Civil Engineering Reference
In-Depth Information
supplier for any one contract as an early warning for over-dependency.
This level, however, is often raised to 30 per cent or more in private-
sector organisations for individual contracts, and depends on the atti-
tude to risk and other commercial and strategic concerns of the buying
organisation.
The 25 and 30 per cent levels of exposure are suffi ciently signifi cant
to incentivise suppliers to mobilise their best teams to meet client
demand, fi rstly during the tendering process and secondly during deliv-
ery. At the same time these levels of exposure are not so great that a
supplier's output might be too concentrated in one contract, but they
leave them with the opportunity to diversify across other markets and
clients.
Figure 9.1 demonstrates the implications of the interdependencies
when the forces of supply and demand shift from a buyers' market to a
sellers' market, and also highlights how the dominance between the
client and the seller affects the power position in the demand and supply
relationship.
In the top left quadrant, shown as, 'Demand Dominance', the balance
of power lies with the strong buyer, who has potential infl uence over
a weak supplier. This dynamic offers signifi cant opportunities for lev-
eraging greater client value from supply, and that can be achieved
through aggregating demand or targeting suppliers whose capacity is
appropriately matched to the scale of demand.
This contrasts with the lower-right quadrant, which illustrates
'Demand Dependence'. In this situation the balance of power lies with
Bargaining
strength
Strong
Buyers' market
Neither dominant:
Demand dominant
both inter-dependent
Purchaser
Neither dominant:
Sellers' market
Weak
both independent
Demand dependence
Weak
Strong
Bargaining
strength
Supplier
Figure 9.1
The relative bargaining positions of buyers and purchasers.
