The impact of inflation on the bargaining power of buyers

Abstract

In ancient times, the price of any goods, like a loaf of bread, was relatively stable for centuries, which is a sharp contrast to the modern era and the impact of inflation. Nowadays, with the development of globalization and the diverse exchanges throughout the world, many events can have an impact on global inflation and upset the markets, either geopolitical, sanitary, or even natural disasters. This has recently been the case since 2020 with the Covid pandemic which has permanently reshaped the way consumers could access goods and services. Later on, the Russian-Ukraine conflicts also played a big role in the escalation of prices, with the different embargos and difficulty to access some resources. All these events have an impact on the general consumer, but businesses and industries have also been affected. Companies are in a constant need to offer an adequate response to a dynamic and challenging work environment. On the frontline of their procurement strategies, the buyers play the big role of adapting to the market while respecting the company’s requirements. This study is providing a practical insight of the situation within the aerospace industry. It shows that buyers are prioritizing long term relationship with suppliers in order to team up during difficult times. Contract management plays a big role in the management of this relationship, as well as other innovative tools (games theory sessions).