An Empirical Study Of The Impact Of Customer Concentration On The Cost Structure Of Firms

In the current dynamic global economic environment,businesses are facing challenges such as rising labor costs and intensified market competition.Due to the high proportion of fixed costs in total costs,the elasticity of cost structure is reduced.The trend of deepening cooperation between businesses and customer-centric procurement practices has become widespread.However,reliance on major customers may bring uncertainties and risks,including uncertainties in production planning and revenue security,customer attrition,demand fluctuations,and operational challenges.Exploring the role or impact of customer concentration on cost structure decisions can help businesses allocate resources rationally,make proprietary asset investments,and maintain and attract major customers.Although there is no consensus in the academic community regarding the relationship between customer concentration and cost structure,it is a topic worthy of further exploration,as it can provide valuable theoretical basis and insights for policymakers and practical business strategies.This paper,based on an analysis of the current research status on customer concentration and cost structure,firstly conducts empirical research on the impact of customer concentration on cost structure.Secondly,it integrates customer concentration,product market competition,and cost structure into the same analytical framework for empirical research.Finally,it selects companies for a case study.Ⅰ.The impact of customer concentration on cost structure: The results show a significant negative correlation between customer concentration and cost structure,indicating that higher customer concentration leads to lower cost elasticity(i.e.,higher fixed costs).This suggests that companies with higher customer concentration,i.e.,those concentrated on a few customers,have lower cost structure elasticity.The results remain robust even after controlling for variables and incorporating time and firm fixed effects.Further testing using propensity score matching supports the negative impact of customer concentration on firm’s cost structure.In the sub-sample analysis of manufacturing companies where core product sales are more concentrated and customer stickiness is relatively stronger,the coefficient of the impact of customer concentration on cost structure is significantly negative,indicating the robustness of the regression results.Heterogeneity analysis based on ownership,competitive position,and industry regulation shows that the negative relationship between customer concentration and cost structure is more significant in non-stateowned enterprises,enterprises with low competitive positions,and non-regulated industries,while it is not significant in state-owned enterprises,enterprises with high competitive positions,and regulated industries.Ⅱ.The moderating effect of product market competition on the relationship between customer concentration and cost structure: The research results indicate a negative moderating effect of product market competition on the relationship between customer concentration and cost elasticity,meaning that product market competition intensifies the negative impact of customer concentration on cost elasticity.This effect is particularly significant in non-state-owned enterprises,enterprises with low competitive positions,and non-regulated industries,while it is not significant in state-owned enterprises,enterprises with high competitive positions,and regulated industries.Ⅲ.Case study: During the research period,Company W had consistently high customer concentration,mainly due to the concentration of customer sources and sales channels in the manufacturing industry.At the same time,the company had low cost elasticity.By analyzing the influence of product market competition on the company at different times,it was found that Company W faced fierce product market competition.For Company W with high customer concentration,product market competition intensified the negative effect of customer concentration on cost elasticity.This study examines the impact of customer concentration on cost structure.Firstly,it enriches the research at the micro-level by focusing on A-share listed companies and provides new empirical evidence for the study of customer concentration on cost structure.Secondly,it analyzes and tests the mechanism of the impact of customer concentration on cost structure,which helps identify the performance of customer concentration in different product market competitions and its inhibitory effect on cost structure.Thirdly,it combines the analysis of general phenomena and case studies to avoid the limitations of purely case studies.The paper provides comprehensive analysis,discussion,and management insights.