The competitive nature of today’s business-to-business markets requires companies to continually look for ways to reduce costs; one of the easiest of which is to demand price reductions from suppliers. In a recent research project, Professor John Henke, along with colleagues, Professors Shen Yeniyurt (Rutgers University) and Chen Zhang (University of Vermont), studied the price reduction demands and the corresponding concessions given by 238 suppliers to the major North American Automotive manufacturers during 2001 – 2007. They found that suppliers are willing to give higher price concessions when buyers align specific interfacing characteristics and processes, such as product development involvement and help to reduce supplier costs, with their suppliers so that the suppliers perceive greater opportunities for future business and profit.

These results have important managerial implications as they provide, for the first time, an understanding of the dynamic nature of the impact of buyer-supplier relational components on supplier price concessions. In doing so, the study provides direction as to how management can maximize the price concessions it receives from suppliers and how suppliers can respond to their customers' demands for price concessions.