Buyer supplier exchange is based on the innate relationship between the two parties who are involved. The term “relationships” covers a lot of meaning in the supply chain management. They stem from strategic relationship, tactical relationship and internal relationships. The notions of supply chain are needed for maintaining the balance. In case of one stakeholder wielding too much power and influence, there can be the undermining of the effectiveness of the supply chain. One of the fundamental principles of maintaining the supply chain is the power of the individual talents and contributions into the mix. This is the nuanced protocol where the idea of value chain was developed by Michael Porter (Mangan and Lalwani, 2016). There are five main steps in the value chain. These are inbound logistics, operational procedures, outbound logistics, marketing, sales and services. In this, the role of the relationship or the power of each party plays an important role in the operational process. It has been observed that the notions of creating of the supply chain and the value chain are more attuned towards the needs of the stakeholders who are involved in the process. Invariably, this depends on the relationship between different stakeholders. The purpose of this analysis is to understand the buyer-supplier power to be important to the management and outcome of buyer-supplier exchanges. A brief overview about the value chain process has been detailed in the following.
Value chain is theories from the theories of supply and demand. They are intricately bound to the theories of economics. They have a specific value chain. These are found to gain value with the passing of time. These chains of activities ensure that the actual product or service adds to the actual deliverable or service that is rendered to the client. From the supply chain system, there is creation of the marketing opportunities. The decision making that done in this schema is a nuanced process where the applications are very multifaceted. The notion of intangible personal relationship plays a critical impact in this process. There is the implied power that plays a vital role in this process. The relationship between the different stakeholders can be explored using the notions of power . These have been explained in the following.
The nuances of buyer supplier power are dependent on supply, demand, buyer-supplier relationship and other intangibles. Some of them have been explored in the following section.
In this circumstance, the buyer would have dominance in the sales of the product. For example, in the current times, the growth of the smart phones has given numerous choices to the people. The people can now buy phone from a wide range of prices. Similar trend is observed in the situation of the automobile industry. They offer a number of service offering. The end consumer is benefited from the choices and the wide-ranging prices. Hence, they wield more power. In cases where the buyer is dominant, the buyer takes in all the surplus value. There is more situation of independence to the buyer. The supplier will not have the freedom to price discriminate. If the supplier cannot define the prices, there will be the situation of independence. In these situations when the supplier cannot control the prices, it causes the individual buyer’s utility function to be in surplus. The price cannot be controlled by the supplier.
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