How Managers Consider Buyer-Supplier Power in Procurement Decisions

This essay delves into the critical concept of buyer-supplier power within the procurement process, examining how managers within buying organizations should consider this dynamic when making sourcing and supplier relationship decisions. The essay begins by defining key terms such as 'buying organizations' and 'supply chain management,' emphasizing the importance of effective supplier relationships for timely procurement and delivery. It then explores the impact of market demand, organizational goals, and the overall supply chain network on the decision-making process. The core of the essay focuses on buyer-supplier power, defining it as the ability to influence actions within the supply chain. It introduces the 'Four Box Model of Power' to analyze power balance and its impact on risk and competitive advantage. The essay concludes by highlighting the pivotal role managers play in maintaining an effective power balance, drawing up contracts, and using sourcing strategies to achieve business and strategic goals. The essay emphasizes the importance of power balance between buyers and suppliers for the effective functioning of the supply chain, aiming to ensure timely procurement of raw materials and the efficient delivery of finished products to the market.

Running head: BUYER-SUPPLIER POWER AND THE PROCUREMENT PROCESS
HOW MIGHT MANAGERS WITHIN A BUYING ORGANIZATION CONSIDER THE
CONCEPT OF BUYER-SUPPLIER POWER WHEN MAKING DECISIONS ABOUT
SOURCING AND SUPPLIER RELATIONSHIPS?
Name of the Student:
Name of the University:
Author’s Note:

1BUYER-SUPPLIER POWER AND THE PROCUREMENT PROCESS
As opined by Lo (2015), the concept of buyer-supplier power holds a pivotal place within
the framework of the supply chain system used by the different business enterprises, especially
when it comes to buying organizations or organizational buying. Kim and Chai (2017) are of the
viewpoint that an effective buyer-supplier power relationship is important from the perspective
of the adequate performance of the procurement system used by the buying enterprises which in
turn greatly determines the success attained by the same. Thus, it is seen that the different
enterprises are opting for the adequate usage of various kinds of measures so as to maintain the
status-quo or the power balance between the suppliers and the buyers within the spectrum of
their enterprises.
More importantly, it had been seen that the managers are required to play an ever-
increasing or for that matter prominent role within the business enterprises for the effective
management of the supply chain system which are being used by the same (Cox 2015). For
example, rather than merely being concerned with the management of the employees or the
workflow of the enterprises, the managers are also required to take the help of different kinds of
measures or initiatives for the enhancement of the procurement system which is being used by
the enterprise (Gualandris and Kalchschmidt 2016). This often influences the decision-making
process undertaken by the managers which in turn propels them to resort to the usage of the
measure of sourcing as well as the development of effective supplier relationships with the
concerned entities. This essay intends to analyze the manner in which the managers within a
buying organization need to consider the concept of buyer-supplier power when making
decisions about sourcing and supplier relationships.
Patrucco et al. (2019) are of the viewpoint that the term “Buying organizations” or for
that matter organizational buying usually refers to the decision-making process which is being

2BUYER-SUPPLIER POWER AND THE PROCUREMENT PROCESS
undertaken by the formal business enterprises for the purpose of establishing effective
relationships with their suppliers. On the other hand, Amoako-Gyampah et al. (2019) have noted
that the business enterprises through the usage of the construct of buying organizations or
organizational buying are required to effectively evaluate their buying needs related to the raw
materials, identify as well as evaluate the diversity of options or choices that are available to
them and finally select the one which is likely to offer them the maximum amount of benefit.
However, as discussed by Ghadge et al. (2019), the business enterprises while undertaking this
decision-making process are required to take into account their organizational goals or
objectives, the vision or the mission that they are trying to achieve and other important aspects of
their enterprise. In addition to these, the enterprises are also required to effectively analyze the
market or the customer demand for the products or services that they offer and thereby undertake
the process of organizational buying taking these aspects into consideration.
According to Vitasek (2016), the process of organizational buying is heavily reliant on
the aspect of market demand or for that matter the demand for the final services or products
offered by the enterprises to their target market. The importance of this can be explained on the
basis of the fact that if the enterprises procure raw materials which are needed for the
manufacture of the products or services offered by them to the customers and thereby
manufacture them without taking into account the demand for the same then they are more likely
to incur losses because of the same (Talay, Oxborrow and Brindley 2018). More importantly,
recent researches in a succinct manner have revealed the fact that the business enterprises and the
managers related to them in order to effectively use the process of organizational buying need to
develop or formulate effective relationships with their suppliers, retailers, wholesalers and others
who are involved in the supply chain network or system used by them (Abolbashari et al. 2018).

3BUYER-SUPPLIER POWER AND THE PROCUREMENT PROCESS
As discussed by Kähkönen (2015), this is important since it would not only ensure the timely
procurement of the raw material which are needed by the enterprises for the manufacture of the
commodities or the services offered by them but also the timely delivery of the finished
commodities or services to the market as well. This in turn is likely to help the enterprises to
enhance their profitability since in the present times it had observed that the customers generally
like to opt for the services or products of an enterprise which is being able to deliver the same to
the markets in a timely manner (Patrucco et al. 2019). In the light of these aspects, it can be said
that the growth or the development of an enterprise is directly tied up with the effective usage of
the process of organizational buying within the same.
De Jong and Benton (2019) are of the viewpoint that the concept of Supply chain
management in the particular context of commerce or the business world can be defined as the
effective management of the transfer or the flow of goods or services from the point of their
manufacture to the market. Adding to this, Lanier Jr., Wempe and Swink (2019) have noted that
the supply chain management used by the enterprises also involves the procurement of the raw
materials which are needed for the manufacture of the services or the commodities which are
being offered by the enterprises to their target market or customers. In addition to these, it is seen
that the supply chain management system used by the contemporary business enterprises also
involves the transfer of adequate or the required information, the storage as well as the
movement of the raw materials from one point to another, development of different channels for
the effective transfer of the finished products or services or the raw materials and others
(Marshall et al. 2016). However, at the same time it needs to be said that for the effective usage
of the construct of supply chain management the business enterprises are required to adequately

4BUYER-SUPPLIER POWER AND THE PROCUREMENT PROCESS
design, plan, execute, control and thereby monitor the different activities related to the supply
chain network used by them (Brewer and Arnette 2017).
As opined by Cho, Ke and Han (2019), the construct of supply chain management
becomes an important one from the perspective of the different business enterprises since it not
only enhances the net value or the profitability of the enterprises but at the same time helps it to
gain a competitive infrastructure as well. Furthermore, it also helps the enterprises to cater or for
that matter meet the demand shown by the customers towards the commodities or the services
offered by them through the timely delivery of the finished products or services to the markets.
However, an important factor which affects the effectiveness or the efficiency of the construct of
supply chain management used by the different business enterprises is the process of buyer-
supplier power or relationship (Rita and Krapfel 2015). Thus, the business enterprises in order to
derive the needed benefits from the supply chain networks that they use are required to develop
relationships with their buyers and suppliers.
According to Lonsdale et al. (2016), an important factor which determines the
effectiveness or the efficiency of the supply chain system which is being used by the different
business enterprises is the aspect of power or for that matter power balance between the buyers
and the suppliers. In simple terms, the concept of power can be defined as the ability or the
capability of the individuals or the business enterprises to act or perform in a certain specific
manner (Rita and Krapfel 2015). In the particular context of the supply chain logistics, the entity
of power can be defined as the ability or the capability of the buyers or the suppliers who are
related to a particular enterprise to influence the enterprise to act in a certain specific manner
(Kotabe and Murray 2018). For example, it is seen that if the bargaining power of the buyers is
too high then this is likely to not only reduce the bargaining power of the suppliers but at the

5BUYER-SUPPLIER POWER AND THE PROCUREMENT PROCESS
same time disrupt the power-balance between the suppliers and the buyers within the supply
chain logistics used by the enterprises. On the other hand, if the bargaining power of the
suppliers then this is likely to adversely affect the ability of the concerned enterprise to meet the
demand of the customers for the products or services which are being offered by it (Schleper,
Blome and Wuttke 2017). In the light of these aspects, it can be said that an adequate power
balance between the buyers and the suppliers is needed so that the enterprises can derive the
necessary benefits from the supply chain logistics that they use.
The “Four Box Model of Power” is an important one which is commonly being used for
the purpose of analyzing the power balance within the supply chain logistics used by the
different business enterprises. For example, as the name of the model under discussion here
suggests there are four quadrants of the model which the enterprises are required to take into
account, namely, supplier dominance, interdependence, interdependence and buyer dominance
(Lo 2015). The concerned model in a succinct manner reveals the fact that if the supplier
dominance is high then this not only poses a substantial amount of risk to the enterprise but at the
same time adversely affects the critical success factors of the enterprise and thereby reduces its
ability to attain competitive advantage as well (Kähkönen 2015). On the other hand, if the buyer
dominance is high then also the risk that the enterprise faces is very high which in turn adversely
affects the critical success factors of the enterprise and thereby its ability to gain success in the
business market of its operations (Cox 2015). Thus, the business enterprises and the managers
related to them are required to try to place the buyer-supplier relations that they have in the
supply chain network used by them in the interdependence quadrant so as to reduce the risk that
it faces and also for the purpose of attaining competitive advantage as well.

6BUYER-SUPPLIER POWER AND THE PROCUREMENT PROCESS
Kim and Chai (2017) are of the viewpoint that the effective usage of the construct of
Buyer-supplier power by the managers is likely to offer them various benefits which in turn
propel the majority of the business enterprises to resort to the usage of the same. For example,
the managers are required to take the help of various measures so as to ensure the fact that an
effective power balance exists between the different suppliers and the buyers who are related to
the enterprise. This is important from the perspective of the business enterprises since this is
likely to help them to not only meet the demand of the customers but at the same time to attain
the business or the strategic goals that they have formulated for themselves (Patrucco et al.
2019). At the same time, it needs to be said that the managers of the enterprises are likely to play
a pivotal role for the effective management of the relationship between the suppliers and the
buyers. The managers for the effective management of the same have the option to draw up the
required contracts which will guide the relationship between the enterprise and the suppliers or
the buyers. In addition to this, the managers also have the option to take the help of the process
of sourcing through which they can give contracts to the other enterprises or the companies for
the manufacture of the products or the services offered by them to the customers or any other
department of their entire in case the power dynamics between the enterprise and the suppliers or
the buyers are adversely affecting the business prospects of the enterprise (Abolbashari et al.
2018).
As discussed by Amoako-Gyampah et al. (2019), the role played by the managers of the
enterprises becomes important from the perspective of the procurement performance of the
supply chain management or logistics used by the enterprises. For example, the job role of the
managers related to the effective management of the buyer-supplier power relationship greatly
determines the performance of the procurement system which is being used by the enterprises.

7BUYER-SUPPLIER POWER AND THE PROCUREMENT PROCESS
This is important since the overall revenue earned by the enterprises greatly depends on the
efficiency or the performance of not only the procurement system that they are using but also the
supply chain system as well. More importantly, it had been seen that the managers related to
business enterprises in the present times for the effective enhancement of the performance of the
procurement system used by them have the opportunity to take the help of the processes of
sourcing and contract management (Vitasek 2016). However, at the same time it needs to be said
that the managers for the usage of the process of contract management are required to follow the
seven stages of contract management.
In the first stage of contract management, the managers are required to not only identify
their needs but at the same time establish goals, set the desired expectations and also highlight
the risks which would be involved in the process (Ghadge et al. 2019). Furthermore, they are
also required to take the help of different risk mitigation strategies for the effective mitigation of
the risks which they are likely to face on the score of the contract which is being drawn. In the
second stage of contract management, the managers are required to undertake the process of
drawing or for that matter authoring the contract. In the third stage, the managers would have to
undertake negotiation with the different entities who would be signing the contract so as to reach
a consensus regarding the terms and the conditions of the contract (Gualandris and Kalchschmidt
2016). For the fourth stage, the managers are required to get formal approval from all the entities
involved in the contract pertaining to the terms of the contract. In the fifth stage, the actual
process of the execution of the contract is being undertaken by the managers whereas in the sixth
stage the managers are required revise the terms of the contract as per the needs or the demands
of the enterprise. In the final stage, the managers are required to undertake the process of

8BUYER-SUPPLIER POWER AND THE PROCUREMENT PROCESS
auditing and ensure the stipulations of the contracts are being ardently followed by all the
concerned entities (Talay, Oxborrow and Brindley 2018).
De Jong and Benton (2019) are of the viewpoint that the process of contract management
is not only important for the business enterprises from the perspective of the procurement system
that they use but also from the perspective of the sourcing process which the managers often use
for the improvement of the supply chain logistics. As already mentioned, the effective usage of
the process of sourcing requires the managers to lease out or offer contracts to the third parties
regarding the effective completion of the job roles of certain specific departments of their
enterprise. However, for the effective usage of this process the managers are once again required
to resort to the usage of the process of contract management and its seven stages so as to ensure
adequate performance of the sourcing process and also display effective decision-making
abilities.
To conclude, the process of supply chain management had become an integral part of
the core business functions of the different business enterprises. For example, the effective usage
of the process of supply chain management not only enables the business enterprises to procure
the raw materials that they need for offering the required products or services to the customers in
a timely manner but also to deliver them in the markets at the right time as well. However, it had
been seen that one of the most important factors which adversely affect the performance of the
procurement process or for that matter the entire supply chain management system used by the
enterprises is the buyer-supplier power. It is precisely here that the role of the managers becomes
important since they are required to take the help of various processes like sourcing, contract
management and others to ensure the adequate performance of the supply chain management
which is being used by the enterprises. Furthermore, the decision of the enterprises or the

9BUYER-SUPPLIER POWER AND THE PROCUREMENT PROCESS
managers to opt for the usage of these processes greatly depends on the decision-making abilities
of the managers. These aspects of the process of supply chain management become apparent
from the above analysis.

10BUYER-SUPPLIER POWER AND THE PROCUREMENT PROCESS
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