1. Industrial Marketing Management 36 (2007) 219 – 229
Power and interdependence in buyer supplier relationships:
A purchasing portfolio approach
Marjolein C.J. Caniels *, Cees J. Gelderman 1
¨
Faculty of Management Sciences (MW), Open University of the Netherlands (OUNL), P.O. Box 2960, 6401 DL Heerlen, The Netherlands
Received 27 September 2004; received in revised form 4 July 2005; accepted 3 August 2005
Available online 23 September 2005
Abstract
Power and interdependence are generally considered to be important concepts for understanding buyer – supplier relationships. Yet, empirical
research on power and interdependence in buyer – supplier relationships is still limited. Power and interdependence issues also play an important
role in Kraljic’s portfolio approach, which is increasingly used by purchasing practitioners for managing different supplier relations and
developing appropriate purchasing strategies. In this paper, the concepts of power and interdependence have been quantified for each quadrant of
the Kraljic portfolio matrix, using data from a comprehensive survey among Dutch purchasing professionals. Several hypotheses have been tested
and the findings largely confirm the theoretical expectations. The observed supplier dominance in the strategic quadrant of the Kraljic matrix is a
notable finding, which indicates that even satisfactory partnerships are dominated by the supplier. Therefore, the presumed power symmetry of
buyer – supplier relationships in the strategic quadrant seems no longer valid.
D 2005 Elsevier Inc. All rights reserved.
Keywords: Buyer – supplier relationships; Power and interdependence; Purchasing portfolio approach; Kraljic matrix; Purchasing strategies
1. Introduction models using other classification dimensions (e.g. Bensaou,
1999; Olsen & Ellram, 1997; Van Stekelenborg & Kornelius,
Purchasing portfolio models have received much attention 1994). However, the fundamental assumption of all portfolio
in recent literature about professional purchasing. Not only did models seems to be the occurrence of differences in power and
Kraljic’s seminal paper in the Harvard Business Review in dependence between buyers and suppliers (Dubois & Pedersen,
1983 have a broad influence on professional purchasing (see 2002). Kraljic (1983) does not explicitly deal with issues of
the evidence of Gelderman, 2003; Kamann & Bakker, 2004), it power and dependence. However, some of his recommendations
has also inspired many academic writers to undertake further obviously refer to the power structure (Fexploit power_). Others
research into portfolio models (e.g. Bensaou, 1999; Croom, are aimed at reducing the dependence on suppliers (Fdiversify_).
2000; Dubois & Pedersen, 2002; Dyer, Cho, & Chu, 1998; Moreover, Kraljic (1983: 112) stated that the general idea of the
Gelderman & Van Weele, 2002, 2003; Lilliecreutz & Ydres- portfolio approach is to ‘‘minimize supply vulnerability and
kog, 1999; Nellore & Soderquist, 2000; Olsen & Ellram, 1997; make the most of potential buying power’’. Therefore, power
Wagner & Johnson, 2004; Wynstra & ten Pierick, 2000; and dependence play a significant part in the Kraljic approach.
Zolkiewski & Turnbull, 2002). Although power and dependence are generally considered
Kraljic’s model classifies a firm’s purchased intermediate important for the understanding of buyer –supplier relation-
goods into four categories on the basis of two dimensions: (1) ships (e.g. Cox, 2001; Frazier & Antia, 1995), it seems that
profit impact and (2) supply risk. Recent adaptations and they are still often overlooked factors in conceptual and
refinements of Kraljic’s model have led to alternative portfolio empirical studies (e.g. Cox, 2001; Maloni & Benton, 2000).
Little is known about the exact way in which power and
dependence in buyer – supplier relationships enter the Kraljic
* Corresponding author. Tel.: +31 45 5762724; fax: +31 45 5762103.
E-mail addresses: marjolein.caniels@ou.nl (M.C.J. Caniels),
¨
matrix (Dubois & Pedersen, 2002; Gelderman & Van Weele,
kees.gelderman@ou.nl (C.J. Gelderman). 2003). Moreover, the few portfolio models that do discuss
1
Tel.: +31 45 5762590; fax: +31 45 5762103. power and dependence issues in relation to portfolio matrices
0019-8501/$ - see front matter D 2005 Elsevier Inc. All rights reserved.
doi:10.1016/j.indmarman.2005.08.012
2. 220 M.C.J. Caniels, C.J. Gelderman / Industrial Marketing Management 36 (2007) 219 – 229
¨
generally focus on the strategic quadrant only (Wagner & Kraljic’s approach includes the construction of two portfolio
Johnson, 2004). Buyer –supplier relationships in this quadrant matrices. The first matrix classifies a firm’s purchased products
can be characterized as strategic partnerships. However, many on the basis of two dimensions: profit impact and supply risk.
studies have acknowledged that not all supplier relationships Each dimension has two possible values: Flow_ and Fhigh_. The
can or should be strategic partnerships (e.g. Gadde & Snehota, resulting 2 Â 2 matrix consists of four quadrants (see Table 1).
2000; Wagner & Johnson, 2004). In fact, firms are found to Depending on the category, Kraljic identifies certain Fmain
benefit from entering into a variety of relationships with tasks_ for the firm in the interaction with its supplier. He also
different suppliers (e.g. Bensaou, 1999; Lilliecreutz & Ydres- identifies the required information and the decision level in
kog, 1999). Therefore, undertaking research into power and organizations per category.
dependence in all four quadrants of the matrix for all The main purpose of Kraljic’s approach is to identify
relationship types is critically important. strategic items. The second Kraljic matrix focuses on this
The aim of this paper is to empirically test hypotheses that can category. This matrix shows the relative power position of the
be deduced from the literature on power and dependence with company in the corresponding supply markets. Three general
respect to all quadrants of the Kraljic purchasing portfolio purchasing strategies are distinguished, depending on the
matrix. In order to do this we have defined the concepts of power balance of power in the buyer – supplier relationship: exploit
and dependence in terms of buyer’s and supplier’s dependence. (in case of buyer dominance), balance (in case of a balanced
Subsequently, we have developed constructs for buyer’s relationship), and diversify (in case of supplier dominance).
dependence as well as supplier’s dependence. The empirical Note that Kraljic does not pay much attention to strategic
analysis is founded on a survey among 250 purchasing aspects of product categories other than the strategic items.
professionals. On the basis of the survey data we have assessed Other scholars have filled this gap (e.g. Bensaou, 1999; Elliott-
power and interdependence in buyer –supplier relationships for Shircore & Steele, 1985; Lilliecreutz & Ydreskog, 1999; Olsen
all quadrants of the Kraljic matrix. In general terms this study & Ellram, 1997; Syson, 1992; Van Weele, 2000). They refined
contributes to a better understanding of the (perceived) power the original matrix and elaborated on the Fmain tasks_ for
and interdependence in buyer – supplier relationships. bottleneck, non-critical and leverage items. In addition, they
The organization of the paper is as follows. In Section 2 a formulated strategic recommendations, resulting in one overall
brief overview of the Kraljic approach is given and, on the basis purchasing strategy for each cell/category.
of recent literature, we will identify hypotheses with respect to Although power and interdependence issues underpin these
power and dependence for each quadrant. In Section 3 the survey purchasing strategies, they are not explicitly discussed in any
design and the constructs for the key variables are presented. The of the studies referred to above. Yet, the purchasing strategies
results of the survey are shown in Section 4. Section 5 will for each of the Kraljic quadrants give rise to hypotheses on the
conclude and give suggestions for further research. importance of power and dependence in the Kraljic matrix. In
Section 2.3 we will revisit these strategies and connect them to
2. Conceptual background the power and interdependence balance.
2.1. The Kraljic matrix 2.2. Power and interdependence
Kraljic (1977, 1983) introduced a comprehensive portfolio Firms always depend, to varying extents, on their trading
approach as a tool for professional purchasers. With the help of partner. Early studies on dependence focused on the effects for
the portfolio matrix, professional purchasers could optimize the the buyer of its dependence on the supplier, without taking into
use of capabilities of different suppliers (Nellore & Soderquist, account the supplier’s dependence (e.g., El-Ansary & Stern,
2000) and thereby effectively manage suppliers. Currently, 1972). More recent studies have incorporated dependence from
Kraljic’s matrix is widely used by purchasing professionals. the perspective of the buyer as well as the supplier (Buchanan,
Especially in Western Europe the Kraljic approach has received 1992; Geyskens, Steenkamp, Sheer, & Kumar, 1996; Kumar,
large-scale recognition and has attained an increasing degree of Sheer, & Steenkamp, 1995). In other words, dependence is
adoption. Lamming and Harrison (2001) stated that Kraljic’s mutual.
matrix remains the foundation for purchasing strategies of many Mutual dependence and power are closely related concepts.
organizations across sectors. In a survey of Dutch companies The buyer’s dependence on the supplier is a source of power for
Boodie (1997) found that 44% of the responding purchasing
managers used the Kraljic matrix for formulating purchasing
strategies. No less than 80% of industrial companies that operate Table 1
on a mass production basis use it. Several years later, Bos, Van The Kraljic purchasing portfolio model (modified from Kraljic, 1983: 111)
der Heijden, Goedhart, and Notermans (2005) reported in a Profit impact Supply risk
similar study that portfolio usage was increased to 61%. In the Low High
course of time the Kraljic approach has entered many textbooks High Leverage items Strategic items
on purchasing and supply management. Gradually Kraljic has Exploitation of purchasing power Diversify, balance, or exploit
gained acceptance in other countries, notably in the USA, Low Non-critical items Bottleneck items
Canada and Northern Europe. Efficient processing Volume assurance
3. M.C.J. Caniels, C.J. Gelderman / Industrial Marketing Management 36 (2007) 219 – 229
¨ 221
the supplier, and vice versa. A well-known definition is that the possesses much power, it is not likely that either side is going
relative power of an organization over another is the result of the to use it. The risk of retaliation is often considered as being too
net dependence of the one on the other. If A depends on B more high (Ramsay, 1996). In addition, when total interdependence
than B depends on A, then B has power over A (Pfeffer, 1981). is high, both partners are faced with high exit barriers
Similarly, Bacharach and Lawler define relative power as ‘‘the (Geyskens et al., 1996).
dependence of one party compared to the dependence of the From the above can be concluded that the literature makes a
other party’’ (1981: 65). Likewise, Dickson (1983) states that clear difference between the concepts of (1) relative power,
the power of one party over another is a function of relative which is the result of interdependence asymmetry; and (2) total
dependence. Anderson and Narus (1990) also use the term power, which is the result of full interdependence of both parties
relative dependence to refer to the difference between a firm’s on each other and which is commonly referred to as total
dependence on its partner and its partner’s dependence on the interdependence. However, empirical research on the impact of
firm. The primary consequence of relative dependence is relative power and total interdependence on buyer – supplier
indicated as power. relationships is scarce. To be able to fill this void, both concepts
Buchanan (1992) conceptualized power-dependence imba- were defined in terms of buyer’s and supplier’s dependence (cf.
lances in buyer –supplier relationships as the difference in Bacharach & Lawler, 1981; Pfeffer, 1981). In this study, the
value that buyers and sellers attach to the relationship. In buyer’s relative power will be measured as the difference
asymmetric relationships, the most independent partner dom- between supplier’s dependence and buyer’s dependence. Sim-
inates the exchange. Balanced relationships refer to domination ilarly, the supplier’s relative power will be measured as the
of neither party (Buchanan, 1992). Kumar et al. (1995) use the difference between buyer’s dependence and supplier’s depen-
term interdependence asymmetry in this respect, which is dence. This conforms Pfeffer’s (1981: 99) viewpoint that the
defined as the difference between the two partner’s levels of relative power of one social actor over another is the result of the
dependence. Symmetrical interdependence exists when parties net dependence of the one on the other. In accordance with
are equally dependent on each other. Bacharach and Lawler (1981: 61), total interdependence in a
Buyer – supplier relationships that are characterized by relationship will be measured by ‘‘the sum of the parties’
asymmetric interdependence are believed to be deficient because dependence on one another’’.
the independent partner experiences high power and might be
attempted to exploit it (Anderson & Weitz, 1989; Frazier & 2.3. Hypotheses on relative power and total interdependence in
Rody, 1991; Geyskens et al., 1996). McDonald (1999) states in the Kraljic matrix
this respect that power imbalances within a buyer –supplier
relationship can lead to unproductive partnerships. In the long In Section 2.1 we referred to purchasing strategies for each
term the position of the weaker party will be eroded too much of the four Kraljic quadrants. These strategies will be used to
and the partnership will be destroyed. Anderson and Weitz point characterize the relation between the Kraljic quadrants and the
out that ‘‘imbalanced channel relationships are characterized by power-dependence balance in buyer – supplier relationships
less cooperation and greater conflict’’ (1989: 312). However, (see also Van Weele, 2000).
note that an unbalanced relationship does not automatically Strategic products 2 represent a considerable value to the
involve actual misuse of power (Provan & Gassenheimer, 1994). organization in terms of a large impact on profit and a high
Power can provide an effective coordination of exchange supply risk. Examples are engines and gearboxes for automo-
relationships, as the distribution of power has become legitimate bile manufacturers, turbines for the chemical industry and
over time (Frazier & Antia, 1995). Maloni and Benton (2000) bottling equipment for breweries. Often strategic products can
found empirical evidence, which indicates that power asymme- only be purchased from one supplier (single source), causing a
try can be used as a tool to promote supply chain integration and significant supply risk. In order to counterbalance this risk,
to induce high levels of performance. firms will aim at building a partnership relationship with its
Various researchers have argued that a comprehensive view supplier (Elliott-Shircore & Steele, 1985). The mutual trust and
of the interdependence of a dyadic relationship should include commitment that comes with the intensified relationship is
not only interdependence asymmetry (or relative power), but likely to reduce the supply risk to a minimum. A close and
also total interdependence (or total power), for example lasting cooperation with suppliers will lead to improvements in
Bacharach and Lawler (1981), Frazier and Antia (1995), product quality, delivery reliability, lead times, product devel-
Gundlach and Cadotte (1994), Geyskens et al. (1996), Kumar opment, product design, and it will lead to cost reduction
et al. (1995). Total interdependence refers to the intensity of a (Hadeler & Evans, 1994; Tuten & Urban, 2001). This situation
relationship. A high level of total interdependence is an can be characterized as one with balanced power. Buyers and
indicator for a strong, cooperative long-term relationship in suppliers are both heavily involved in the partnership, therefore
which both parties have invested. Mutual trust and mutual
commitment will characterize those relationships (Geyskens et 2
al., 1996). Besides this loyalty towards the other partner and Although Kraljic (1983) identified three strategies for this quadrant (exploit,
balance and diversify), our discussion will be limited to the balance strategy,
the accompanying desire to continue the relationship, there is which is in accordance with the approach adopted by many others, e.g. Elliott-
an alternative motivation for both firms to keep the partnership Shircore and Steele (1985), Hadeler and Evans (1994), Olsen and Ellram
intact. In the case that both parties know that the other party (1997), and Van Weele (2000).
4. 222 M.C.J. Caniels, C.J. Gelderman / Industrial Marketing Management 36 (2007) 219 – 229
¨
mutual dependence is expected to be high. Total interdepen- Table 2
dence is high as well, since the relationship is very intense. Expectations on basis of the literature with respect to relative power and total
interdependence in the Kraljic matrix
Hypothesis 1a. The strategic quadrant of the Kraljic matrix is Profit Supply risk
characterized by balanced power. impact Low High
Hypothesis 1b. In the strategic quadrant of the Kraljic matrix High Leverage items Strategic items
Buyer dominated: BD < SD Balanced power: BD = SD
total interdependence is higher than in each of the other
Moderate level of High level of interdependence:
quadrants. interdependence: (BD + SD) in (BD + SD) in the strategic
the leverage quadrant < (BD + SD) quadrant > (BD + SD) in each
Bottleneck products have a moderate influence on the
in the strategic quadrant and of the other quadrants
financial results of a firm, however, they are vulnerable with (BD + SD) in the leverage
regard to their supply. Suppliers have a dominant power position quadrant > (BD + SD) in the
for these products (Kempeners & van Weele, 1997). The non-critical quadrant
purchasing strategy is therefore primarily focused on assurance Low Non-critical items Bottleneck items
Balanced power: BD = SD Supplier dominated: BD > SD
of supply, if necessary even at additional cost. Keeping extra
Low level of interdependence: Moderate level of
stocks of the materials concerned or developing consigned stock (BD + SD) in the non-critical interdependence: (BD + SD)
agreements with suppliers are examples of this strategy. Firms quadrant < (BD + SD) in each in the bottleneck
can make a risk analysis to determine the most important of the other quadrants quadrant < (BD + SD) in the
bottleneck products and the consequences hereof. Contingency strategic quadrant and
(BD + SD) in the bottleneck
planning might be a possibility for dealing with unexpected bad
quadrant > (BD + SD) in the
situations. Since the buyers and suppliers are not highly involved non-critical quadrant
in the relationship, total interdependence in this quadrant is Note that BD refers to buyer’s dependence and SD denotes supplier’s
expected to be lower than in the strategic quadrant. dependence.
Hypothesis 2a. The bottleneck quadrant of the Kraljic matrix is
characterized by supplier dominance. From a purchasing point of view, these items cause only few
technical or commercial problems. As a rule of thumb routine
Hypothesis 2b. In the bottleneck quadrant of the Kraljic matrix products require 80% of the purchasing department’s time, while
total interdependence is higher than in the non-critical they often represent less than 20% of the purchasing turnover.
quadrant. The handling of these products requires a purchasing strategy
In general leverage products can be obtained from various aimed at reducing the logistic and administrative complexity
suppliers. These products represent a relatively large share of the (Olsen & Ellram, 1997). Systems contracting is generally
end product’s cost price in combination with a relatively low advised as the way of doing business with suppliers of routine
supply risk. As a consequence, this segment is buyer dominated products (Elliott-Shircore & Steele, 1985; Kempeners & van
(Kempeners & van Weele, 1997). The buyer has many possibilities Weele, 1997). The main idea is to enhance purchasing power by
and incentives for negotiation, since small percentages of cost standardization and bundling of purchasing requirements. The
savings usually involve large sums of money (Olsen & Ellram, routine character of the transaction implies that the mutual
1997). At the same time the supply risk is minimal. These dependence between buyers and suppliers is balanced. Total
characteristics justify an aggressive approach to the supply market interdependence is low, since the buyer’s dependence and the
(e.g. Van Weele, 2000). Frequently, a purchasing strategy on the supplier’s dependence will both be quite low.
basis of principles of competitive bidding is pursued. Since Hypothesis 4a. The non-critical quadrant of the Kraljic matrix
suppliers and products are interchangeable, there is no need for is characterized by balanced power.
long-term supply contracts. In general, a coordinated purchasing
approach is adopted that has the form of a centrally negotiated Note that it is not necessary to propose a separate hypothesis
umbrella agreement with preferred suppliers. Call-off orders are about total interdependence in the non-critical quadrant. The
then placed as an administrative formality. The buying power is combination of hypotheses 1b, 2b and 3b makes a separate
actively used to get better deals with interchangeable suppliers. hypothesis redundant.
Total interdependence is expected to be moderate. Although the In sum, the quadrants in the Kraljic matrix correspond to four
supplier’s dependence is expected to be high, the buyer’s basic power-and-dependence positions. Table 2 gives an
dependence is expected to be quite low. overview of our expectations for the balance of power and the
level of total interdependence in each of the four quadrants.
Hypothesis 3a. The leverage quadrant of the Kraljic matrix is
characterized by buyer dominance. 3. Methodology
Hypothesis 3b. In the leverage quadrant of the Kraljic matrix
3.1. Survey design, sample and response
total interdependence is higher than in the non-critical quadrant.
Non-critical products usually have a small value per unit. The hypotheses were tested in a survey among 250
Many alternative suppliers can be found for these products. purchasing professionals. For this purpose we translated each
5. M.C.J. Caniels, C.J. Gelderman / Industrial Marketing Management 36 (2007) 219 – 229
¨ 223
of the purchasing strategies discussed in Section 2.3 into (NEVI) in three stages. Purchasing professionals were speci-
comprehensive descriptions of real-life situations (scenarios). fically targeted with this survey. Purchasing professionals
The description of the four scenarios is given in Table 3. undertake negotiations with suppliers on a daily basis. There-
The survey adopts a repeated measures design, i.e. respon- fore, they have vast experience, expertise and insight into the
dents had to evaluate a series of identical questions for each of power and dependency issues in the relationship with their
the four scenarios from their own perspective, i.e. the suppliers. In the first two stages, the questionnaires were sent out
perspective of the buyer. The distinct advantage of using a by postal mail. The last stage consisted of an electronic mailing.
repeated measures design instead of other experimental designs In each round only those respondents were addressed that had
is that the potential bias caused by individual differences among not responded to an earlier mailing. Tests on the likelihood of a
groups of respondents is taken away. Each of the respondents has non-response bias indicated no statistical significant differences
to answer all questions in each of the four scenarios. Therefore, between the first wave and the second wave of respondents.
specific characteristics of the respondents, such as I.Q., A total number of 248 responses were received, resulting in a
education and motivation, do not differ across the four groups response rate of 21.5% (248 / 1153). Questionnaires that were
that reply to the questions in each scenario. In sum, by adopting a completed for less than 90% were declared invalid. Hence, a
repeated measures design, variability among groups of respon- total of 10 reactions were discarded due to incomplete
dents is removed from the error term, which makes the design information. In addition, all responses were removed that scored
more powerful than randomized designs (Stevens, 2001). on average less than 3 for recognition on a 5-point Likert scale.
A potential drawback of the adopted research method is that In this way, another 22 responses were omitted, resulting in an
respondents might not be able to fully visualize themselves in the effective response rate of 18.7% (216 / 1153). This can be
proposed descriptions, resulting in unreliable answers. This considered as quite satisfactory for an industrial mail survey in
shortcoming was countered by including an entry for recognition Europe (Erdogan & Baker, 2002; Frohlich, 2002), especially
of the scenario, i.e. respondents were asked to assess the degree when we take into account that the questionnaire was very long.
in which they recognize the described situation. In the analysis of Whereas Yu and Cooper (1983) have shown that an optimal
the data, we removed the survey results for respondents with low response is received on questionnaires that contain 40 to 50
scores on Frecognition_ from the database. In this way we items, the questionnaire contained 8 pages with 175 items in
ensured the validity of the results. total.
The survey procedure included a pilot study aimed at
enhancing the reliability and the validity of the questionnaire. 3.2. Developing constructs for buyer’s and supplier’s
The pilot study entailed discussions with six purchasing dependence
professionals in four manufacturing companies in the Nether-
lands. Several issues were discussed during these interviews, In Section 2.2 we have explained that relative power and
such as the clarity of the questionnaire items, the recognizability total interdependence were defined in terms of buyer’s and
of the scenarios, the time needed to fill in the questionnaire and supplier’s dependence (cf. Bacharach & Lawler, 1981; Pfeffer,
issues for further improvement of the items. On account of the 1981). There is no general consensus in the literature on how
pilot study several improvements have been made in the these two concepts should be operationalised. We have
description and layout of the questionnaire items, response examined relevant academic contributions to the literature to
options and scenarios. derive several aspects of organizational dependence that could
The final questionnaire has been administered to 1153 be used to operationalise buyer’s dependence and supplier’s
members of the Dutch Association of Purchasing Management dependence.
Table 3
Description of the scenarios corresponding to the Kraljic quadrants
Scenario Characterization Corresponding Kraljic quadrant Scenario description
1 Maintain partnership Strategic quadrant Consider a product with a high purchasing risk and a high financial value. You consider
the supplier as an important partner with whom a satisfactory strategic relationship exists.
The performance of the supplier is excellent. Both parties have an interest in continuing
the relationship and the parties have a good mutual understanding.
2 Keep safety stocks Bottleneck quadrant Consider a product with a relative low financial value, but a high purchasing risk. Your
firm is vulnerable regarding the supply of one supplier. You try to ensure a constant
supply by keeping high stocks.
3 Partner of convenience Leverage quadrant You have a very favorable negotiating position with this product. The purchasing risk is
low, while the product has a relatively high financial value. Negotiations are fierce. You
let those suppliers prevail that offer the lowest price while guaranteeing quality and
prompt delivery. Competitive bidding is one of your tactics. You only allow short-term
contracts.
4 Pooling of requirements Non-critical quadrant Consider a product that has a relative low financial value and a low purchasing risk. The
product is not very critical for your company, but still it has to be purchased. You choose
to buy the product as a part of a package of similar products from a certain supplier. In this
way it is possible to have only one supplier for several products.
6. 224 M.C.J. Caniels, C.J. Gelderman / Industrial Marketing Management 36 (2007) 219 – 229
¨
Jacobs (1974) introduces two concepts from economic alternative suppliers and low switching costs between suppliers
theory to describe dependence, namely Fessentiality_ and are much more important to the buyer than the relative amount of
Fsubstitutability_. He points out that it is of primary importance money that is involved. Hence, we have excluded Ffinancial
to the concept of dependence whether A can do without B magnitude_ from the construct of buyer’s dependence and
(essentiality of a resource) or whether other sources are included it in the supplier’s dependence construct.
available (substitutability of the resource). Scholars in Re- There is a difference in the perspective of buyers and
source Dependence Theory refer to Fessentiality_ as Fthe suppliers with regard to the second component of dependence
importance of a resource_, which is said to be determined by as well. The criticality of a resource refers to the degree in which
(1) the relative financial magnitude of the resource and (2) the the organization is able to continue its business processes in the
criticality of the resource (Pfeffer & Salancik, 1978). On the absence of the resource. In essence, however, the concept is two-
other hand, substitutability can be subdivided into (1) the fold in nature. On the one hand it refers to a need for
availability of alternative sources and (2) the level of relation technological expertise of the partner, on the other hand it
specific investments (i.e. the costs involved with switching points to issues of logistical indispensability (Cagliano, Caniato,
between suppliers) (e.g. Bourantas, 1989). & Spina, 2002). The need for technological expertise is critical
In addition to these conceptual studies, several empirical for both parties, buyer and supplier. In an industrial context,
studies pay attention to the concept of organizational depen- companies rely more and more on technologically advanced
dence. Most of these studies regard organizational dependence (key) suppliers. From the supplier’s perspective a similar
as an explanatory variable instead of trying to find the factors argument holds. Companies increasingly need the critical
that have an influence on it. The few studies that try to explain expertise and specialized knowledge of their (industrial)
the factors that influence organizational dependence (e.g. customers. Logistics-based dependence, on the other hand, is
Nooteboom, de Jong, Vossen, Helper, & Sako, 2000; Sriram, less an issue to the supplier than it is to the buyer. The buyer is
Krapfel, & Spekman, 1992) find similar factors as indicated by mainly interested in receiving the goods in a way that is
the conceptual studies above. In all empirical studies logistically compatible with its own production system. In
Fimportance_ and Fsubstitutability_ determine dependence, contrast, the supplier will deliver the goods in any logistic way
whereby importance is found to have a positive relationship that is required, as long as the buyer will pay for it. The buyer’s
with dependence and substitutability is found to have a negative main concern is the correct delivery of the goods, whereas the
relationship. The empirical studies do not provide decisive supplier’s main concern is of a financial nature. On the basis of
answers concerning the statistical significance of the dimensions these considerations we have redefined the concept of resource
of dependence. Only some tentative empirical evidence can be criticality in the construct of supplier’s dependence to solely
found that importance and substitutability are significantly include the need for the buyer’s technological expertise. The
related to dependence. construct for buyer’s dependence includes the logistical
In summary, the analysis of conceptual and empirical studies indispensability of the supplier, in addition to the need for a
shows that organizational dependence contains four key supplier’s technological expertise.
characteristics: With respect to the availability of alternative sources and
switching costs the dependence positions of buyers and suppliers
(1) the financial magnitude of the exchanged resources; are symmetrical. The buyer depends as much on the supplier as
(2) the criticality of the resources; the other way around. Both buying and supplying organizations
(3) the availability of alternative sources; invest in the relationship with their trading partner. When the
(4) switching costs, incurred when replacing a trading supplier develops and uses dedicated equipment assigned
partner. exclusively to one customer this will result in high switching
costs if the relationship deteriorates. On the other hand, buying
With these characteristics in mind we have set up organizations also face relation specific investments, making
constructs for buyer’s dependence and supplier’s dependence significant investments in suppliers.
as follows. For obvious reasons the overall dependency on the other
The Resource Dependence Theory posits a positive re- party is also included in both variables, the construct of buyer’s
lationship between the (financial) magnitude of a resource and dependence and the construct of supplier’s dependence. Table 4
the mutual dependence of the trading partners. It is reasonable to
assume that the first characteristic of organizational dependence,
Table 4
the relative financial magnitude of transactions, particularly Aspects that compose buyer’s dependence and supplier’s dependence
relates to supplier’s dependence. In the view of the supplier, a
Construct Buyer’s dependence Supplier’s dependence
relatively important buyer (in terms of financial magnitude of the
transaction) will have a very powerful position in negotiations, Aspects Logistical indispensability Financial magnitude
(items) Need for supplier’s Need for buyer’s
causing the supplier to be dependent on the buyer. For the buyer technological expertise technological expertise
the financial magnitude of the transaction with a certain supplier Availability of alternative Availability of
is much less crucial for it’s dependence position. If switching suppliers alternative buyers
costs are low, the buyer will not experience any dependence on Switching costs buyer Switching costs supplier
the supplier. Therefore, factors such as the availability of Overall buyer’s dependence Overall supplier’s dependence
7. M.C.J. Caniels, C.J. Gelderman / Industrial Marketing Management 36 (2007) 219 – 229
¨ 225
Table 5 4. Results
Reliability analysis: Cronbach’s alphas
Construct A comprehensive view of the dyadic nature of buyer –
Category in the Kraljic matrix Buyer’s dependence Supplier’s dependence supplier relationships should include the assessment of (1) the
Strategic quadrant 0.64 0.74 difference between buyer’s and supplier’s dependence (net
Bottleneck quadrant 0.61 0.76 dependence) which corresponds to the relative power of each
Leverage quadrant 0.64 0.69 party; and (2) the sum of buyer’s and supplier’s dependence
Non-critical quadrant 0.67 0.72
(total interdependence) which indicates the intensity and
development phase of the relationship between parties.
summarizes the aspects of buyer – supplier relationships that Note that the repeated measure design of the survey was
pertain to buyer’s dependence and supplier’s dependence. Note accounted for when analyzing the data. We used Estimated
that each aspect was measured by a corresponding item in the Marginal Means (EMMEANS) in SPSS (General Linear
questionnaire, using a 5-point Likert scale. Model-repeated measures) for the comparisons of the means
in different scenarios. Bonferroni adjustments were made to
3.3. Validity analysis control for Type I errors (Tabachnick & Fidell, 2001).
Table 6 shows the average score for the construct variables
A reliability analysis using Cronbach’s alpha was performed supplier’s dependence and buyer’s dependence in the four
to ensure the internal consistency of the items that constitute scenarios. The last two columns in Table 6 show the resulting
each construct as shown in Table 4 (Cronbach, 1951). Table 5 findings for the power balance and total interdependence. Note
presents the results of the reliability analysis. The table shows that column 3 indicates the relative power position of the buyer,
the values of Cronbach’s alpha for each of the four Kraljic i.e. the difference between supplier’s dependence and buyer’s
quadrants. The coefficients of Cronbach’s alpha are all higher dependence. Therefore, a negative sign for the power balance
than 0.60, indicating an acceptable internal consistency and shows that the supplier dominates the relationship, whereas a
reliability of the constructs. positive sign points to buyer dominance. Total interdependence
Additional correlation analysis in each quadrant showed that (last column in Table 6) is measured by the sum of buyer’s
items that should be related, are strongly correlated, indicating dependence and supplier’s dependence. On a scale that runs
convergent validity. In addition it was found that items that from +2 (minimal interdependence) to +10 (maximum interde-
theoretically should not be related, did not correlate (discri- pendence) we consider values below 5 as low, between 5 and 7 as
minant validity). moderate and above 7 as high.
Furthermore, we used explanatory factor analysis (principal Several points emerge from Table 6. Column 1 in Table 6
components analysis with varimax rotation) to identify a shows a relatively high buyer’s dependence on the right hand
possible underlying factor structure (see the table in the side of the Kraljic matrix (bottleneck and strategic quadrant),
Appendix for the detailed results of the factor analysis). For and a relatively low buyer’s dependence on the left hand side of
each quadrant of the Kraljic matrix a separate factor analysis has the matrix (non-critical and leverage). These findings are in
been executed. The factor solutions confirmed our expectations, accordance with our prior expectations. Column 2 in Table 6
i.e. in each quadrant two components were found: one contain- indicates that the findings for supplier’s dependence are not
ing the items that were expected to indicate buyer’s dependence clear-cut. Remarkably, the supplier’s dependence in the leverage
and the other containing the items that were expected to point to quadrant is lower than we might have expected in advance (2.68
supplier’s dependence. Almost all items had factor loadings that on a 5-point scale). The same holds for the strategic quadrant,
exceeded the recommended level of 0.50 (Hair, Anderson, where the supplier’s dependence is medium (3.31 on a 5-point
Tatham, & Black, 1998). Note that none of the items cross- scale). However, the relatively low supplier’s dependence in the
loaded on both factors. In other words, the items that should not bottleneck and the non-critical quadrant confirm our expecta-
be related were indeed not related. We can safely conclude that tions on the basis of the literature.
buyer’s dependence and supplier’s dependence in each of the These findings have notable implications for the hypoth-
four quadrants are dissimilar constructs. eses. With respect to the power balance (column 3) it was
Table 6
Power and interdependence in the Kraljic matrix (n = 216)
Scenario Buyer’s Supplier’s Relative Total interdependence
dependence (1)* dependence (2)* power (2) À (1)** (1) + (2)***
Strategic quadrant Maintain partnership 4.03 3.31 À0.72a 7.34
Bottleneck quadrant Keep safety stocks 3.66 2.32 À1.34a 5.97
Leverage quadrant Partner of convenience 2.41 2.68 +0.27a 5.09
Non-critical quadrant Pooling of requirements 1.90 1.97 +0.07 3.87
a
Difference between supplier’s dependence and buyer’s dependence is significant at p < 0.05.
*Supplier’s and buyer’s dependence are measured by taking the average score on the items of each construct respectively.
**Power is measured on a scale from À4 (maximum supplier’s dominance) to +4 (maximum buyer’s dominance).
***Total interdependence is measured on a scale from +2 (minimum interdependence) to +10 (maximum interdependence).
8. 226 M.C.J. Caniels, C.J. Gelderman / Industrial Marketing Management 36 (2007) 219 – 229
¨
found that buyer – supplier relationships are dominated by the Table 8
supplier in the strategic quadrant, rejecting Hypothesis 1a. We Differences with respect to interdependence between quadrants of Kraljic
matrix
will come back to this unexpected result in the next
Results with respect to interdependence
paragraph. The results in column 3 indicate that buyer –
supplier relationships are also dominated by the supplier in (1) INDEPstrat À INDEPbottle +1.37a
(2) INDEPstrat À INDEPnon +3.47a
the bottleneck quadrant, confirming Hypothesis 2a. In
(3) INDEPstrat À INDEPlev +2.25a
contrast, the buyer is dominant in the leverage quadrant, (4) INDEPnon À INDEPbottle À2.10a
supporting Hypothesis 3a. The t-tests showed that, with the (5) INDEPnon À INDEPlev À1.22a
exception of the non-critical quadrant, all quadrants presented a
Significantly different from zero at p < 0.05.
statistically significant differences between supplier’s and
buyer’s dependence. The insignificant difference between When we look at the underlying data of the supplier’s
supplier’s dependence and buyer’s dependence in the non- dependence construct (Table 7) we find that respondents
critical quadrant refers to a significant power balance in this reported that they:
quadrant, thereby confirming Hypothesis 4a.
The results for the strategic quadrant lead to a rejection of - have more need for the supplier’s technological expertise
Hypothesis 1a that suggested a balanced power relationship than vice versa; and
for this quadrant. The literature puts a lot of emphasis on the - face higher switching costs than the suppliers; and
idea that buyer – supplier relationships in this quadrant are - have fewer alternative trading partners than the supplier
typically characterized as satisfactory relationships based on does.
trust, commitment and open communication (e.g. De Ruyter,
Moorman, & Lemmink, 2001; Morgan & Hunt, 1994). The last column of Table 6 shows the level of total
However, the results suggest that such satisfactory relation- interdependence in the various quadrants.
ships in the strategic quadrant have an asymmetric power From the literature on the Kraljic matrix we are expecting:
balance. From the buyer’s perspective the supplier dominates
the relationship. When we examine the data in greater detail, - high levels of interdependence in the strategic quadrant
this result can be traced back to the medium level of (Hypothesis 1b);
supplier’s dependence (3.31 on a 5-point scale) and the high - moderate levels of interdependence in the bottleneck and
level of buyer’s dependence (4.03 on a 5-point scale) that leverage quadrant (Hypotheses 2b and 3b respectively); and
was reported by the respondents in the survey. This deviates consequently
from what is expected from the literature, which indicates - low levels of interdependence in the non-critical quadrant.
that supplier’s dependence is high as well in the strategic
quadrant. Several separate tests have been undertaken to determine
Presumably, once a buyer has entered a partnership this whether total interdependence in one quadrant significantly
ensures a disproportionate raise in the dependence of the buyer differs from total interdependence in all other quadrants. The
on the supplying partner. Cox, Lonsdale, Watson, and Qiao results are reported in Table 8, where INDEPstrat, INDEPbottle,
(2003) give a possible explanation for this phenomenon. In INDEPlev and INDEPnon refer to total interdependence in the
their belief a pre-contractual situation of balanced power shifts strategic, bottleneck, leverage and non-critical quadrant
to a post-contractual situation of supplier dominance, when the respectively.
supplier refuses to offer balance in the relationship and locks The results largely confirm our prior expectations. Total
the buyer in. Other writers suggest that unbalanced relation- interdependence has its highest value in the strategic
ships may not always be troublesome: a known distribution of quadrant, confirming Hypothesis 1a. As expected, total
power between both partners could provide effective co- interdependence is moderate in the bottleneck and the
ordination of the exchange relationship (Frazier & Antia, leverage quadrant, thereby giving confirmation of Hypotheses
1995). A relative power position can be used to enhance the 2b and 3b respectively. Consequently, the non-critical
nature of relational exchange between trading partners. It quadrant contains the lowest value of total interdependence.
seems that the distribution of power can become legitimated We conclude that the empirical findings confirm the hitherto
over time, so that both social actors expect and value a certain untested theoretical notions about total interdependence in
pattern of influence. buyer – supplier relationships.
Table 7
Item scores and standard deviations (between parentheses) for the buyer’s dependence and the supplier’s dependence construct in the strategic quadrant
Buyer’s dependence Supplier’s dependence
Logistical indispensability 4.63 (0.541) Financial magnitude 3.95 (0.761)
Supplier’s technological expertise 4.08 (0.868) Buyer’s technological expertise 3.32 (1.038)
Alternative suppliers 2.81 (1.168) Alternative buyers 3.27 (1.079)
Switching costs buyer 4.08 (1.074) Switching costs supplier 3.36 (1.131)
Overall buyer’s dependence 4.22 (0.757) Overall supplier’s dependence 3.25 (0.998)
9. M.C.J. Caniels, C.J. Gelderman / Industrial Marketing Management 36 (2007) 219 – 229
¨ 227
5. Summary, conclusions and suggestions for further justified in the case of channel studies (manufacturer –
research distributor), where relations often revolve around one major
supplier. However, the method is also often used in studies
Purchasing practitioners maintain a variety of supplier relating to industrial relationships, in which the limitation to
relationships with different suppliers, and the management of the dominant supplier is not a self-evident point of departure.
these relationships is increasingly based on a portfolio frame- Alternatively, many studies invite respondents to answer
work. Power and dependence are generally considered to be questions referring to Ftheir suppliers_ in general. On the
important for understanding buyer– supplier relationships, yet basis of this study we conclude that neither approach provides
these factors are often overlooked in empirical studies. Little is a comprehensive insight into buyer – supplier relationships. We
known about the role of power and dependence in buyer – have found evidence of the existence of four buyer – supplier
supplier relationships from a purchasing portfolio perspective. relationships that differ significantly with respect to relative
In this study we filled this gap by first deducing hypotheses from power and interdependence. This result confirms the notion
the literature on Frelative power_ and Ftotal interdependence_ in that companies maintain a portfolio of differentiated supplier
each of the four Kraljic quadrants. Second, we empirically tested relationships. Therefore, neither reference to Fa key supplier_
these hypotheses using data from a comprehensive survey nor reference to Fsuppliers_ in general takes into account the
among Dutch purchasing professionals. full variation in the actual supplier base of a company. This
A comparison of the hypotheses with the empirical findings common practice among researchers should only be used if
leads to the following results. The hypotheses that concerned the the research question specifically requires such a sampling
relative power position of the buyer and the supplier in each method. In all other cases it should be discarded. Future and
quadrant (1a – 4a) were confirmed, except Hypothesis 1a. That further surveys can no longer ignore the large variety in
is, we observed supplier dominance in the strategic quadrant, supplier relationships.
where one would expect a balanced power situation on basis of The findings also have managerial relevance. They offer
the literature. This provocative result sheds new light on the evidence that in the strategic quadrant a supplier-dominated
buyer’s view on issues of power and dependence. It indicates that partnership is perceived to be satisfactory from the perspective
suppliers are perceived to dominate satisfactory partnerships. of the buyer. Industrial marketers should be aware that
All hypotheses concerning the level of total interdepen- professional purchasers feel dominated by them, even in
dence in each quadrant (1b –3b) were confirmed. Table 9 satisfactory relationships. Possibly this finding could entice
summarizes the differences between the expectations on the marketers to try to exploit their power and to skim off the
basis of the literature on power and dependence, and the market surplus. However, marketers should be aware of the
results from this study. negative effects of the exploitation of their position. In fact, a
The theoretical contribution of this paper lies primarily in situation in which the buyer feels dominated yet satisfied is
the notion that future research can no longer assume that desirable, since the buyer will not search for alternatives
buyer –supplier relationships in the strategic quadrant of the (suppliers or products). Therefore, marketers should nurture
Kraljic matrix are necessarily characterized by symmetric these kinds of relationships.
power positions. When we combine this result with the high For professional purchasers the managerial implication of
total interdependence reported in this quadrant, we arrive at a this study is that they should be aware that dependence
more refined theoretical implication of this study. Future implies vulnerability. Buyers should ask themselves whether
studies should take into account that a relationship which is there are sufficient benefits attached to the relationship to
characterized by a high involvement of buyers and suppliers offset the obvious disadvantages of such a vulnerable and
does not necessarily imply a balanced power position between dependent position towards a supplier. In addition, purchasers
the parties, but can yet be satisfactory, at least from the point of should assess the risks that are harbored in this kind of
view of the buyer. relationship, and explore possibilities that might increase the
Furthermore, this study holds an implication for future bargaining power of their company. In other words, even in
research, which pertains to the sampling method in survey- satisfactory relationships, buyers should explore the market
based studies. Many studies ask respondents to express their by scouting for alternative suppliers and determining their
opinions on their relationship with a single (type of) supplier, competencies. Furthermore, professional purchasers should
usually the key or the major supplier. This approach is become aware of their own power basis. They should
investigate to what extent the perceived supplier dominance
Table 9 is based on an objective assessment of the relationship.
Comparison of relative power and total interdependence in the Kraljic matrix: Despite the rigor of the analysis, this study contains several
theory and practice limitations that might entice further research. One of the
Relative power Total interdependence limitations of the study concerns the fact that the survey was
Expected Observed Expected Observed confined to the perspective of the buyer. Yet, buyer – supplier
Strategic Balanced Supplier dominance Highest Highest relationships are dyadic in nature. Suppliers might have different
Bottleneck Supplier dominance Supplier dominance Moderate Moderate opinions on the power and interdependence structure of the
Leverage Buyer dominance Buyer dominance Moderate Moderate various buyer –supplier relationships. Therefore, there is a need
Non-critical Balanced Balanced Lowest Lowest to more fully study the supplier’s perspective in order to
10. 228 M.C.J. Caniels, C.J. Gelderman / Industrial Marketing Management 36 (2007) 219 – 229
¨
establish whether or not both parties perceive each other’s power by the supplier in the strategic quadrant calls for further
position in the relationship in the same way. research to identify the circumstances under which supplier
Another limitation concerns the sample, which was drawn dominated relationships provide a problem for the buyer
from a list of members of the Dutch Association of Purchasing (Frazier & Antia, 1995). Additionally, the operationalisation
Management (NEVI). Although the sample included a wide in this study could serve as a promising point of departure for
range of industry sectors, the generalizability of the results further quantitative research to the issues of power and
would benefit from the inclusion of firms in the service sector, dependence in buyer – supplier relationships. The level of
as well as other Dutch and international companies. This might relative power might be related to the sizes of the buying and
be the object of a further study. the supplying companies. Alternatively, network positions or
With respect to additional issues for further research we the positions in the supply chain could be included as a
propose the following. The finding that buyers feel dominated determining factor of relative power.
Appendix A. Results of the factor analyses (factor loadings)
Leverage quadrant Strategic quadrant Non-critical quadrant Bottleneck quadrant
Factor 1 Factor 2 Factor 1 Factor 2 Factor 1 Factor 2 Factor 1 Factor 2
Buyer’s Supplier’s Buyer’s Supplier’s Buyer’s Supplier’s Buyer’s Supplier’s
dependence dependence dependence dependence dependence dependence dependence dependence
Items of buyer’s dependence:
Logistical indispensability 0.445 À 0.144 0.654 À0.058 0.529 À0.035 0.556 À0.091
Supplier’s technological expertise 0.692 0.205 0.697 0.237 0.791 0.288 0.709 0.107
Alternative suppliers À0.544 À 0.232 À0.484 À0.037 À0.617 0.064 À 0.470 0.334
Switching costs buyer 0.721 0.177 0.545 0.330 0.586 0.216 0.654 0.139
Overall buyer’s dependence 0.757 0.005 0.790 0.054 0.643 0.142 0.676 0.179
Items of supplier’s dependence:
Financial magnitude À0.170 0.661 0.325 0.534 À0.027 0.695 0.036 0.831
Buyer’s technological expertise 0.194 0.683 0.223 0.710 0.330 0.573 0.067 0.874
Alternative buyers À0.083 À 0.451 0.023 À0.570 À0.215 À0.499 0.105 0.766
Switching costs supplier 0.105 0.717 À0.722 0.793 0.103 0.727 À 0.046 À0.450
Overall supplier’s dependence À0.053 0.799 0.188 0.783 À0.323 0.824 À 0.037 0.731
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