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Buyer-supplier relationships have received increased attention in light of new management philosophies and techniques and the knowledge that effective buyersupplier relationships will significantly contribute to a firm's strategic success. According to the many articles published in both practitioner and academic journals, it appears that the buyer-supplier relationship has played a more important role in organizations in the past few years.
This article reviews two approaches to buyersupplier relationships by comparing traditional adversarial relationships with cooperative relationships. The advantages and disadvantages of each with respect to the bargaining power of the buyer and supplier are discussed. Various scenarios of buyer-supplier relationships are explored (e.g., where there are one, few, or multiple buyers/suppliers representations), and the bargaining power of each scenario is discussed. Further, the two approaches are evaluated and a hybrid approach proposed. Finally, a conclusion and assessment of the results are provided.
Review of the Literature
The issue of buyer-supplier relationships emerged from the purchasing function, whose role in corporate strategy is rooted in part in the field of marketing [1]. Marketing and purchasing both involve developing and maintaining relationships with external firms. In the early 1970s the importance of buyer-supplier relationships was not recognized because the role of purchasing in the business organization was viewed as a passive one. The 1973-74 oil crisis and related raw material shortages, however, drew significant attention to the importance of purchasing. And buyers and suppliers were identified as two of the five critical forces shaping the competitive nature of industry [35]. Thus, the strategic importance of buyer-supplier relationships began receiving recognition in the academic literature. Porter's competitive analysis model, presented in figure 1, shows that the bargaining power of buyers and suppliers affects industry competitiveness. This topic will be discussed in more detail later.
According to Porter's model, if there are fewer buyers in a business industry, the bargaining power of buyers increases. That will force suppliers to increase product quality and to lower cost. On the other hand, if there are few suppliers in a business industry, the bargaining power of suppliers increases. They may lower product quality and increase the price. In that framework, any firm in a market chain competes for profit margin with its upstream suppliers and downstream buyers [26].
In the early-...