Upstream denotes the buyers and power associated with them. This implies existence of two strategies followed by the buyers to determine the potential suppliers and these include selection of suppliers and self-enforcing contract.
Five factors that influence the selection of suppliers are delivery, quality, technology, environment and change management (Lonsdale, 2017). The case of DTG is a clear example to exhibit the possible criteria considered to source the PC screen technology. DTG faced confusions to choose between NU and UL. While competence does exist as a criterion, the power exercised by UL on DTG is high and the interest to change as per demand comes with a condition. On the other hand, NU is new to the market and cannot be trusted for long though there is supplier opportunism. The best method to handle this situation is through negotiation which can enable the buyer to exercise possible power on the supplier.
The idea of self-enforcing agreement demands for an effective OBB, reasonable aspect of deal and management of non-strategic hazards through appropriate contract design policies. The advantage with self-enforcement is that the switch cost is less and a goodwill trust between the two ends persists. As a result, a congruent supplier is chosen and the threat of return is likely to be managed in a better way (Moorman et al., 1992). It is a value sharing concept where the engagement is maximized. In the case of NS&I, it is clear that the contract has to take adverse selection hazard and hold up before and after contract and moral hazards into consideration.
On the whole, this section has shown that it is possible to leverage power on the other party in a strategic manner which can achieve mutual benefits. This can eliminate dominance of one actor over the other.
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