The Optimal Relationship between Buyer and

Seller Obtained Using TOPSIS Method

Feng-Yi Wu
Graduate Institute of Management Sciences, Tamkang University
Email: annie.wu2007@msa.hinet.net

Chung-Chu Chuang
Graduate Institute of Management Sciences, Tamkang University
Email: ccchuang@mail.tku.edu.tw

AbstractAchieving optimal buyerseller relationship is a

growing concern among members of market channels
because all members of the retail industry are increasingly
linked to each other. A good buyerseller cooperative
relationship increases revenue, whereas a poor relationship
increases the cost of communication. This study is to
investigate the distributors in food industry by using the
Technique for Order Preference by Similarity to Ideal
Solution (TOPSIS) method for normalizing the collected
data. The results show that the optimal relationships exist
for companies with revenues between 500 million to 5000
million.

act, recognition, professional knowledge, and skills.

These powers demonstrate intention; the channel
members aim is to change the other partys decision,
execution, and, on a psychological level, their cognition
[6]. In numerous studies, communication is considered a
factor involved in the successful development of longterm buyerseller relationships. From the people
perspective, communication is a way of establishing and
maintaining a sound relationship among different groups
or partners who are closely connected [7]. In a buyer
seller relationship, satisfaction is not one-dimensional; it
can be further categorized into economic and noneconomic satisfaction [8]. The subjective economic
satisfaction is provided by other channel members,
whereas non-economic satisfaction is the reward of
members demonstrating their emotional feelings or the
outcome of assessing the interactions between members
[9]. In this study, the criteria for studying a relationship
are coercive power, communication, and satisfaction. The
scale of coercive power was developed from the Zhuang
and Tsang [10] study. The scale of communication was
developed from the study by Rodrguez, Agudo, and
Gutirrez [11]. The scale of satisfaction was developed
from the Geyskens and Steenkamp [8] study. This study
examines the food industry as the research subject
through 308 valid questionnaires.

Index
TermsPower,
Communication,
Satisfaction,
Technique for Order Preference by Similarity to Ideal
Solution (TOPSIS).

I.

INTRODUCTION

Over the past three decades, buyerseller relationships

have become one of the most investigated topics in
marketing research. Many studies have found that
exertion of power has a significant influence on buyer
seller relationships [1-2]. Good relationships enable
organizations to acquire more customers. The wide
variety of brick-and-mortar or virtual channels allows
customers to use these options, which can further
influence the revenue outcome [3]. The TOPSIS method
was initially presented by Yoon and Hwang [4] and Lai,
Liu, and Hwang [5]. This method is a process of finding
the best solution among all practical alternatives. The
finding of our research will help enterprises to
appropriately allocate their resources and therefore have
long-term competitive advantages. In Section 2, we
review relevant literature and research design. Section 3
introduces the TOPSIS method. Section 4 presents an
empirical example and the final section reports the
conclusions drawn from the study.
II.

III.

TOPSIS METHOD

This study uses the TOPSIS method. A positive ideal

solution maximizes the benefit criteria or attributes and
minimizes the cost criteria or attributes, whereas a
negative ideal solution maximizes the cost criteria or
attributes and minimizes the benefit criteria or attributes.
The TOPSIS method is expressed in a succession of six
steps as follows:
Step 1: Calculate the normalized decision matrix. The
normalized value rij is calculated as follows:

LITERATURE REVIEW AND RESEARCH DESIGN

Channel power refers mainly to channel members

perception toward reward and punishment system, legal

rij xij

1/5

x
i 1

2
ij

i =1, 2, ..., m and j = 1, 2, ..., n.

Step 2: Calculate the weighted normalized decision

matrix. The weighted normalized value

Step 6: Rank the preference order.

is

ij

IV. EMPIRICAL EXAMPLE

calculated as follows:

r ij w j

ij

This study tests the relationship between a buyer and a

seller in a Taiwanese channel. The buyers revenue is
classified into four types: 105 companies with revenue of
under 50 million, 93 companies with revenue of 50500
million, 30 companies with revenue of 5005000 million,
and 80 companies with revenue above 5000 million. Four
criteria were established through numerous discussions:
coercive power, communication, economic satisfaction,
and non-economic satisfaction in Table 1. Then the
procedure of TOPSIS for interval number can be
expressed in the following steps. We normalized the
collected data in Table 2. All the above criteria have the
same importance. In this study, we adopt the suggestion
of Jahanshahloo et al. [12] and all criteria are given a
weighting of 0.25 for normalization. We used Equations
(1) to find the weighted normalized decision matrix
shown in Table 3.

i =1, 2,..., m and j = 1, 2, ..., n.

(1)

where

attribute and

j 1

th

criterion or

1.

A ) and negative ideal (

Step 3: Determine the ideal (

is the weight of the

j

) solutions.
*

T*ABLE 1. THE COLLECTED DATA OF REVENUE TYPE

{(max vij | j C b), (min vij | j C c )} {v j | j 1,2,..., m}

i

Revenue
type

(2)

1. under
50
million
j
2. 50
million
500
million
3. 500
million
5,000
million
4. above
5,000
million

Coercive
power

Communication
cost

A {(min v | j C ), (max v | j C )} {v | j 1,2,..., m}

ij

ij

(3)
Step 4: Calculate the separation measures using the mdimensional Euclidean distance. The separation measures
of each alternative from the positive ideal solution and
the negative ideal solution, respectively, are as follows:

*
i

(v v )

* 2
j

ij

j 1

, j 1,2,..., m

Economic
satisfaction

Noneconomic
satisfaction

4.56

4.19

4.23

4.68

4.25

4.38

4.17

5.21

5.28

5.25

5.28

5.05

5.39

4.15

5.19

5.38

TABLE 2. THE NORMALIZED MATRIX WITH REVENUE TYPE

AND EVALUATION CRITERIA

(4)

Revenu
e type

(vij v j ) 2 , j 1,2,..., m

j 1

1. under
50
million
2. 50
million
500
million
3. 500
million
5,000
million
4. above
5,000
million

(5)
Step 5: Calculate the relative closeness to the ideal
solution. The relative closeness of the alternative
with respect to

RC

*
i

is defined as follows:

S S

, i 1,2,..., m

Coercive
power

Communication
cost

Economic
satisfaction

Noneconomic
satisfaction

0.234086

0.233166

0.224165

0.230315

0.218172

0.243739

0.220986

0.256398

0.271047

0.292153

0.279809

0.248524

0.276694

0.230940

0.27504

0.264764

TABLE 3. CRITERIA WEIGHTING

Revenu
e type

(6)
2/5

Coercive
power

Communication
cost

Economic
satisfaction

Noneconomic
satisfaction

1. under
50
million
2. 50
million
500
million
3. 500
million
5,000
million
4. above
5,000
million

0.058522

0.058291

0.056041

0.057579

0.054543

0.060934

0.055246

0.064099

0.067762

0.073038

0.069952

0.062131

0.069174

0.057735

0.06876

0.066191

complexity is especially reflected in the aspects of

communication. When the seller uses coercive power, the
buyer tends not to display strong communication. This
increases the channel satisfaction of the buyer with the
seller and the buyers expectation of maintaining a longterm collaborative relationship with seller. The ranking
result by TOPSIS pointed out that the third alternative is
strategically optimum for the seller. The best options for
coercive power, communication cost, economic and noneconomic satisfaction appeared for the companies with
revenues of 5005000 million. Therefore, the sellers must
continuously adjust their resources to increase the
number of optimal buyers to maximize mutual benefits.
The following study can strengthen the link between
strategy and management through other approaches
similar to the TOPSIS method.

The positive ideal (A*) and negative ideal (A-)

solutions are determined using Equations (2) and (3). The
results are shown in Table 4. The separation of each
alternative solution is calculated using Equations (4) and
(5). The final results are shown in Table 5.
TABLE 4. POSITIVE IDEAL AND NEGATIVE IDEA
SOLUTIONS

Solution
Positive
ideal
Negative
ideal

References

Coercive
power

Communication
cost

Economic
satisfaction

Noneconomic
satisfaction

0.069173

0.073038

0.055246

0.057578

0.054543

0.057735

0.069952

0.066190

[1]

B. Ramaseshan, L. S. C. Yip and J. H. Pae, Power,

satisfaction, and relationship commitment in
Chinese store-tenant relationship and their impact
on performance. Journal of Retailing, vol.82, no.1,
pp.63-70, 2006.
[2] M. J. Sanzo, M. L. Santos, R. Vzquez and L. I.
lvarez, The effect of market orientation on buyerseller
relationship
satisfaction,
Industrial
Marketing Management, vol.32, no.4, pp.327-345,
2003.
[3] G. H. V. Bruggen, M. Kacker and C. Nieuwlaat,
The impact of channel function performance on
buyer-seller relationships in marketing channels,
International Journal of research in Marketing,
vol.22, pp.141-158, 2005.
[4] K. Yoon and C. L. Hwang, Multiple attribute
decision making: Methods and applications : a
state-of-the-art survey. Germany: Springer-Verlag,
1981.
[5] Y. J. Lai, T. Y. Liu and C. L. Hwang, TOPSIS for
MODM, European Journal of Operational
Research, vol.76, pp.486-500, 1994.
[6] L. W. Stern, A. I. El-Ansary and A. T. Coughlan,
Marketing Channels. New Jersey: Prentice Hall,
1996.
[7] C. Lages, C. R. Lages and L. F. Lages, The
RELQUAL scale: a measure of relationship quality
in export market ventures, Journal of Business
Research, vol.58, no.8, pp.1040-1048, 2005.
[8] I. Geyskens and J-B. E. M. Steenkamp, Economic
and social satisfaction : Measurement and relevance
to marketing channel relationships, Journal of
Retailing, vol.76, no.1, pp.11-32, 2000.
[9] F. Selnes, Antecedents and consequences of trust
and satisfaction in buyerseller relationships.
European Journal of Marketing, vol.38, no.3/4,
pp.305-322, 1998.
[10] G. Zhuang, Y. Xi and A. S. L . Tsang, Power,
conflict and cooperation: The impact of guanxi in

TABLE 5. MEASURES OF SEPARATION OF EACH

ALTERNATIVE SOLUTION

S
S
S
S

*
i1
*

i2
*
i3
*

i4

0.000166
0.000202
0.000119
0.000245

S
S
S
S

i1

i2

i3

i4

0.000142
0.000115
0.000213
0.000108

The result of the ranking of approaches is derived

using Equations (6) (Table 6). The third alternative is
considered as the best maximization of expected benefits
for the seller to concentrate the business resources and
strengthen advertising strategy.
TABLE 6. RESULTS OF CLOSENESS COEFFICIENT AND
RANK

Revenue type
under 50 million
50 million500 million
500 million5,000 million
above 5,000 million

RC
0.46121
0.364193
0.640302
0.305006

*
i

Rank
2
3
1
4

V. Conclusions
This study found that in food industry, the perception
of the buyerseller relationship is complex and the
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Chinese marketing channels, Industrial Marketing

Management, vol.39, pp.137-149, 2010.
[11] I. R. B. Rodrguez, J. C. Agudo and H. S. M.
Gutirrez, Determinants of economic and social
satisfaction
in
manufacturer-distributor
relationships, Industrial Marketing Manage.,
vol.35, pp.666-675, 2006.
[12] G. R. Jahanshahloo, F. Hosseinzadeh Lotfi and A.
R. Davoodi, Extension of TOPSIS for decisionmaking problems with interval data: interval
efficiency, Mathematical and Computer Modelling,
vol.49, pp.11371142, 2009.

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Feng-Yi Wu was born in Taipei on April 10 of 1969. The

educational background is Doctoral
Student at the Graduate Institute of
Management
Sciences,
Tamkang
University, Tamsui Dist., New Taipei
City. The current job is Adjunct
Instructor with the Department of
Marketing and Logistics Management,
Chihlee Institute of Technology, Bancial
Dist., New Taipei City. The major field
of study is marketing and management.
Chung-Chu Chuang was born in Kaohsiung on February 1 of
1957. The educational background is Ph.D
at Graduate Institute of Management
Sciences, Tamkang University, Tamsui
Dist., New Taipei City. His current job is
professor and chairman of Graduate
Institute of Management Sciences,
Tamkang University, Tamsui Dist., New
Taipei City. His major field of study is
financial and management.

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