Article

Marketing Letters

, Volume 20, Issue 1, pp 61-74

Supplier price concessions: A longitudinal empirical study

  • John W. HenkeJr.Affiliated withSchool of Business Administration, Oakland University Email author 
  • , Sengun YeniyurtAffiliated withSchool of Business, Rutgers University
  • , Chun ZhangAffiliated withSchool of Business Administration, University of Vermont

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Abstract

The competitive nature of today’s business-to-business markets requires companies to continually look for ways to reduce costs; one of the easiest of which is to demand price reductions from suppliers. In this research, price reduction demands and the corresponding concessions given by 238 suppliers to the six major North American Automotive original equipment manufacturers during 2001–2007 are analyzed utilizing a simultaneous equation model. The three stage least squares estimates indicate that suppliers are willing to give higher price concessions when buyers align specific interfacing characteristics and processes with their suppliers so that the suppliers perceive greater opportunities for future business and profit. These results provide, for the first time, an understanding of the dynamic nature of the impact of buyer–supplier relational components on supplier price concessions.

Keywords

Buyer–supplier relations Buyer price reduction pressure Supplier price concessions Supplier product development involvement