Buyer power in supply chain essay

To stay competitive in this area, Toyota keeps a large database of small business suppliers in their operations.

The number of substitute product for car is limited because in low pressure on the manufacturers. For example, in automobile industry, all companies make cars, trucks or SUVs. In automotive industry, it is less price-based competition, but more recently the competition has intensified — rebates, interest free loans and long-term warranties have helped to lure in customers, but they also put pressure on the profit margins for vehicle sales.

Relationships between buyers and supplier are influenced by various factors including; trust, commitment, if the two organizations have mutual goals, power and interdependence, and cooperation.

So, the key to win and keep the customers is to understand their needs and wants for buying something better than competitors do. However, lower cost may induce consumers to shift preferences from higher cost of vehicle to another lower cost transportation such as mass transit, motorcycle and public transportation Gomez-Mejia et al.

In automotive industry, consumers do not have much buying power as they ever purchase huge volumes of cars and switching cost are relatively low Palepu, K G.

According to this model, a shift in power balance results in a change in the relationship portfolio which could have the benefits of improved performance outcomes Axelsson, Rozemeijer and Wynstrap.

If large suppliers raise prices, Toyota may suffer in their profitability. Power can also have the effects of either facilitation or constraint on the relationship between buyers and suppliers.

A power imbalance is said to occur if one actor in the relationship gets the other to do something they would not normally do. The power regime model by Andrew Cox et alpp. Thus Toyota seems to be simultaneously pursuing both a low cost and a differentiated business level strategy.

The Hybrid Synergy Drive of Toyota is the threat of substitute products. Bargaining power of buyer Bargaining power of buyer Essay Bargaining power of buyer refers to the ability of individual customer to negotiate prices that extract profit from the seller. Low-cost producers usually excel at cost reductions and efficiencies.

Power therefore determines if a buyer supplier relationship will be an arms- length relationship or a partnership. Greater dependence on particular supplier increase the power that supplier to impose terms on the buyer Gomez-Mejia et al.

Suppliers are extremely susceptible. Raw materials and input-labor are needed to complete the finish product of the organization Gomez-Mejia et al. Within in automobile industry, normal cars cannot substitute the luxury cars, and vice versa.

The Concept of Power in Buyer-Supplier Relationships

The power regimes methodology suggests that the type and nature of a relationship is fundamentally defined by the power balance and relations between the two actors. Generally, competitive rivalry will be high if there is just a little differentiation opportunities, the competitors are nearly the same with each other, and the competitors all have similar strategies Henry, Suppliers are important to an organization as they can affect the cost of input.

Differentiation provides a defence against competitive rivalry that helps to protect the organization from price competition. Toyota has this superiority, brand and marketing skills to use a premium pricing policy charge for many of its popular models.

They maximize economies of scale, implement cost-cutting technologies, stress reduction in overhead and in administrative expenses, and use volume sales techniques to propel themselves up the earning curve Pearce ll, J.

However, in this concept of power, the different actors in a relationship may wield power but chose not to exercise it fully Houser and Domokos-Cheng Ham,p. The major players of the American big three: Toyota has differentiated its cars from those of rivals on the basis of superior design and quality.

The study of power is multi faceted and complex, but its consequences are observable in all aspects of our lives. In this essay also, the power regimes approach in supply relationship management will be discussed.

For instance, the buyer may be willing to initiate a partnership but the supplier fails to reciprocate and even if they reciprocate, the suppliers intention maybe to award themselves a disproportionate share of the profits in the partnership.

In a vertical business exchange where the buyer can be categorised as having either a dominant or interdependence power position the most appropriate relationship approach is one whose focus is supplier development.

This analysis creates the categories of products as; strategic items, leverage items, and bottleneck items. Among these categories of relationships, the relationship with suppliers is very important and this task lies in the hands of an organisations supply chain management.

Power has for a long time been a contested concept with disagreements mainly based on what its scope should be and how it should be understood. Nissan and Honda have developed the same technologies for their car models.

This efficiency gives Toyota a low cost position within the automobile industry because it has developed considerable skills in efficient supply chain management and low-cost assembly capabilities. When it comes to power within organisations, Fleming and Spicerp.

Thus, it maybe will directly affect the sales of Toyota Car in Malaysia market. Substitutes are moderately strong due to different and less-expensive transportation facilities.performance of the entire supply chain. The study of buyer-supplier relationships and their impact on supply chain management is pertinent for two reasons.

Firstly, the prevailing culture in Taiwan’s distribution system emphasizes personal relationship between the manufacturers, wholesalers and retailers (Trappey and Lai ). Wal-Mart Supply Chain Practices Essay.

Words 6 Pages. The firm is committed to find the best prices by leveraging on their buyer power to obtain favorable supple chain arrangements.

• Wal-Mart strategic alliances with Procter and Gamble (P&G) through a vendor-managed inventory (VMI) also known as continuous replenishment.

Buyer-Supplier Relationships Essay examples. Words 9 Pages. Within integrated supply chains, managers have looked across traditional boundaries to interfirm relationships to manage risk and advance corporate social responsibility (CSR) requirements, such as sustainability.

Essay about Bargaining Power of Supplier. In this essay also, the power regimes approach in supply relationship management will be discussed. The role power plays in supplier selection as well as in negotiations between suppliers and buyers is discussed in order to demonstrate how power affects buyer-supplier relationships.

Powerful Essays: The Role of Value Chain Model Essay - 2 From value chains to value networks and inter firm relationship The evolution of the concepts of value chain Porter´s value chain model shaped our way of understanding and analyzing industries for the past 30 years.

Bargaining power of buyer Essay

It explores the links between the activities to be undertaken in order. Bargaining power of buyer Essay Bargaining power of buyer refers to the ability of individual customer to negotiate prices that extract profit from the seller. Buyers are more price sensitive when the product is undifferentiated and there are few switching costs.

Buyer power in supply chain essay
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