The effect of supplier power on supplier development strategies of buyers with sustainability targets

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The effect of supplier power on supplier development strategies of

buyers with sustainability targets

A multiple case study in a highly innovative buying firm in the pharmaceutical industry

Master’s Thesis Supply Chain Management

University of Groningen, Faculty of Economics and Business

Rezan Zibari Student number: s2242567

rezanzibari@gmail.com

Supervisor, University of Groningen: C. Xiao, BSc

Co-assessor, University of Groningen: dr. K. Scholten

Co-examiner, University of Groningen: Prof. dr. H. (Manda) Broekhuis

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ABSTRACT

Purpose – The purpose of this research is to create an understanding of how supplier power influences what kind of supplier development strategy buyers use. In more detail, the focus is on what supplier development strategy and what type of buyer power, i.e. reward or coercive power, the buyer uses toward low power and high power suppliers when wanting them to follow the buyer’s requirements such as sustainability targets.

Design / Methodology/ Approach – A multiple case study was done by investigating six buyer-supplier dyads in the pharmaceutical industry, in which the buyer remained the same in all cases. The researcher travelled for this research to do in total 12 face-to-face interviews with two purchasing managers, located in the United Kingdom and in Belgium, and one sustainability manager in the Netherlands. The data was transcribed and coded in order to perform within-case analyses and cross-case analyses.

Findings – Findings reveal that low power buyers are willing to cooperate and sign a code of conduct, incl. sustainability targets, while high power suppliers are not. Buyers use reward power through a supplier incentives strategy to develop and improve the performance of low power suppliers. Toward high power suppliers who are not willing to cooperate, the buyer uses coercive power through a competitive pressure strategy. I.e. by threatening them to switch to another supplier or by adding supply options to create competitiveness, the buyer tries to make the supplier meet their requirements such as pricing and sustainability targets.

Originality / Value – This paper contributes to existing power asymmetry literature in several original ways. Firstly, asymmetric BSRs have remained understudied in the pharmaceutical industry. Second, rather than investigating this topic from a focal supplier’s side, this study has focused on the buyer’s view. Third, the in-depth analysis of this research created detailed insights in three variables: different sources of supplier power, different supplier development strategies and the presence of coercive and reward power. Therefore, a complete understanding of the research question could be provided. Keywords – power asymmetry, SSCM, code of conduct, coercive / reward power, supplier power, supplier development strategy

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1. INTRODUCTION

Japanese and Western business relationships are characterized by buyers’ dominance over suppliers from emerging markets such as China and India (Cox, 2001; Locke, Amengual et al., 2009). Such powerful buyers can exploit coercive and/or reward power over their suppliers in order to have their suppliers complied with their standards. However, for less powerful buyers it is more challenging to cope with power asymmetry in buyer-supplier relationships (BSRs), since they do not have a surplus power that they can exploit over their suppliers. Therefore, the aim of this research is to explore how low-power buyers stimulate supplier sustainability in BSRs with adversarial power asymmetry.

Due to for example a lack of competences or resources, low-power buyers rarely succeed in implementing sustainable relationships with powerful suppliers (Cox, 2004). Previous research shows that buyers are enforced to develop effective strategies to stimulate supplier development (Kumar and Rahman, 2015). In order to maintain sustainable BSRs, low-power buyers are encouraged to focus their procurement competence on transparent, long-term, and collaborative ways of working (Cox, 2004). Procurement strategies such as supplier development strategies are a key part of sustainable supply chain management (SSCM) (Krause, 2002; Seuring & Muller, 2008) and can stimulate supplier sustainability in an adversarial power asymmetry context (Cox, 2004). Several researchers have shown how buyers can use power through different supplier development strategies in a power asymmetry context (Cox, 2004; Pedersen & Andersen, 2006), but this has rarely been explored within a context of supplier development strategies used by low-power buyers.

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buyers can use sustainability-related audits as a code of conduct, so that suppliers are enforced to comply with their standards.

Moreover, the fact that supplier development strategies are a key part of SSCM calls for further exploration within a sustainability context as well (Pedersen and Andersen, 2006). From this lack of knowledge stems the following research question: How does the power of suppliers

influence what supplier development strategies low-power buyers use with sustainability as a purchasing target?

While Nagati and Rebolledo (2013) have shown a direct relationship between supplier development strategies and the role of suppliers and supplier performance, it has remained understudied how the power of suppliers influences what specific supplier development strategies low-power buyers use in such situations. In more detail, since the power of suppliers comes from different sources (Belaya, Gagalyuk and Hanf, 2009), the in-depth analysis will show how the source of supplier power impacts the buyer’s supplier development strategy. Namely, the buyer is likely to react differently toward different supplier sources, since the supplier development strategies include both coercive and reward power (Liu et al., 2018). I.e., whether a buyer will reward or threat a supplier depends on the source of supplier power. Hence, consequently, as mentioned in the previous section, this study aims to answer the following question as well: What type of power do buyers use within the supplier development strategy to

cope with the supplier’s power?

This research has been conducted through a multiple case study in a highly innovative multinational in the pharmaceutical industry. The multiple case studies involved six cases, of which three high-power suppliers and three low-power suppliers for comparison of the results. The interviews were done with purchasing and sustainability managers of the buying firm to create an operational understanding of the phenomenon and the dynamics behind decision making on the supplier development strategies.

This study contributes to the literature in two ways. Since asymmetric power buyer-supplier relationships have remained under-studied in the pharmaceutical industry (Shah, 2004), this in-depth analysis provides new insights for this industry. Besides, this research contributes to asymmetric buyer-supplier relationship literature, since strategies for improving power have mainly been discussed from a focal supplier’s perspective rather than from the low-power buyer’s view (Seuring and Muller, 2008; Gorton et al., 2015).

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2. THEORETICAL BACKGROUND

Previous research has been studied in order to create an understanding of known theories about supplier development strategies within an adversarial power asymmetry context. In section 2.1 power asymmetry in BSRs is defined and discussed, followed by the four supplier sustainability development strategies in section 2.2. In this section the strategies are discussed within a sustainability context as well, i.e. within SSCM. Moreover, an overview of the theoretical background is shown in table 1. Finally, the conceptual model of this study is motivated and described in section 2.3.

2.1. POWER ASYMMETRY IN BUYER-SUPPLIER RELATIONSHIPS

Due to a shift from adversarial to cooperative relationships with suppliers over the past three decades, especially in US industrial firms (Krause, 2002), research in buyer-supplier relationships (BSRs) has often been limited to situations with a focal buyer or non-adversarial relationships. However, while BSRs are characterized by power asymmetry (Caniels & Gelderman, 2007; Hingley, 2005; Ireland & Webb, 2007; Maloni & Benton, 2000; McCarther & Northcraft, 2007), the implications of power asymmetry have remained unexplored in previous research (Brito & Miguel, 2017).

2.1.1. DIFFERENT TYPES OF POWER BASES IN BSRs

There are different types of power bases in BSRs, which French and Raven (1959) have grouped into mediated and non-mediated power. Mediated power (reward, coercion and legal legitimate) is exerted by the strong partner to influence the other using positive or negative reinforcements. Non-mediated power (expert, referent and legitimate) is used indirectly and is less manipulative towards the weaker partner (Brito & Miguel, 2017). However, only the existence of coercive and reward power was found in BSRs, since power asymmetry in BSRs comes from exploitation of power by the focal partner and/or tolerance to power by the weaker partner (Brito & Miguel, 2017).

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& Combs, 2007; Brito & Miguel, 2017), reward power affects both positively (Benton & Maloni, 2005; Maloni & Benton, 2000; Brito & Miguel, 2017). Besides, also performance is affected positively by reward power (Maloni & Benton, 2000). According to Terpend and Ashenbaum (2012) power asymmetry in BSRs can improve supplier performance factors such as delivery, quality, innovation, and flexibility.

2.1.2. SOURCES OF SUPPLIER POWER

In order to understand how supplier power affects the buyer’s supplier development strategy, it is important to understand how supplier power is being developed into a high or low power. I.e. understanding the source of the supplier power will create better understandings of the analysis and results of this research. Hence, rather than only labeling supplier power as high or low, this section zooms in on the sources of supplier power; when is supplier power low or high?

An asymmetrical distribution of power among buyers and suppliers is mainly caused by differences in expertise, size of the companies, switching costs in terms of investments, the degree of dependence on each other and the contract structure (Belaya, Gagalyuk and Hanf, 2009). According to Kumar (2005) the partner’s dependence gives the firm power over its partner. In other words, buyer power is low when the buyer highly depends on the supplier, such that the supplier is likely to act dominant. High dependence is generally due to high criticality of the resource and high scarcity of an alternative, i.e. limited availability of other suppliers. Logically, the opposite counts for high buyer power. Hence, buyer power is high when dependence on the supplier is low, i.e. criticality of resource is low and scarcity of alternative for another supplier is low (Chicksand at al., 2012; Touboulic et al., 2014).

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2.2. SUPPLIER SUSTAINABILITY DEVELOPMENT STRATEGIES

Many buying firms actively try to facilitate supplier performance and capability improvements through supplier development (Krause & Ellram, 1997). In order to do that, supplier development strategies have been developed. Buyers can use different supplier development strategies for sustainability purposes. Previous research shows four main strategies; supplier assessment, supplier incentives, direct involvement activities and competitive pressure. Within these strategies buyers can use coercive or reward power in order to gain a stronger position towards their suppliers, such that suppliers are encouraged or forced to comply with the buyers’ standards.

In the following sections these supplier development strategies are discussed, while taking into account what power can be used within a certain strategy. Also, within the context of this study the following sections discuss how these supplier development strategies fit within a SSCM context.

2.2.1. BUYER & SUPPLIER POWER IN SUPPLIER ASSESSMENT

Buyer power. Main activities of supplier assessment are evaluating the performance of the supplier, providing feedback about the evaluation results to the supplier, and supplier certification. Evaluation is done using a supplier evaluation system with established guidelines and procedures. The aim of certification is to certify the quality of the supplier. Within the supplier assessment strategy communication about supplier performance and improvements is done formally (Krause, 2002). Monitoring, reporting and verification, so that both parties are aware of the performance, are key elements of supplier assessment (Liu et al., 2018).

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Supplier assessment within the context of SSCM should include environmental and social indicators in supplier performance and these expectations need to be communicated to the supplier (Vachon and Klassen, 2008).

Supplier power. When buyers constantly assess their supplier’s capabilities in terms of quality and lead times, and give their suppliers feedback on the results (Krause, 2002; Prahinski & Benton, 2004), it raises supplier’s awareness to comply with the buyer’s requirements (Nagati & Rebolledo, 2013). Besides, the supplier should be readily available to take corrective actions and improve compliance with the buyer’s requirements (Nagati & Rebolledo, 2013).

Hence, the supplier assessment strategy puts the supplier in a position with lower power than the buyer, since the supplier is forced to follow the rules and requirements of the buyer in order to maintain the business relationship.

2.2.2. BUYER & SUPPLIER POWER IN SUPPLIER INCENTIVES

Buyer power. In order to encourage suppliers to improve their performance, buyers can use a supplier incentives strategy. Encouragement can be created by using reward power toward the supplier. Supplier incentives mainly include promises of current benefits and future business (Krause, 2002), which refers to profit-sharing and long-term commitment activities (Liu et al., 2018). Rewards can be given through for instance large-volume orders and long-term contracts (Brito & Miguel, 2017). Besides, also recognition can serve as a reward (Liu et al., 2018). Recognitions such as a preferred supplier status are commonly used (Krause, 2002).

Liu et al (2018) show that sustainability targets can be included in supplier incentives as well. For example, buyers can give recognition and reward to suppliers with high performance on sustainability or they can promote recycling practices to reduce supplier costs. Also, the co-design of green products with suppliers, so that both suppliers and buyers can benefit, can serve as supplier incentives (Lee and Kim, 2011).

Supplier power. Within the supplier incentives development strategy the buyer is in charge and the supplier follows and meets the buyer’s requirement in order to receive the rewards and promises made by the buyer (Nagati & Rebolledo, 2013). Hence, the supplier does have low or no power in this supplier development strategy.

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visits (Krause, 2000; Krause, 2002; Krause et al., 2007). More specifically, such activities entail management involvement through capital, human and organizational or equipment investments (Liu et al., 2018).

When developing suppliers through direct involvement activities, buyers can use reward power by directly transferring knowledge to their supplier, so that they can develop and consequently buyers can benefit from their development as well (Liu et al., 2018).

Buyers can also use reward power through direct involvement activities in SSCM. For instance, buyers can support supplier’s top management to improve supplier performance on sustainability (Liu et al., 2018). Also, investments with environmental friendly purposes such as on-site pollution control facilities for suppliers or automation to eliminate risk of occupational hazards can be included in this strategy (Liu et al., 2018). Furthermore, training programs to share sustainability-related knowledge are counted as direct involvement activities in SSCM as well (Lewis et al., 2015).

Supplier power. Suppliers involved in the direct involvement activities strategy have the power to either join the investments being made by the buyer or to not join them. When buyers make the decision to directly invest in a supplier, as mentioned in the previous section, most often the buyer is the one who is investing in terms of payment. However, the supplier needs to agree on the investment as well, which gives them some sort of power. Without the supplier’s approval for investments in the supplier’s firm, the buyer cannot proceed with this strategy. Since the supplier will benefit from the investments as well, the supplier is most likely to follow the buyer’s investments and cooperate. Hence, the buyer is the partner who gets more power indeed when implementing this strategy (Wagner, 2006).

2.2.4. BUYER & SUPPLIER POWER IN COMPETITIVE PRESSURE

Buyer power. Competitive pressure includes the use of multiple suppliers for a purchased item or service, and the threat of switching suppliers (Brito & Miguel, 2017; Krause, 2000; Krause 2002; Liu et al., 2018). By applying this competitive force on the suppliers, buyers create the advantage of being able to request bids from suppliers, which are likely to result in short-term contracts to achieve a low purchase price (Krause, 2000). Hence, by threatening suppliers this way coercive power can be used toward them.

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Within the context of SSCM Liu et al (2018) encourage buyers to include social or environmental performance indicators.

Supplier power. Within the competitive pressure supplier development strategy the supplier is “one of many” available suppliers, which on first sight results into a passive position of the supplier. I.e., the buyer is the powerful partner who is able to choose from many available options for their supply base.

However, the supplier is able to put themselves in a more powerful position through a way that creates more awareness of the capabilities and offers of the supplier. For example, the supplier can become more visible by offering a lower price or higher expertise (Nagati & Rebolledo, 2013). It depends on the type of industry whether price and/or expertise are the trigger to stand out from competitors. For example, expertise is highly important in the automotive industry (Krause, 2002) and in the pharmaceutical industry (Krause, 2002; Shah, 2004). Hence, in the pharmaceutical industry suppliers can use a unique and/or high expertise as a power base in the competitive pressure supplier development strategy.

2.3. CONCEPTUAL MODEL

The aim of this study is to create an understanding of what specific supplier development strategy low-power buying firms use to manage high-power suppliers, with sustainability as a purchasing target. As supplier power influences the supplier development strategy that buyers use, this study has focused firstly on what kind of supplier development strategies are known from previous research. Consequently, the theory sections have described the sources of supplier power and what kind of power buyers use within a certain supplier development strategy. While sustainability targets are included in the context of this study, these are not part of the research scope, as we are interested in the effect of supplier power on buyer’s supplier development strategies.

The conceptual model (fig. 1) shows the focus of this research. This model serves as a graphic tool to answer the research question and the sub-question, as mentioned in section 1:

1. How does the power of suppliers influence what supplier development strategies

low-power buyers use with sustainability as a purchasing target? (shown as link 1

in the conceptual model)

2. What type of power do buyers use within the supplier development strategy to cope

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In order to provide an answer to these questions, the buyer-supplier dyad will be studied. Specifically, on the supplier’s side the studied variable is the source of supplier power, variable (A) in the conceptual model and shown in fig.1. On the buyer’s side the focus is on two variables: the supplier development strategy (B) and the type of buyer power, i.e. coercive or reward power (C). These two variable have been studied in-depth and are discussed in table A.1. (Appendix A); supplier development strategies are discussed further in table 3.4.

Figure 1. Conceptual model: this study will provide an in-depth analysis of variables A, B and C, and “how” link 1 and 2 work, in a buyer-supplier dyad.

(A) Source of supplier power Alternative supply options Switching cost (investment) Supplier’s expertise Supplier’s firm size

(B) Buyer’s supplier development strategy Supplier assessment Supplier incentives Direct involvement activities Competitive pressure

Supplier sustainability performance improvement

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3. METHODOLOGY

The aim of this study is to create an in-depth understanding of how supplier power affects buyers’ supplier development strategy when striving for sustainability. Conceptual theory building was used in order to analyze this phenomenon of interest, and to present and generate theory by defining concepts and the relationships between them (Skilton, 2011). More specifically, this case research can be characterized as theory elaboration (Ketokivi & Choi, 2014), as conceptual propositions of general theory have been used within the specific context of sustainable supply chain management.

Due to the exploratory nature of this research a case study was used. This also enabled the exploration of real-life concepts of the phenomenon of interest and the creation of an in-depth understanding (Eisenhardt and Graebner, 2007; Yin, 1994).

3.1. RESEARCH DESIGN

A multiple-case study provides a stronger base for theory building than single case studies (Yin, 1994), since the findings gained from multiple sources provide space for comparison. Besides, a multiple case study decreases observer bias, increases external validity and allows for more generalizable statements about the results (Eisenhardt and Graebner, 2007; Voss et al., 2002). Moreover, a multiple case study can be used to refine existing theory (Ketokivi & Choi, 2014). Therefore, a multiple-case study was opted.

3.2. RESEARCH SETTING AND CASE SELECTION

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Consequently, the units of analysis were asymmetric power buyer-supplier relationships. Interviews were conducted with purchasing and sustainability managers and/or directors of this buying firm. These professionals were chosen, such that they could provide insights in what supplier development strategies they use toward suppliers, both on a strategic and decision-making level of the company’s supplier sustainability management. Besides, gathering data from multiple sources, i.e. from different professionals, increases the reliability of this research (Voss et al., 2002).

Six cases were selected based on three characteristics and/or conditions. First, in order to gain an understanding of how buyers adapt their supplier development strategy toward the supplier’s relative power, comparison of cases with high and low power suppliers provided a more in-depth analysis. It should be noted that in all cases the buyer is the same company, i.e. only the suppliers are different per case. Therefore, three cases were selected in which the supplier used more power over the buyer and in the other three cases the supplier has less power. In advance of the interviews this has been communicated with the managers, such that sufficient data could be collected for the analysis. Moreover, the difference between low and high power of suppliers could give us more insights in the different sources of supplier power (Krause, 2002), which provided the opportunity to do an in-depth analysis and find similarities and differences between the cases. Namely, from the comparison between the cases it could be analyzed how a certain source of supplier power affects a specific supplier development strategy of the buyer.

Table 3.1. Case selection: criteria 1 – high and low power suppliers

Second, in order to be able to do an in-depth analysis concerning the buyer’s supplier development strategy as well. This was communicated to the managers. They were aware of the four main supplier development strategies, and based on this criterion and the previous one the cases were selected. It was important to communicate this criterion to the managers in advance, since according to Nagati and Rebolledo (2013) supplier development strategies are

Low power supplier – high power buyer High power supplier – low power buyer Case 1 buyer-supplier dyad1

Case 2 buyer-supplier dyad2

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usually needed when managing key suppliers, i.e. these strategies are not initiated with all suppliers.

Table 3.2. Case selection: criteria 2 – buyer’s supplier development strategy initiated; and criteria 3 – sustainability targets

Third, as the context of this study specifically is SSCM, in all cases sustainability targets should be taken into account in the buyer’s supplier development strategy. In all cases sustainability was targeted through different ways, but they were equal in every case. An overview of the main sustainability targets from literature has been provided in table 3.3. The presence of these targets within the cases was confirmed by the managers in advance of the interviews, such that the cases were selected within the SSCM context.

Table 3.3. Case selection: criteria 3 – common sustainability targets

Hence, based on these three criteria the six cases were selected, resulting in six buyer-supplier dyads, consisting of six different buyer-suppliers and one buyer. Sampling was based on literal replication. Selecting cases with relatively high and low supplier power provided comparisons in the findings. Six cases could clarify whether a finding is simply specific to a single case or replicated by several cases (Eisenhardt, 1991).

3.3. DATA COLLECTION

Data was gathered through semi-structured interview protocols and secondary data. Primarily open-ended questions were used in every interview, so that data collection could be done with consistency and flexibility (Yin, 1994). The interview protocol was used to check whether all topics were discussed (Voss et al., 2002) and so that the reliability and validity of the case study could be enhanced or even improved (Yin, 1994). Interviews were conducted face-to-face in the Netherlands, Belgium and The United Kingdom. Considering the global supply chain of this pharmaceutical company, it was not likely to travel for these interviews,

Buyer has initiated supplier development strategy Sustainability targets

Case 1-6 Yes Yes

Sustainability targets

Reduction of hazardous materials in products and services, including packaging Providing a safe and healthful workplace for employees

Reducing waste sent to the environment

Incorporating an environmental, health and safety management system into company’s operations Promoting a diverse and inclusive workplace

Greening of the company’s supply chain

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taking into account the limited time available for this study as well. However, keeping the number of interviewees limited to three managers in total, this could be managed. Interviews were recorded with permission of the interviewees. Transcription afterwards provided a guarantee of the reliability of the process (Yin, 1994).

Secondary data included presentations and documents provided by different purchasing and sustainability managers. Prior to each additional interview, that data was evaluated, so that questions related to certain issues could be added (Corbin & Strauss, 2008). The use of multiple sources increases the reliability of the results of the research (Voss et al., 2002).

3.4. OPERATIONALIZATION

The interviews were analyzed through a structured overview of variables that were indicators for certain strategies as shown below.

Variables Examples within power asymmetry Indication for supplier development strategy

Buyer evaluates supplier’s performance formally.

Buyer provides evaluative feedback for supplier.

Buyer uses supplier certification. Monitoring, reporting and verification of supplier.

Buyer stops placing orders if supplier does not meet min. percentage of certification requirement (Brito & Miguel, 2017).

Buyer creates contractual requirement and code of conduct for sustainability purposes to rule out suppliers with poor performance (Liu et al., 2018).

Supplier assessment

Buyer promises current business. Buyer promises future business. Buyer gives recognition of good supplier status.

Buyer commits to business on a long-term.

Buyers reward suppliers with recognition of a preferred supplier status (Handfield et al., 2000; Krause 2002), e.g. with a high sustainability performance (Liu et al., 2018).

Buyers reward suppliers with large volume orders (Brito & Miguel, 2017).

Long-term contracts (Brito and Miguel, 2017).

Supplier incentives

Buyer trains supplier’s personnel Buyer exchanges personnel

Buyer visits supplier’s site (Handfield et al., 2000; Krause, 2000; Krause, 2002).

Management involvement through capital, human and organizational or equipment investments (Liu et al., 2018).

Transaction-specific investments.

Knowledge transfer through direct interaction between knowledge giver and recipient (Liu et al., 2018).

Direct involvement activities

Buyer uses multiple suppliers for a purchased item or service (Krause, 2000; Krause 2002; Liu et al., 2018).

Buyer can threat to switch suppliers (Krause, 2000; Krause 2002; Brito & Miguel, 2017).

Suppliers with better performance obtain higher volumes of business (Liu et al., 2018).

Competitive pressure

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3.5. DATA ANALYSIS

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4. FINDINGS

In this section the findings of the within-case analysis and the cross-case analysis are discussed. First, the case descriptions are given based on the coding outcomes of the interviews, of which an overview can be found in appendix X. Since data was found extensively only outstanding outcomes and patterns have been highlighted in this section. In order to keep data confidential, the buyer and suppliers are described as in table X.

4.1. DESCRIPTION OF CASES

As one of the criteria for the case selection power asymmetry between buyer and supplier exists in all six cases. The buyer is the same company in each case, while the suppliers are different. Cases 1, 2 and 3 show power asymmetry within a low power supplier – high power buyer relationship, while the remaining cases show a high power supplier – low power buyer relationship.

4.2. WITHIN-CASE ANALYSIS

The cases are analyzed as following. There are six cases, each consisting of one buyer-supplier dyad. Within each case the following variables are discussed: source of buyer-supplier power, buyer’s supplier development strategy and buyer power (coercive or reward), and sustainability targets, including the sustainability code of conduct. A case-oriented analysis was done per buyer-supplier dyad, such that per case the following question could be answered in each : How

does supplier power impact the buyer’s supplier development strategy in this case?

Sustainability findings from secondary data. However, firstly the general findings on sustainability targets, retrieved from secondary data, need to be discussed, as the secondary data counts for all cases. Consequently, within each case the case-specific findings on sustainability are discussed. Sustainability targets have been set as contractual requirements and/or separately in the supplier code of conduct. Apart from being included as a section in the contract, the supplier code of conduct is a separate document that needs to be signed by the supplier as well, and exists as a combination of following codes: “[…] ethical, compliance to laws and

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the right to verify a supplier’s compliance with the Supplier Code of Conduct. If (Company X) becomes aware of any actions or conditions not in compliance with the Supplier Code of Conduct, (Company X) reserves the right to seek corrective action.” [Secondary data; confidential supplier code of conduct document]

4.2.1. CASE 1: BUYER-SUPPLIER DYAD1

Buyer-supplier Dyad1 represents a low power supplier – high power buyer relationship. Source of supplier power. Firstly, in order to define the source of supplier power, it is important to understand why the buyer chooses to have a business relationship with the current supplier. In Dyad1 the buyer chooses to stick to the current supplier, because the supplier’s expertise in lead times and production is better than the expertise of alternative suppliers. “And I found some [suppliers] that could be cheaper, but then lead time does not necessarily work like as for this supplier. […] they are experts of their products already.” (Purchasing manager, Dyad1)However, while expertise is a source of supplier power and a motive to maintain this relationship, the buyer is in a stronger position, since there are multiple alternative suppliers to easily switch to. Relatively this results in a low supplier power (and a high buyer power).

Buyer’s supplier development strategy and buyer power. Therefore, i.e. due to a low supplier power, the supplier is willing to improve their performance according to the buyer’s requirements, so that they maintain the relationship with this buyer. In this case the buyer assesses the supplier’s performance through quarterly face-to-face business reviews, yearly manufacturing quality audits on site and KPI tracking. “So, in the case of this supplier I do that

on a quarterly basis, we meet face-to-face quarterly. […] We do track the supplier’s performance through KPI tracking, so that when we start to see some suppliers with poor trends, that’s when we start to do more frequent reviews, but this supplier performs very well.”

(Purchasing manager, Dyad1) As the supplier is performing well, the buyer tries to motivate them to perform even better, so that the buyer’s performance improves as well. “If we help them or motivate them to improve their performance, we will benefit as well of course, so we try to

encourage them through several ways.” (Purchasing manager, Dyad1)

The buyer uses reward power through a supplier incentives strategy to motivate the supplier to improve their performance and expertise. One of the rewards is that the supplier is rewarded with a good supplier status. “This supplier has a preferred supplier status, as it is the

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implemented in this case. “So, any new project, they will get it automatically and they know

that as well. We have just started to give them some business at one of our plants in Italy.”

(Purchasing manager) Besides, the buyer points out that the supplier is rewarded with a long-term contract, since the supplier agreed to decrease the prices. “[…] we had to renegotiate some

of the prices which they were open to, but they said in that case we would like to extend the contract with more years; which we did.” (Purchasing manager, Dyad1) Finally, the supplier can be rewarded by the possibility to be nominated for the supplier award program, a tool used by the company to motivate any supplier to improve their performances and in return for winning the award, they will get visibility as a high quality supplier. Therefore, this program serves as an incentive for suppliers to perform well and deliver high quality, as in return they will get assigned a recognized good reputation and visibility as a good supplier within the pharmaceutical industry. “We have a supplier awarding system. […], but there are also

opportunities to give them earlier recognition if we feel like the supplier deserves to be

awarded.” (Purchasing manager, Dyad1)

Sustainability targets. Specifically, within the SSCM context of this research, the supplier has signed the code of conduct, in which sustainability targets are included as well.

“These suppliers were very willing to sign the contractual requirements also in terms of sustainability targets, because they are interested in continuing the business with us. […] Indeed, as our relationship benefits them as well, they will follow our sustainability requirements and sign it.” [Sustainability manager on Dyad1, Dyad2, Dyad3] Furthermore, besides accepting the contractual requirement concerning the buyer’s sustainability targets, they have signed the Supplier code of conduct document as well.

Case conclusion Dyad1. Finally, the following question could be answered to this case:

How does supplier power impact the buyer’s supplier development strategy?

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Buyer-supplier Dyad2 represents a low power supplier – high power buyer relationship. Source of supplier power. The supplier in Dyad2 has a relatively low power due to other available supplier alternatives for the buyer. While on the market this supplier is powerful, as it is a big size company compared to its competitors, the supplier does not act as a powerful supplier. In this case this is likely to happen, since the supplier does not want to lose business with this buyer, knowing the buyer can easily switch so another supplier. Therefore, the supplier is willing to cooperate, so that they improve their performance and meet the buyer’s requirements. “Even though they are a big size company, they make efforts to keep the

relationship and are interested in going forward together. For example, we have workshops together on improving our processes.” [Purchasing manager, Dyad2] Hence, in this case the big size of the firm, as one of the sources of supplier power, does not outweigh the many supplier alternatives. I.e., the supplier does not use the source of supplier power to act as more powerful than the buyer, since then the buyer could decide to switch to another supplier.

Buyer’s supplier development strategy and buyer power. In this case the buyer is collaborating with this supplier for over ten years and the supplier is interested as well in improving their processes together. The buyer uses supplier assessment to monitor the performance. For example, the buyer arranges quarterly face-to-face business reviews and quality audits at the distribution centers. “Well, every quarter we measure the delivery

performance KPI’s. We review them together formally, so we keep track of their performance.”

[Purchasing manager, Dyad2] Quality audits are based on distribution guidelines at distribution centers, since this supplier is a logistics service provider, not a manufacturer. “Our quality

people visit the distribution centers to audit distribution quality procedures. This is important, as we have to comply with distribution quality guidelines.” [Purchasing manager, Dyad2]

However, while implementing supplier assessment, the buyer is using reward power through the supplier incentives strategy to motivate the supplier to improve their performance. The buyer has promised increased business volumes to the supplier. “Because of their

remarkable improvements in our current processes such as booking processes we are working on extending the business with them to other areas as well.” [Purchasing manager, Dyad2]

Sustainability targets. The buyer’s strong position could force the supplier to sign.

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sustainability targets, because they are interested in continuing the business with us. […] Indeed, as our relationship benefits them as well, they will follow our sustainability requirements and sign it.” [Sustainability manager on Dyad1, Dyad2, Dyad3] Besides accepting the contractual requirement concerning the buyer’s sustainability targets, they have signed the Supplier code of conduct document as well. Many sustainability targets are included in the contract; “[…] greening of the Company’s supply chain, an environmental, health and

safe management system, reduction of dangerous materials in products or services, these and several other sustainability goals are included in the contract.” [Sustainability manager on contract inclusion]

Case conclusion Dyad2. Finally, it can be concluded how supplier power impacts the buyer’s supplier development strategy within this case. The source of supplier power, i.e. the big size of the firm, cannot outweigh the buyer’s option to switch to another available supplier. In case the big size supplier would like to act more powerful, the buyer could switch to another supplier, as the buyer does not depend on this supplier. Hence, the multiple supplier alternatives for the buyer put the supplier in a low power position, in which the supplier has to follow the buyer’s requirements in order to maintain the business relationship. Therefore, the more powerful buyer uses supplier assessment to monitor the supplier’s performance and the supplier incentives strategy to reward and motivate the supplier for improving their performance and to keep them committed to the relationship.

In buyer-supplier Dyad3 the supplier has low power and the buyer has high power. Since in the interview coding the same main findings are found as in case Dyad2, the analysis of Dyad3 is not as much detailed as the previous cases.

Source of supplier power. The supplier in this case is a big size firm, which can put the supplier in a more powerful situation, as the supplier makes enough sales to survive and does not depend on the sales of a particular supplier. However, this relationship exists for 12 years now, so the supplier is willing to invest in this relationship. “They are a huge logistics provider

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improve our processes with this supplier. We have been together for years and we both have invested a lot in this collaboration you know.” [Purchasing manager, Dyad3]

Buyer’s supplier development strategy and buyer power. The buyer uses a supplier incentives strategy, including different forms of reward power such as a long-term commitment.

“We try to trigger them to do even better by providing a long-term contract.” [Purchasing manager, Dyad3] However, the buyer uses supplier assessment as well by monitoring KPIs, having quarterly business reviews and yearly quality audits at the distribution centers. “We meet

in person every quarter to discuss the KPI performance, because we need to check their performance and we need to be aware whether they are improving, especially now that we have renewed a 3-year contract.” [Purchasing manager, Dyad3]

Supplier targets. The low power supplier was willing to sign the code of conduct document, as well as accepting the contractual requirement concerning the buyer’s sustainability targets. “These suppliers were very willing to sign the contractual requirements

also in terms of sustainability targets, because they are interested in continuing the business with us. […] Indeed, as our relationship benefits them as well, they will follow our sustainability requirements and sign it.” [Sustainability manager on Dyad1, Dyad2, Dyad3]

Case conclusion Dyad3. Hence, it can be concluded how supplier power affects the buyer’s supplier development strategy. The source of supplier power, i.e. the big size firm in this case, did not help the supplier to have more power than the buyer, since the buyer can easily switch to another supplier. The low power supplier has to comply with the buyer’s requirement, which gives the buyer the space to assess the supplier, but also use a supplier incentives strategy and forms of reward power such as a long-term commitment to encourage the supplier to improve their performance.

In this case the supplier has high power and the buyer has relatively low power. Source of supplier power. In Dyad4 the motivation for the buyer to maintain the business relationship with this current supplier is high switching cost in case of switching to another supplier. “It would take a long time to qualify another source and it would inquire a

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the supplier does know that they are our single source for this product, because they are aware of their competitors and this product is just rarely produced.” [Purchasing manager, Dyad4]. Therefore, the buyer has low power, as they highly depend on this supplier. In terms of expertise, the supplier performs poorly. “We have a lot of quality issues with them. They are

going to be re-audited as well, because they failed on that previous quality audit.” [Purchasing manager, Dyad4]

Buyer’s supplier development strategy and buyer power. The buyer uses a direct involvement activities strategy, but the type of power, i.e. coercive or reward power, was not clearly present in this case. The buyer increases their investment in supporting the development of this supplier. One of the transaction-specific investments is personnel exchange to support the supplier’s quality delivery, where the buyer sends an employee who provides support. “We provide our supplier with help from one of our packaging engineering experts. […] to support this supplier from a technical standpoint to make sure that they get the right level of support, because it is a complicated product.” [Purchasing manager, Dyad4] The buyer does this to improve the supplier’s performance, which of course will help the buyer as well in return, as they receive the product. “They cannot firm that audit so they need to pass it, so we are helping

them to make sure they pass. So, we are really actively trying to improve them. […] So it’s more the continuous improvement aspect and how we are trying to support them so that we can keep on working with them.” [Purchasing manager, Dyad4] Another investment is a quality improvement plan and/or workshops. “[…] and they have a quality improvement plan with

different actions that they are working on.” [Purchasing manager, Dyad4]

However, while also knowledge transfer between buyer and supplier is a form of direct investment, the supplier in Dyad4 is very critical on sharing information. The supplier holds back information, because they are afraid that the buyer will switch from supplier and use that knowledge somewhere else. “They are going to want to protect their technology as much as

possible and they are not going to want to share information with us, which we need to be able to improve. […] because they are afraid that we are trying to take some of that information, so that we can go somewhere else and have it done somewhere else.” [Purchasing manager, Dyad4]

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activities. “This quality improvement plan includes more than quality requirements. Our team

has included sustainability goals in this plan as well, for example how we can make our supply chain more green.” [Sustainability manager, Dyad4] Therefore, both supplier and buyer work on sustainability targets together, while the supplier refuses to sign the code of conduct.

Case conclusion Dyad4. Finally, it can be explained how supplier power affects the buyer’s supplier development strategy in this case. The source of supplier power in Dyad4 is high switching cost for the buyer in case of switching to an alternative supplier. Besides, the fact that the purchased product is produced rarely and this supplier is the only supplier for this item, results in a high dependency of the buyer on the supplier. Therefore, the low power buyer invests a lot in this supplier. The buyer uses the direct investment activities strategy to cope with the high power supplier and to try to improve the supplier’s performance, as switching cost are too high to switch to another supplier. Moreover, suppliers for this product are rare.

Dyad5 includes a high power supplier and a low power buyer.

Source of supplier power. The degree of the buyer’s dependence on the supplier is high, as they do not have other or limited alternative suppliers to switch to. “I think now they feel the

power as we are depending too much on them. This is the case indeed, because we do need the product from them for manufacturing.” [Purchasing manager, Dyad5] The high dependence of the buyer causes a high power position of the supplier.

Buyer’s supplier development strategy and buyer power. The buyer uses coercive power through a competitive pressure strategy to cope with the high power supplier. Coercive power is used as a threat to switch from supplier. “I have kind of threatened them to switch

from supplier if they keep increasing prices. So, they know very well we are looking into other supply options.” [Purchasing manager, Dyad5] However, in order to become less dependent and initiate competitive pressure between suppliers, the buyer is starting a dual sourcing situation. “We are in the stage of working with a second (Chinese) supplier. […] So that will

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cheaper players in China; let’s bring them up to speed and try to have a dual sourcing situation, so that we can push away the Japanese due to pricing.” [Purchasing manager, Dyad5]

Besides, the buyer and supplier of Dyad5 have signed a short-term contract based on pricing only. “We have a yearly renewable contract. Every year we have the discussions on

pricing and volumes. It’s just a pricing agreement really, it’s not a full contract.” [Purchasing manager, Dyad5] The category manager explains that the choice for a short-term contract is agreed upon, because of wanting to be able to negotiate yearly when future volume forecasts are unknown. “And, because we had some cost pressures on this brand, it did not make sense

to commit for too long. You want to have the ability to go back every year and negotiate about price. And second, the thing that we did not have is visibility on forecast. So, then I cannot tell you what next year’s volumes are going to be, which results in short-term contracts.”

[Purchasing manager, Dyad5]

The supplier is being assessed through yearly face-to-face performance reviews to negotiate pricing. Assessment is done also by supplier performance KPI tracking, quality audits on site and quality metrics tracking.

Sustainability targets. In this case the supplier refused to sign the code of conduct, which included the sustainability targets of the buyer. “Well, currently we do not have any other

options to switch to, so in order to get the product, we cannot force them to sign our supplier code of conduct.” [Sustainability manager, Dyad6] Hence, the buyer lacks power to convince the supplier to sign it.

Case conclusion Dyad5. From these findings the following question can be answered for this case as well: How does supplier power impact the buyer’s supplier development strategy

in this case? Due to the limited alternative supply options the buyer has low power. The supplier

is in a strong position and therefore they keep increasing the prices. The buyer can only deal with this by adding other supply options to it, such that the buyer can switch. This results in coercive power use by the buyer, threatening the supplier to switch, and a competitive pressure strategy. By moving from single sourcing to dual sourcing, the suppliers are expected to compete and the buyer can gain more power, as they have the ability to switch to an alternative supplier.

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Source of supplier power. The supplier is highly dependent on the supplier in terms of limited or no supplier alternatives. “Unfortunately this is the only parcel shipper that is

available in the United States, so we need them. We depend too much on them, while they don't really care, so we are looking for alternatives” [Purchasing manager, Dyad6] Besides, the supplier’s expertise is high. “They have a good reputation, are solid, not risky and provide on-time deliveries.” [Purchasing manager, Dyad6] Moreover, the supplier is a big size firm with high power. “This is a big provider, who is pushing too much on price negotiations and is not

really following our requirements. We are very small in perspective.” [Purchasing manager, Dyad6]

Buyer’s supplier development strategy and buyer power. The buyer is planning to use coercive power and a competitive pressure strategy. Coercive power is present by including penalties in the contract, as this supplier does not follow their requirements. “This supplier is

giving us a hard time in not following our requirements, so we are looking for opportunities to include penalties in the contract.” [Purchasing manager, Dyad6]

In case Supplier6 the supplier does not accept any investments like this, as it asks for investment from their side as well. “The supplier is not open to join us at any workshop or whatsoever.” [Purchasing manager, Dyad6]

The buyer uses a competitive pressure strategy not only because of high prices, but also because of the fact that the supplier does not follow their requirements. “We depend too much

on them; they don't really care, so we are looking for alternatives.” [Purchasing manager, Dyad6] And “They didn’t want to use our contract model and rate sheet. They don’t follow our

requirements. […] They also start many price negotiations, because they know they are our only supplier for this service.” [Purchasing manager, Dyad6]

Sustainability targets. In this case the buyer only has a pricing agreement, not a full contract. “It’s just a pricing agreement really, […]. We don’t have a 15 page contract with all

the legal terms and stuff like that.” [Sustainability manager, Dyad6] Hence, the supplier does not need to sign any sustainability requirements, as these are not included in a pricing agreement. However, the manager adds to it that “[…] even if we would want to have a full

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tries to assess them on sustainability performance through quality audits, but these are done only yearly. However, the supplier has not agreed on meeting the buyer’s sustainability targets, regardless of whether they are being assessed.

Case conclusion Dyad6. The analysis of this case provided a case-specific answer to how the source of supplier power affects the buyer’s supplier development strategy. The high supplier power in this case is mainly sourced from the scarcity of service, resulting in a high dependency of the buyer on the supplier. Also, the supplier is a powerful big size firm, who is an expert on their service, has a good reputation and is not willing to cooperate easily. These forms of supplier power altogether make the buyer less powerful. However, in order to make the supplier meet the buyer’s requirements anyway, the buyer is introducing to use coercive power by including penalties in the contract in case the supplier does not follow their requirements. By implementing a competitive pressure strategy and using coercive power, while looking for other supply options, the buyer hopes to make the supplier more cooperative in meeting their requirements, including sustainability targets.

4.3. CROSS-CASE ANALYSIS: FINDING PATTERNS

Following the within-case analysis, a cross-case analysis was done to show differences and similarities between the cases. Hence, the patterns provided in this section are useful to illustrate if and how the source of supplier power, i.e. the independent variable of this research, affects the buyer’s development strategy, i.e. the dependent variable. A complete overview of the findings of this analysis can be found in table 4.1. and figures 4.1 – 4.3. A detailed overview of findings per variable is provided in table C.1.- C.7. in Appendix C.

Similarities. The findings of the cross-case analysis show many similarities between the cases. Dyad1, Dyad2 and Dyad3, labeled as low-power suppliers, show the exact same links with the source of supplier power, the type of buyer power, the supplier development strategy and the supplier code of conduct. In other words, these three cases show that the supplier power is low due to the multiple supplier alternatives and the easy option to switch from them. Also, these cases show that the buyer uses the same supplier development strategy; supplier incentives, by using different forms of reward power. Finally, the three low-power suppliers have all signed the sustainability code of conduct.

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buyer uses coercive power through a competitive pressure strategy to deal with the powerful supplier. Both suppliers have a high power due to the single sourcing that causes the supplier to become more powerful, and the rare resources that the suppliers own. The three high power suppliers have not signed the sustainability code of conduct.

Besides, in each case the presence of either coercive or reward power was found, except for case Dyad4.

Finally, the only similarity found between the low power and high power suppliers, is the fact that the supplier assessment (supplier development) strategy is being used for every supplier. The supplier is being assessed by organizing (face-to-face) business reviews to discuss the Key Performance Indicators such as quality metrics and delivery performance. The site visits, whether the sites are manufacturing plants or distribution centers, are for quality audit purposes. As discussed above in the supplier assessment section, the buyer invests in site visits in all cases.

Differences. Dyad4 is a high-power supplier that stands out in the findings, since it gives additional insights on the relationship between source of supplier and the supplier development strategy used. This supplier has high power, since it is a single source supplier, on which the buyer was highly depending. Moreover, high switching cost in case the buyer would want to switch from supplier, made de supplier even more powerful. Dyad4 is the only supplier with high switching cost as a source of supplier power, and the only supplier for which the buyer uses the supplier development strategy of direct involvement activities. However, the type of buyer power, i.e. coercive and/or reward power was not clearly present within this case.

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Case Supplier power

Source of supplier power Buyer power Supplier development strategy

Sustainability code of conduct Dyad1 Low Multiple supplier alternatives, easy to

switch

Reward power Supplier incentives Signed by supplier

Dyad2 Low Multiple supplier alternatives, easy to switch

Dyad3 Low Multiple supplier alternatives, easy to switch

Dyad4 High Single sourcing, high dependence on supplier, high switching cost

Buyer power not clearly present

Direct involvement activities

Not signed by supplier

Dyad5 High Single sourcing, high dependence on supplier, rare resources: moving to dual sourcing

Coercive power Competitive pressure

Dyad6 High Single sourcing, high dependence on supplier, Rare resources

Coercive power Competitive pressure

Table 4.1. Overview main findings of all cases

Figure 4.1. Findings pattern: case Dyad1, Dyad2 and Dyad3

Figure 4.2. Findings pattern: case Dyad4

Figure 4.3. Findings pattern: case Dyad5 and Dyad6

Source of supplier power

Single source, high dependence on rare resources

Buyer’s supplier development strategy

Competitive pressure

High power supplier does not sign code of conduct

Coercive power by buyer Source of supplier power

Single source, high switching cost

Direct involvement activities

High power supplier does not sign code of conduct Source of supplier power

Multiple suppliers, easy to switch

Supplier incentives

Low-power supplier does sign code of conduct

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5. DISCUSSION

In this section the findings of this research are linked to the theory section in order to discuss whether the findings are similar to or contradictory to existing literature.

5.1.SOURCES OF SUPPLIER POWER

The sources of supplier power found in the analyses of this research, and how that results into high or low supplier power, is coherent with the existing sources as described in the literature of Belaya, Gagalyuk and Hanf (2009). The findings show that supplier power sources such as low alternative supplier options, high switching cost and high supplier’s expertise (scarcity of resources) result in high power suppliers.

However, in contradiction to the theory (Belaya, Gaglyuk and Hanf, 2009) the big size of the firm, while existing in 50% of the cases, was not the main source for suppliers with high power. In those cases the analysis shows that either the fact that there are low or no alternative supplier options, or high supplier’s expertise are the main source for the high power of suppliers. These sources made the buyer highly dependent on the suppliers. Hence, it can be concluded from this research that the size of the firm is subservient to other sources of supplier power such as mentioned above and in table 4.1.

5.2.BUYER POWER: REWARD VS. COERCIVE

Regarding findings on reward and coercive power all findings are in coherence with existing literature as described in section 2.

Reward power was found in cases where the supplier has low power. Since the buyer is in a powerful situation to leverage power, they are able to use reward power to motivate their suppliers. In line with the fact that reward power effects the BSR positively (Benton & Maloni, 2005; Maloni & Benton, 2000; Brito & Miguel, 2017), reward power was found indeed in cases where suppliers and the buyer worked together, trying to move forward.

Coercive power was found in cases where the buyer has low power. Threats to switch suppliers or to include penalties in contracts when not following their requirements show that the buyer is less powerful and in some situations even looks hopeless in terms of trials with the supplier.

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2005; Ireland & Webb, 2007; Maloni & Benton, 2000; Crook & Combs, 2007; Brito & Miguel, 2017), while this did not seem to be the case in this research. The buyer introduced the use of coercive power only after noticing that the supplier did not want to work with them the way the buyer wants it. Not following their requirements made the buyer think about introducing penalties in the contract, while that had not been done in earlier stages of the relationship. Hence, the coercive power used by the buyer did not lead to a negative relationship between buyer and supplier, but the coercive power was used as a reaction to the lack of effort of the supplier.

5.3.BUYER’S DEVELOPMENT STRATEGY

No outstanding findings show differences between the findings of the kind of supplier development strategies and existing literature. The theory of Krause (2002), Liu et al. (2018) and Brito and Miguel (2017) is reflected in this research, where the four main supplier development strategies are present.

However, while their theory (Krause, 2002; Brito & Miguel, 2017; Liu et al., 2018) gives the reader the impression that the buyer uses only one main supplier development strategy to deal with their supplier. The supplier assessment strategy was used in all cases, together with another supplier development strategy, i.e. supplier incentives, direct involvement activities or competitive pressure.

The implementation of supplier assessment in all cases can be explained by the theory of Shah (2004). Due to high quality standards and regulations that are characteristics of the pharmaceutical industry (Shah, 2004), supplier assessment seems to be a compulsory supplier development strategy, rather than shown in previous literature as a strategy that the managers can choose to implement.

5.4.SUSTAINABILITY CODE OF CONDUCT

Within the SSCM context, it was expected that the buyer could use the sustainability code of conduct in any case to force suppliers to follow their sustainability targets. Namely, it can be included as a contractual requirement as well, which makes the supplier sign it automatically when interested in doing business with the buyer.

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6. CONCLUSION

This research adds to the asymmetric power relationship literature in the pharmaceutical world that had been remained under-studied in this industry (Shah, 2004). Also, this study contributes to buyer-supplier relationships literature in an adversarial power asymmetry context, where strategies for improving power have mainly been discussed from a focal supplier’s perspective rather than from the low-power buyer’s view (Seuring and Muller, 2008; Gorton et al., 2015). The findings of this research give insights from a buyer’s perspective. In addition, this research identifies patterns between the source of supplier power and the buyer’s supplier development strategy used, specifically in a SSCM setting.

6.1. CONCLUSION

The objective of this study was to answer the research question: How does the power of suppliers influence what supplier development strategies low-power buyers use with sustainability as a purchasing target? In the findings of this research three patterns have been identified, that serve as answers to this research question.

Low-power suppliers. In cases with low-power suppliers, where multiple supplier alternatives are available and it is easy to switch to another supplier, the buyer creates supplier incentives to keep the relationship with their supplier. This supplier development strategy is used by buyers to motivate suppliers. The buyer generally creates incentives using reward power, which indeed motivates the suppliers to step up and keep the relationship with the buyer as it is or improve it. Supplier incentives found were recognition of a preferred supplier status, increased business volumes and long-term commitments and/or contracts with the supplier. However, these findings do not show new insights to existing literature, but the selection of low-power suppliers was needed to shape a contract between the findings of low-power and high-power suppliers. Therefore, the low-power supplier cases are useful for making more in-depth conclusions on the research question.

The effect of supplier power on supplier development strategies of buyers with sustainability targets