrant),
Appendix for the detailed results of the factor analysis). For and a relatively low buyer’s dependence on the left hand side of
each quadrant of the Kraljic matrix a separate factor analysis has the matrix (non-critical and leverage). These findings are in
been executed. The factor solutions confirmed our expectations, accordance with our prior expectations. Column 2 in Table 6
i.e. in each quadrant two components were found: one contain- indicates that the findings for supplier’s dependence are not
ing the items that were expected to indicate buyer’s dependence clear-cut. Remarkably, the supplier’s dependence in the leverage
and the other containing the items that were expected to point to quadrant is lower than we might have expected in advance (2.68
supplier’s dependence. Almost all items had factor loadings that on a 5-point scale). The same holds for the strategic quadrant,
exceeded the recommended level of 0.50 (Hair, Anderson, where the supplier’s dependence is medium (3.31 on a 5-point
Tatham, & Black, 1998). Note that none of the items cross- scale). However, the relatively low supplier’s dependence in the
loaded on both factors. In other words, the items that should not bottleneck and the non-critical quadrant confirm our expecta-
be related were indeed not related. We can safely conclude that tions on the basis of the literature.
buyer’s dependence and supplier’s dependence in each of the These findings have notable implications for the hypoth-
four quadrants are dissimilar constructs. eses. With respect to the power balance (column 3) it was
Table 6
Power and interdependence in the Kraljic matrix (n = 216)
Scenario Buyer’s Supplier’s Relative Total interdependence
dependence (1)* dependence (2)* power (2) À (1)** (1) + (2)***
Strategic quadrant Maintain partnership 4.03 3.31 À0.72a 7.34
Bottleneck quadrant Keep safety stocks 3.66 2.32 À1.34a 5.97
Leverage quadrant Partner of convenience 2.41 2.68 +0.27a 5.09
Non-critical quadrant Pooling of requirements 1.90 1.97 +0.07 3.87
a
Difference between supplier’s dependence and buyer’s dependence is significant at p < 0.05.
*Supplier’s and buyer’s dependence are measured by taking the average score on the items of each construct respectively.
**Power is measured on a scale from À4 (maximum supplier’s dominance) to +4 (maximum buyer’s dominance).
***Total interdependence is measured on a scale from +2 (minimum interdependence) to +10 (maximum interdependence).
8. 226 M.C.J. Caniels, C.J. Gelderman / Industrial Marketing Management 36 (2007) 219 – 229
¨
found that buyer – supplier relationships are dominated by the Table 8
supplier in the strategic quadrant, rejecting Hypothesis 1a. We Differences with respect to interdependence between quadrants of Kraljic
matrix
will come back to this unexpected result in the next
Results with respect to interdependence
paragraph. The results in column 3 indicate that buyer –
supplier relationships are also dominated by the supplier in (1) INDEPstrat À INDEPbottle +1.37a
(2) INDEPstrat À INDEPnon +3.47a
the bottleneck quadrant, confirming Hypothesis 2a. In
(3) INDEPstrat À INDEPlev +2.25a
contrast, the buyer is dominant in the leverage quadrant, (4) INDEPnon À INDEPbottle À2.10a
supporting Hypothesis 3a. The t-tests showed that, with the (5) INDEPnon À INDEPlev À1.22a
exception of the non-critical quadrant, all quadrants presented a
Significantly different from zero at p < 0.05.
statistically significant differences between supplier’s and
buyer’s dependence. The insignificant difference between When we look at the underlying data of the supplier’s
supplier’s dependence and buyer’s dependence in the non- dependence construct (Table 7) we find that respondents
critical quadrant refers to a significant power balance in this reported that they:
quadrant, thereby confirming Hypothesis 4a.
The results for the strategic quadrant lead to a rejection of - have more need for the supplier’s technological expertise
Hypothesis 1a that suggested a balanced power relationship than vice versa; and
for this quadrant. The literature puts a lot of emphasis on the - face higher switching costs than the suppliers; and
idea that buyer – supplier relationships in this quadrant are - have fewer alternative trading partners than the supplier
typically characterized as satisfactory relationships based on does.
trust, commitment and open communication (e.g. De Ruyter,
Moorman, & Lemmink, 2001; Morgan & Hunt, 1994). The last column of Table 6 shows the level of total
However, the results suggest that such satisfactory relation- interdependence in the various quadrants.
ships in the strategic quadrant have an asymmetric power From the literature on the Kraljic matrix we are expecting:
balance. From the buyer’s perspective the supplier dominates
the relationship. When we examine the data in greater detail, - high levels of interdependence in the strategic quadrant
this result can be traced back to the medium level of (Hypothesis 1b);
supplier’s dependence (3.31 on a 5-point scale) and the high - moderate levels of interdependence in the bottleneck and
level of buyer’s dependence (4.03 on a 5-point scale) that leverage quadrant (Hypotheses 2b and 3b respectively); and
was reported by the respondents in the survey. This deviates consequently
from what is expected from the literature, which indicates - low levels of interdependence in the non-critical quadrant.
that supplier’s dependence is high as well in the strategic
quadrant. Several separate tests have been undertaken to determine
Presumably, once a buyer has entered a partnership this whether total interdependence in one quadrant significantly
ensures a disproportionate raise in the dependence of the buyer differs from total interdependence in all other quadrants. The
on the supplying partner. Cox, Lonsdale, Watson, and Qiao results are reported in Table 8, where INDEPstrat, INDEPbottle,
(2003) give a possible explanation for this phenomenon. In INDEPlev and INDEPnon refer to total interdependence in the
their belief a pre-contractual situation of balanced power shifts strategic, bottleneck, leverage and non-critical quadrant
to a post-contractual situation of supplier dominance, when the respectively.
supplier refuses to offer balance in the relationship and locks The results largely confirm our prior expectations. Total
the buyer in. Other writers suggest that unbalanced relation- interdependence has its highest value in the strategic
ships may not always be troublesome: a known distribution of quadrant, confirming Hypothesis 1a. As expected, total
power between both partners could provide effective co- interdependence is moderate in the bottleneck and the
ordination of the exchange relationship (Frazier & Antia, leverage quadrant, thereby giving confirmation of Hypotheses
1995). A relative power position can be used to enhance the 2b and 3b respectively. Consequently, the non-critical
nature of relational exchange between trading partners. It quadrant contains the lowest value of total interdependence.
seems that the distribution of power can become legitimated We conclude that the empirical findings confirm the hitherto
over time, so that both social actors expect and value a certain untested theoretical notions about total interdependence in
pattern of influence. buyer – supplier relationships.
Table 7
Item scores and standard deviations (between parentheses) for the buyer’s dependence and the supplier’s dependence construct in the strategic quadrant
Buyer’s dependence Supplier’s dependence
Logistical indispensability 4.63 (0.541) Financial magnitude 3.95 (0.761)
Supplier’s technological expertise 4.08 (0.868) Buyer’s technological expertise 3.32 (1.038)
Alternative suppliers 2.81 (1.168) Alternative buyers 3.27 (1.079)
Switching costs buyer 4.08 (1.074) Switching costs supplier 3.36 (1.131)
Overall buyer’s dependence 4.22 (0.757) Overall supplier’s dependence 3.25 (0.998)
9. M.C.J. Caniels, C.J. Gelderman / Industrial Marketing Management 36 (2007) 219 – 229
¨ 227
5. Summary, conclusions and suggestions for further justified in the case of channel studies (manufacturer –
research distributor), where relations often revolve around one major
supplier. However, the method is also often used in studies
Purchasing practitioners maintain a variety of supplier relating to industrial relationships, in which the limitation to
relationships with different suppliers, and the management of the dominant supplier is not a self-evident point of departure.
these relationships is increasingly based on a portfolio frame- Alternatively, many studies invite respondents to answer
work. Power and dependence are generally considered to be questions referring to Ftheir suppliers_ in general. On the
important for understanding buyer– supplier relationships, yet basis of this study we conclude that neither approach provides
these factors are often overlooked in empirical studies. Little is a comprehensive insight into buyer – supplier relationships. We
known about the role of power and dependence in buyer – have found evidence of the existence of four buyer – supplier
supplier relationships from a purchasing portfolio perspective. relationships that differ significantly with respect to relative
In this study we filled this gap by first deducing hypotheses from power and interdependence. This result confirms the notion
the literature on Frelative power_ and Ftotal interdependence_ in that companies maintain a portfolio of differentiated supplier
each of the four Kraljic quadrants. Second, we empirically tested relationships. Therefore, neither reference to Fa key supplier_
these hypotheses using data from a comprehensive survey nor reference to Fsuppliers_ in general takes into account the
among Dutch purchasing professionals. full variation in the actual supplier base of a company. This
A comparison of the hypotheses with the empirical findings common practice among researchers should only be used if
leads to the following results. The hypotheses that concerned the the research question specifically requires such a sampling
relative power position of the buyer and the supplier in each method. In all other cases it should be discarded. Future and
quadrant (1a – 4a) were confirmed, except Hypothesis 1a. That further surveys can no longer ignore the large variety in
is, we observed supplier dominance in the strategic quadrant, supplier relationships.
where one would expect a balanced power situation on basis of The findings also have managerial relevance. They offer
the literature. This provocative result sheds new light on the evidence that in the strategic quadrant a supplier-dominated
buyer’s view on issues of power and dependence. It indicates that partnership is perceived to be satisfactory from the perspective
suppliers are perceived to dominate satisfactory partnerships. of the buyer. Industrial marketers should be aware that
All hypotheses concerning the level of total interdepen- professional purchasers feel dominated by them, even in
dence in each quadrant (1b –3b) were confirmed. Table 9 satisfactory relationships. Possibly this finding could entice
summarizes the differences between the expectations on the marketers to try to exploit their power and to skim off the
basis of the literature on power and dependence, and the market surplus. However, marketers should be aware of the
results from this study. negative effects of the exploitation of their position. In fact, a
The theoretical contribution of this paper lies primarily in situation in which the buyer feels dominated yet satisfied is
the notion that future research can no longer assume that desirable, since the buyer will not search for alternatives
buyer –supplier relationships in the strategic quadrant of the (suppliers or products). Therefore, marketers should nurture
Kraljic matrix are necessarily characterized by symmetric these kinds of relationships.
power positions. When we combine this result with the high For professional purchasers the managerial implication of
total interdependence reported in this quadrant, we arrive at a this study is that they should be aware that dependence
more refined theoretical implication of this study. Future implies vulnerability. Buyers should ask themselves whether
studies should take into account that a relationship which is there are sufficient benefits attached to the relationship to
characterized by a high involvement of buyers and suppliers offset the obvious disadvantages of such a vulnerable and
does not necessarily imply a balanced power position between dependent position towards a supplier. In addition, purchasers
the parties, but can yet be satisfactory, at least from the point of should assess the risks that are harbored in this kind of
view of the buyer. relationship, and explore possibilities that might increase the
Furthermore, this study holds an implication for future bargaining power of their company. In other words, even in
research, which pertains to the sampling method in survey- satisfactory relationships, buyers should explore the market
based studies. Many studies ask respondents to express their by scouting for alternative suppliers and determining their
opinions on their relationship with a single (type of) supplier, competencies. Furthermore, professional purchasers should
usually the key or the major supplier. This approach is become aware of their own power basis. They should
investigate to what extent the perceived supplier dominance
Table 9 is based on an objective assessment of the relationship.
Comparison of relative power and total interdependence in the Kraljic matrix: Despite the rigor of the analysis, this study contains several
theory and practice limitations that might entice further research. One of the
Relative power Total interdependence limitations of the study concerns the fact that the survey was
Expected Observed Expected Observed confined to the perspective of the buyer. Yet, buyer – supplier
Strategic Balanced Supplier dominance Highest Highest relationships are dyadic in nature. Suppliers might have different
Bottleneck Supplier dominance Supplier dominance Moderate Moderate opinions on the power and interdependence structure of the
Leverage Buyer dominance Buyer dominance Moderate Moderate various buyer –supplier relationships. Therefore, there is a need
Non-critical Balanced Balanced Lowest Lowest to more fully study the supplier’s perspective in order to
10. 228 M.C.J. Caniels, C.J. Gelderman / Industrial Marketing Management 36 (2007) 219 – 229
¨
establish whether or not both parties perceive each other’s power by the supplier in the strategic quadrant calls for further
position in the relationship in the same way. research to identify the circumstances under which supplier
Another limitation concerns the sample, which was drawn dominated relationships provide a problem for the buyer
from a list of members of the Dutch Association of Purchasing (Frazier & Antia, 1995). Additionally, the operationalisation
Management (NEVI). Although the sample included a wide in this study could serve as a promising point of departure for
range of industry sectors, the generalizability of the results further quantitative research to the issues of power and
would benefit from the inclusion of firms in the service sector, dependence in buyer – supplier relationships. The level of
as well as other Dutch and international companies. This might relative power might be related to the sizes of the buying and
be the object of a further study. the supplying companies. Alternatively, network positions or
With respect to additional issues for further research we the positions in the supply chain could be included as a
propose the following. The finding that buyers feel dominated determining factor of relative power.
Appendix A. Results of the factor analyses (factor loadings)
Leverage quadrant Strategic quadrant Non-critical quadrant Bottleneck quadrant
Factor 1 Factor 2 Factor 1 Factor 2 Factor 1 Factor 2 Factor 1 Factor 2
Buyer’s Supplier’s Buyer’s Supplier’s Buyer’s Supplier’s Buyer’s Supplier’s
dependence dependence dependence dependence dependence dependence dependence dependence
Items of buyer’s dependence:
Logistical indispensability 0.445 À 0.144 0.654 À0.058 0.529 À0.035 0.556 À0.091
Supplier’s technological expertise 0.692 0.205 0.697 0.237 0.791 0.288 0.709 0.107
Alternative suppliers À0.544 À 0.232 À0.484 À0.037 À0.617 0.064 À 0.470 0.334
Switching costs buyer 0.721 0.177 0.545 0.330 0.586 0.216 0.654 0.139
Overall buyer’s dependence 0.757 0.005 0.790 0.054 0.643 0.142 0.676 0.179
Items of supplier’s dependence:
Financial magnitude À0.170 0.661 0.325 0.534 À0.027 0.695 0.036 0.831
Buyer’s technological expertise 0.194 0.683 0.223 0.710 0.330 0.573 0.067 0.874
Alternative buyers À0.083 À 0.451 0.023 À0.570 À0.215 À0.499 0.105 0.766
Switching costs supplier 0.105 0.717 À0.722 0.793 0.103 0.727 À 0.046 À0.450
Overall supplier’s dependence À0.053 0.799 0.188 0.783 À0.323 0.824 À 0.037 0.731
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Lamming, R. C., & Harrison, D. (2001). Smaller customers and larger Marjolein C.J. Caniels is Assistant Professor Supply Chain Management in
¨
suppliers: The potential for strategic purchasing approach: A case study. the Faculty of Management Sciences of the Open University of the Nether-
Proceedings of the 10th International IPSERA Conference, Jonkoping, ¨ ¨ lands. Her research interests include buyer – supplier relationships, supply chain
Sweden (pp. 595 – 610). management, technological change and economic growth. She has published
Lilliecreutz, J., & Ydreskog, L. (1999). Supplier classification as an enabler for among others in the Cambridge Journal of Economics and in Industrial and
a differentiated purchasing strategy. Global Purchasing and Supply Chain Corporate Change.
Management, 11, 66 – 74.
Maloni, M., & Benton, W. C. (2000). Power influences in the supply chain. Cees J. Gelderman is Associate Professor of Marketing and Purchasing
Journal of Business Logistics, 21(1), 49 – 73. Management in the Faculty of Management Sciences of the Open University of
McDonald, F. (1999). The Importance of power in partnership relationships. the Netherlands. His research interests include buyer – supplier relationships,
Journal of General Management, 25(1), 43 – 59. purchasing portfolio management, and power and dependence. He has
Morgan, R. M., & Hunt, S. D. (1994). The commitment – trust theory of published among others in the Journal of Supply Chain Management and the
relationship marketing. Journal of Marketing, 58, 20 – 38. Journal of Purchasing and Supply Management.