What is power in the context of buyer supplier relationship?
Power is an acquired or inherited strategic tool associated with an extra possession with which one party can influence the other in order to fulfil a self-advancing motive (Anklesaria, 2008). When party A is in a position to influence party B to do something, which in normal cases B would refrain, then it is defined as power.
Factors affecting the use of power
Power is used knowingly or unknowingly. It is always used to make a gain. For power to be effective in its results, it must be associated with a specific possession. These advantageous possessions could be a large firm size, the asymmetric information, the influence to the price through the size of the order, scarcity of specific goods and services and utility of specific goods and services. These culminate into a powerful tool which is used by marketing companies to make customers make a purchase decision immediately. When these possessions are cemented and amplified by the buyer or the supplier that have power in its favour, the resulting impact is the influence that one desires to exert on the other (Korda, 2011). Howsoever unethical the use of power may be for the victim party, it is a fact that it has become a part of regular negotiations all across the world by small and large multinationals, even domestic companies. Exploiting weakness of the smaller and the weak has become a norm by the powerful and the large. The balance of power varies and oscillates between the buyer and supplier on various dependencies.
Turkkantos (2014) discusses the variance of expert power, market power, legitimate-coercive power and firm size power to have different impacts on the buyer supplier exchange. As per the research, when market power, expert power and firm size power are utilised, it has a positive impact on the firm’s performance. This is ideal when a powerful company uses its superior position to deal with a supplier. The supplier faces some pressure of power and wean in to the buyer’s demands, however hesitant it may be. Morsey and Ibrahim (2013) argue that when the buyer supplier exchange is about sharing information, use of power must be discouraged. Only when power is balanced between the two entities, could innovative knowledge be fruitful. Information thus bars the selfish use of power and recommends a balance to fructify the results.
Kahkonen and Lintukangas (2013) researched that when possible, buyer companies being large in size tends to use power for benefiting their contract terms. They also found that there are some companies where the suppliers’ were equally large the power was offered to be shared among both, which indicates that power has both unethical use as well as ethical use. It depends on the market conditions, the conditions of the companies which negotiate the contract and the extent of profitability that can be ascertained and expected if power is put on the table. Touboulic, Chicksand and Walker (2012) find out that the use of power between buyers and suppliers relies on the relevancy of their extent of the compliancy of legislative and ethical codes. When power is appropriate to be used for self-interest fulfilment, it is used unhesitatingly. When there are compliance issues, they tend to lead to a breach of legislation that is almost ignored.
It is agreed here that power is always a tool and is often considered as a luxury when buyers and suppliers interact and try to negotiate a contract. The arguments of the above mentioned authors and researchers are almost agreed because power is something that is relentlessly associated with unethical uses due to its advantageous nature which is used to seek something that is not easily available through normal means.