Marketing Letters

, Volume 20, Issue 1, pp 61–74 | Cite as

Supplier price concessions: A longitudinal empirical study

  • John W. HenkeJr.
  • Sengun Yeniyurt
  • Chun Zhang


The competitive nature of today’s business-to-business markets requires companies to continually look for ways to reduce costs; one of the easiest of which is to demand price reductions from suppliers. In this research, price reduction demands and the corresponding concessions given by 238 suppliers to the six major North American Automotive original equipment manufacturers during 2001–2007 are analyzed utilizing a simultaneous equation model. The three stage least squares estimates indicate that suppliers are willing to give higher price concessions when buyers align specific interfacing characteristics and processes with their suppliers so that the suppliers perceive greater opportunities for future business and profit. These results provide, for the first time, an understanding of the dynamic nature of the impact of buyer–supplier relational components on supplier price concessions.


Buyer–supplier relations Buyer price reduction pressure Supplier price concessions Supplier product development involvement 


  1. Aaker, D. A., & Jacobson, R. (1994). The financial information content of perceived quality. Journal of Marketing Research, 31, 191–201 (May).CrossRefGoogle Scholar
  2. Anderson, J. C. (1995). Relationships in business markets: Exchange episodes, value creation, and their empirical assessment. Journal of the Academy of Marketing Science, 23(4), 346–350.CrossRefGoogle Scholar
  3. Anderson, J. C., & Narus, J. A. (1990). A model of distributor firm and manufacturer–firm working partnerships. Journal of Marketing, 54, 42–58 (January).CrossRefGoogle Scholar
  4. Cannon, J. P., & Homburg, C. (2001). Buyers–supplier relationships and customer firm costs. Journal of Marketing, 65(1), 29–43.CrossRefGoogle Scholar
  5. Carbone, J. (2005). Cutting cost is key in consumer electronics. Purchasing, 134, 19–20 (November 17).Google Scholar
  6. Cleveland, J. (2004). Succesfully selling to the new domestics. Automotive Design & Production, 116, 16–17 (August).Google Scholar
  7. Cool, K., & Henderson, J. (1998). Power and firm profitability in supply chains: French manufacturing industry in 1993. Strategic Management Journal, 19, 909–926 (October).CrossRefGoogle Scholar
  8. Dewan, S., & Kraemer, K. L. (2000). Information technology and productivity: evidence from country-level data. Management Science, 46(4), 548–562.CrossRefGoogle Scholar
  9. Dyer, J. H., & Singh, H. (1998). The relational view: cooperative strategy and sources of interorganizational competitive advantage. Academy of Management Review, 23(4), 660–679.CrossRefGoogle Scholar
  10. Economist. (1998). The decline and fall of General Motors. October 10th: 63–64+.Google Scholar
  11. Elberse, A., & Eliashberg, J. (2003). Demand and supply dynamics for sequentially released products in international markets: the case of motion pictures. Marketing Science, 22(3), 329–354.CrossRefGoogle Scholar
  12. Ganesan, S. (1994). Determinants of long-term orientation in buyer–seller relationships. Journal of Marketing, 58, 1–19 (April).CrossRefGoogle Scholar
  13. Gassenheimer, J. B., Houston, F. S., & Davis, J. C. (1998). The role of economic value, social value, and perceptions of fairness in interorganizational relationship retention decisions. Journal of the Academy of Marketing Science, 26, 322–337 (Fall).CrossRefGoogle Scholar
  14. Ghosh, M., & John, G. (2005). Strategic fit in industrial alliances: an empirical test of governance value analysis. Journal of Marketing Research, 42, 346–357 (August).CrossRefGoogle Scholar
  15. Hennig-Thurau, T., Houston, M. B., & Sridhar, S. (2006). Can good marketing carry a bad product? Evidence from the motion picture industry. Marketing Letters, 17, 205–219.CrossRefGoogle Scholar
  16. Jap, S. D. (1999). Pie-expansion efforts: Collaboration processes in buyer–supplier relationships. Journal of Marketing Research, 36(4), 461–475.CrossRefGoogle Scholar
  17. Kalwani, M., & Narayandas, N. (1995). Long-term manufacturer–supplier relationships: do they pay off for supplier firms? Journal of Marketing, 59, 1–16 (January).CrossRefGoogle Scholar
  18. Kennedy, P. (2003). A guide to econometrics. Cambridge, MA: MIT.Google Scholar
  19. Krause, D. R., Terpend, R., & Petersen, K. J. (2006). Bargaining stances and outcomes in buyer–seller negotiations: experimental results. Journal of Supply Chain Management, 42(3), 4–15.CrossRefGoogle Scholar
  20. Kumar, N., Stern, L. W., & Anderson, J. C. (1993). Conducting interorganizational research using key informants. Academy of Management Review, 36(6), 1633–1651.CrossRefGoogle Scholar
  21. Laseter, T. M. (1998). Balanced sourcing: cooperation and competition in supplier relationships. San Francisco: Jossey-Bass.Google Scholar
  22. Liker, J. K. (2004). The Toyota way. New York: McGraw-Hill.Google Scholar
  23. Liker, J. K., & Choi, T. Y. (2004). Building deep supplier relationships. Harvard Business Review, 82, 104–113 (December).Google Scholar
  24. Mantrala, M. K., Basuroy, S., & Gajanan, S. (2005). Do style-goods retailers’ demands for guaranteed profit margins unfairly exploit vendors. Marketing Letters, 16(1), 53–66.CrossRefGoogle Scholar
  25. Maremont, M., & Berner, R. (1999). Leaning on suppliers, Rite-Aid deducts cash at bill-paying time. Wall Street Journal (March 31st): A1+.Google Scholar
  26. Miller, J. (2000). Troubled DCX puts squeeze on suppliers. Detroit News (December 4th): A1+.Google Scholar
  27. Nelson, D., Mayo, R., & Moody, P. E. (1998). Powered by Honda: developing excellence in the global enterprise. New York: Wiley.Google Scholar
  28. Neter, J., Kutner, M. H., Nachsteim, C. J., & Wasserman, W. (1996). Applied linear statistical models. Burr Ridge, IL: Richard D. Irwin.Google Scholar
  29. Noordewier, T. G., John, G., & Nevin, J. R. (1990). Performance outcomes of purchasing arrangements in industrial buyer–vendor relationships. Journal of Marketing, 54, 80–93 (October).CrossRefGoogle Scholar
  30. Prabhu, J. C., Chandy, R. K., & Ellis, M. E. (2005). The impact of acquisitions on innovation: Poison pill, placebo, or tonic? Journal of Marketing, 69, 114–130 (January).CrossRefGoogle Scholar
  31. Richardson, J. (1993). Parallel sourcing and supplier performance in the Japanese automobile industry. Strategic Management Journal, 14(5), 339–350.CrossRefGoogle Scholar
  32. Rindfleisch, A. (2000). Organizational trust and interfirm cooperation: an examination of horizontal versus vertical alliances. Marketing Letters, 11(1), 81–95.CrossRefGoogle Scholar
  33. Sherefkin, R. (2006). Suppliers: Big 3 relationships are getting better. Automotive News (June 12): 1+.Google Scholar
  34. Shirouza, N. (2003). Ford and GM put the squeeze on parts suppliers for price cuts. Wall Street Journal. November 18th: A3.Google Scholar
  35. Srivastava, J., Chakravarti, D., & Rapoport, A. (2000). Price and margin negotiations in marketing channels: an experimental study of sequential bargaining under one-sided uncertainty and opportunity cost of delay. Marketing Science, 19(2), 163–184.CrossRefGoogle Scholar
  36. Webster, S. A. (2006). U.S. carmakers improve supplier ties. Detroit Free Press (June 12th): E1+.Google Scholar
  37. Williamson, O. (1996). The mechanisms of governance. Oxford: Oxford University Press.Google Scholar
  38. Wooldridge, J. M. (2002). Econometric analysis for cross section and panel data. Cambridge, MA: MIT.Google Scholar

Copyright information

© Springer Science+Business Media, LLC 2008

Authors and Affiliations

  • John W. HenkeJr.
    • 1
    • 4
  • Sengun Yeniyurt
    • 2
  • Chun Zhang
    • 3
  1. 1.School of Business AdministrationOakland UniversityRochesterUSA
  2. 2.School of BusinessRutgers UniversityPiscatawayUSA
  3. 3.School of Business AdministrationUniversity of VermontBurlingtonUSA
  4. 4.BirminghamUSA

Personalised recommendations