In arguing for the power relationships with a power matrix, Cox (2001) discussed the aspects of pre-and post-contractual power in the case of buyer and supplier exchange relationships. Now this form of power in relationships leads to the situation of improved contractual pre-agreements and performance. In the power, relational understanding, it is observed that the basic elements of scarcity and utility of resources are brought into context. A buyer as such is present in any basic power positions. A buyer will have dominance in some positions. Where the buyer is considered to have dominance in the matrix, it could be said that the buyer has power attributes in comparison to the supplier. The buyer can in this dominant position make use of their power to leverage supplier performance, quality of products, some cost improvement, etc. In this position, the buyer would hence be able to support themselves for a good profit or some extra returns whereas the seller is only able to recover the normal returns. The second matrix that Cox (2001) presents is the independence box. In the interdependence box, both the buyer and the supplier are seen to have near equal power. This is a cooperative situation and here both the parties involved are very aware that they must do what is required to succeed. In this context, neither of the parities can force the other to do what they like; they can only impose on others to do their part of the work to see performance. Both of them get some additional values out of it. If a supplier achieves some extra value, then they might pass it to the buyer in some form or if the buyer is seen to get some extra value, then they will pass it to the supplier, too. The power relations in this situation, are such that there is leverage opportunities for both. However, neither can use it to go above and beyond their profit returns without the cooperation of the other (Kiong and Kee, 1998). Current prevailing prices, quality levels and more would move very slowly in such a context, but the strong point here is that neither the buyer or the supplier would be tempted to operate in average pricing that is much significant than the other.
Now in the case of the dominancy of the supplier, it would so follow that the supplier will oversee different levels of power. It is the supplier who is seen to have the mechanisms with respect to improving competition or barriers to entry and other aspects for maintaining the price and quality to the buyer (Handfield and Bechtel, 2002). Buyer is a price receiver here and the leverage presented by the buyer is purely from the end of negotiating for price and quality.
Positive and strategic buyer supplier exchanges will result in better performance outcomes and procurement. Buyer supplier exchanges have to consider the aspect of power and must not use dominant models just because they have been efficient in other countries or cultures. Now in the context of improving performance outcome in buyer supplier exchanges, it is recommended that they should be fully integral and must be objective. The practitioners of such relationships must try to leverage for maximum benefits and meet required performance outcomes by positioning themselves properly.
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