Buyer-supplier relationships in the mining industry : measures required to enhance supplier satisfaction and achievpreferred customer status

Abstract

In difficult economic conditions, firms constantly strive for competitive advantage. Extant theory suggests that favourable supplier perceptions of a buying firm can contribute significantly towards a buying firms pursuit of competitive advantage, to the extent that buying firms can manifest as a preferred customer to suppliers. This means that buying firms can differentiate themselves from their competitors and attain preferred customer status by improving how they are perceived by their suppliers. In this context, the aim of this study was to identify the measures required to enhance suppliers’ perceptions and thereby secure preferred customer status to gain access to the most capable suppliers and their resources. This study adapted previous research in the field of supplier satisfaction to investigate the perceptions of suppliers to a large mining firm in South Africa. Ten factors, including broad based black economic empowerment, which is currently a prominent topic in business interaction, were considered in terms of their relevance to supplier satisfaction. However, only four factors, excluding broad based black economic empowerment, were identified as relevant. The findings of this study concur with those from previous studies confirming the relevance of profitability, reliability, growth opportunity and operative excellence as significant predictors of supplier satisfaction specific to the mining industry. The study yielded several insights that may be used by a buying firm to enhance the relational and economic dynamics between a buyer and its suppliers. Firstly, in a competitive market, buying firms need to compete for preferred customer status and supplier resources. Secondly, large buying firms should refrain from misusing market power to engender trust in the buyer-supplier relationship. Thirdly, the legislative demands of broad based black economic empowerment require well-defined supplier development programmes that cater for both broad and focused supplier support interventions. Importantly, the need for an environment that is conducive for innovation was identified as a priority for suppliers.