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Supplier price concessions: A longitudinal empirical study

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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.

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Notes

  1. Dummy variables are disguised to protect the confidentiality of the OEMs.

  2. Ordinary least squares method was employed to estimate this statistic.

  3. Detailed results are available from the authors upon request.

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Authors and Affiliations

  1. School of Business Administration, Oakland University, Rochester, MI, 48309, USA

    John W. Henke Jr.

  2. School of Business, Rutgers University, Piscataway, NJ, 08854, USA

    Sengun Yeniyurt

  3. School of Business Administration, University of Vermont, Burlington, VT, 05405, USA

    Chun Zhang

  4. 1035 South Adams Road, Birmingham, MI, 48009, USA

    John W. Henke Jr.

Authors
  1. John W. Henke Jr.
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  2. Sengun Yeniyurt
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  3. Chun Zhang
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Correspondence to John W. Henke Jr..

Additional information

The authors are grateful for the partial funding received for this research from the MIT International Motor Vehicle Program.

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Henke, J.W., Yeniyurt, S. & Zhang, C. Supplier price concessions: A longitudinal empirical study. Mark Lett 20, 61–74 (2009). https://doi.org/10.1007/s11002-008-9034-5

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  • DOI: https://doi.org/10.1007/s11002-008-9034-5

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