Customer Concentration And Cost Structure Decision

As supply chains become more complex,the role of Strategic Cost Management that aligns corporate resources with long-term and short-term strategies and then improves the efficiency of supply chain management,promotes the value-growth for suppliers and customers has gradually emerged and been emphasized.This paper takes advantage of Chinese listed firms’ disclosure on names and sales of the top5 customers,based on the institutional background of China’s relationship-oriented rather than market-oriented business environment,and cites the mechanism that relationship and trust can promote the cooperation and information exchange between suppliers and their large customers to reduce information asymmetry and alleviate moral hazard,and then stimulate relationship-specific investment,and examines the effect of customer concentration on firms’ cost structure.The results show that,when customer concentration is high,cost elasticity is low.Further evidence shows that,in regions with low level of business environment,in SOEs,and when the geographic proximity between firms and their major customers is high,the negative relation between customer concentration and cost elasticity strengthens.The paper not only contributes to the literature on the determinants of cost structure decisions,and consequences of customer concentration,but also provides insight into understanding the effect of customer concentration on strategic cost management by providing empirical evidence from inside the field of managerial accounting,which plays a significant role on playing the advantages of strategic cost management on supply chain management,and promoting firm transformation and sustainable development in China.