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Impact of transaction costs on supply operations and price competitiveness in wholesale marketing: a study in reference to Mexico

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  • Rajagopal
  • Ananya Rajagopal

Abstract

Transaction costs make significant impact on determining the costs of logistics and inventory in companies marketing consumer wholesale products. Effective management of transaction cost helps companies ensure competitive prices, and induce loyalty among the consumers. This paper aims at analysing the transactions cost, and its relationship with wholesale prices. It critically examines the previous studies on transaction cost approach of wholesaler firms in reference to the cost incurred in their brands using 'direct-to-customer' strategy. Data in this study has been collected in reference to two large wholesale outlets in Mexico City. This study reveals that wholesaler brands are price competitive and effectively reduce the uncertainty of supplies as they address the existing demand in the market. The wholesale brands largely meet the price expectation of consumers and enhance their satisfaction level. Large wholesaling firms reduce their transaction costs by lowering the margin spread among the suppliers, and obtaining supplies from a limited number of suppliers nationwide.

Suggested Citation

  • Rajagopal & Ananya Rajagopal, 2019. "Impact of transaction costs on supply operations and price competitiveness in wholesale marketing: a study in reference to Mexico," International Journal of Logistics Systems and Management, Inderscience Enterprises Ltd, vol. 33(4), pages 525-542.
    • Handle: RePEc:ids:ijlsma:v:33:y:2019:i:4:p:525-542
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    References listed on IDEAS

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    1. M. Bensaou & Erin Anderson, 1999. "Buyer-Supplier Relations in Industrial Markets: When Do Buyers Risk Making Idiosyncratic Investments?," Organization Science, INFORMS, vol. 10(4), pages 460-481, August.
    2. Patrick W. Schmitz, 2006. "Information Gathering, Transaction Costs, and the Property Rights Approach," American Economic Review, American Economic Association, vol. 96(1), pages 422-434, March.
    3. Christos N. Pitelis & Anastasia N. Pseiridis, 1999. "Transaction costs versus resource value?," Journal of Economic Studies, Emerald Group Publishing, vol. 26(3), pages 221-240, September.
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