Vendor partnerships based on relational contacts-such as the relationships between vehicle manufacturers and their component suppliers-are superior to either pure market contracts or vertical integration because:
A)They give manufacturers immense bargaining power over their suppliers
B)They offer similar benefits of high-powered incentives and flexibility that market contracts
C)They offer similar coordination benefits as vertical integration
D)They combine the coordination benefits of vertical integration with the incentive and flexibility benefits of market contracts.

Question

Quizplus · Accepted Answer

Relational contracts offer the combined benefits of coordination in vertical integration and incentives and flexibility in market contracts. This helps both parties to adjust to changing market conditions and improve their performance metrics while maintaining a strong relationship based on trust and mutual understanding. Therefore, option D is the correct choice.

Vendor Partnerships Based on Relational Contacts-Such as the Relationships Between