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  • Bargaining Power of Suppliers and Buyers

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    Krischelle Anne Fidelino
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    Supplier groups have bargaining power when they are dominated by a few large companies, substitute products are unavailable, and industry firms are not major customers. Supplier power also increases when suppliers provide critical goods for buyer success, create high switching costs, and could potentially integrate forward. Buyer groups are powerful when they purchase a large industry output portion, the product is a major cost portion, buyers can easily switch products, and the product is undifferentiated allowing potential backward integration.

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    Bargaining power of suppliers and buyers

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    Supplier groups have bargaining power when they are dominated by a few large companies, substitute products are unavailable, and industry firms are not major customers. Supplier power also increases when suppliers provide critical goods for buyer success, create high switching costs, and could potentially integrate forward. Buyer groups are powerful when they purchase a large industry output portion, the product is a major cost portion, buyers can easily switch products, and the product is undifferentiated allowing potential backward integration.

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    © All Rights Reserved
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    20 views5 pages

    Bargaining Power of Suppliers and Buyers

    Uploaded by

    Krischelle Anne Fidelino
    Supplier groups have bargaining power when they are dominated by a few large companies, substitute products are unavailable, and industry firms are not major customers. Supplier power also increases when suppliers provide critical goods for buyer success, create high switching costs, and could potentially integrate forward. Buyer groups are powerful when they purchase a large industry output portion, the product is a major cost portion, buyers can easily switch products, and the product is undifferentiated allowing potential backward integration.

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    © All Rights Reserved
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    BARGAINING POWER OF SUPPLIERS

    THE SUPPLIER GROUP IS POWERFUL WHEN:

    • It is dominated by a few large companies


    • Satisfactory substitute products are not available to industry
    firms
    • Industry firms are not a significant customer group for the
    supplier group
    THE SUPPLIER GROUP IS POWERFUL WHEN:

    • Suppliers’ goods are critical to buyers’ marketplace success.


    • The effectiveness of suppliers’ products has created high
    switching costs for industry firms.
    • Suppliers are a credible threat to integrate forward into the
    buyers’ industry.
    BARGAINING POWER OF BUYERS
    THE BUYER GROUP IS POWERFUL WHEN:

    • They purchase a large portion of the industry’s output.


    • The product being produced from an industry accounts for a
    significant portion of the buyers’ cost.
    • They could switch to another product at little, or no cost.
    • The industry’s products are undifferentiated and standardized,
    and buyers can integrate backward into the sellers’ industry.

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