Analysing the

5-forces

5-forces vs the
industry
Analysing the
5-forces
The
Industry

5-forces vs the
industry
Bargaining Power of SUPPLIERS

If you have powerful suppliers, they will use their negotiating leverage to charge
higher prices or to insist on more favourable terms. In either case, industry
profitability will be lower.

When analysing the power of suppliers, be sure to include all the purchased inputs
that go into a product or service e.g. labour, rental, materails
 Do the suppliers
Supplier
have higher
bargaining power
than the industry?

If so, the industry will lose

its profits to them…

The
Industry

Bargaining Power of SUPPLIERS

 Do the suppliers
Supplier
have higher
bargaining power
than the industry?

If so, the industry will lose

its profits to them…
because costs
The
Industry

Bargaining Power of SUPPLIERS

 Power of Suppliers is high when:
Supplier
• Few suppliers therefore they command the price

• Their product is unique and essential for the

industry

• Suppliers are not threatened by alternative inputs

for the industry

• The industry DOES NOT make up an important

part of suppliers’ own business (i.e. small impact
The
on suppliers’ revenue/profits)
Industry

Bargaining Power of SUPPLIERS

 n…
tratio
Illustration…
Illus
Power of Suppliers is high when:

• Few suppliers therefore they command the price

• Their product is unique and essential for the

R e t ai l industry

space • Suppliers are not threatened by alternative inputs

for the industry

• The industry DOES NOT make up an important

part of suppliers’ own business (i.e. small impact
on suppliers’ revenue/profits)

Bargaining Power of SUPPLIERS

 n…
tratio
Illustration…
Illus
Power of Suppliers is high when:

• Few suppliers therefore they command the price

• Their product is unique and essential for the

R e t ai l industry
Increases suppliers’
space • bargaining power
Suppliers are not threatened by alternative inputs
for the industry
Increases suppliers’
bargaining power
• The industry DOES NOT make up an important
part of suppliers’ own business (i.e. small impact
on suppliers’ revenue/profits)
Medium impact

Increases suppliers’
bargaining power
Bargaining Power of SUPPLIERS
 n…
tratio
Illustration…
Illus
Power of Suppliers is high when:

• Few suppliers therefore they command the price

Labou • Their product is unique and essential for the

r industry

• Suppliers are not threatened by alternative inputs

for the industry

• The industry DOES NOT make up an important

part of suppliers’ own business (i.e. small impact
on suppliers’ revenue/profits)

Bargaining Power of SUPPLIERS

 n…
tratio
Illustration…
Illus
Power of Suppliers is high when:

• Few suppliers therefore they command the price

Labou • Their product is unique and essential for the

r industry

• Suppliers are not threatened by alternative inputs

Lowers
Lowers buyers’
for thesuppliers’
industry
bargaining power
bargaining power
• The industry DOES NOT make up an important
part of suppliers’ own business (i.e. small impact
on suppliers’ revenue/profits)
Medium impact

Increases suppliers’
bargaining power
Bargaining Power of SUPPLIERS
When assessing the bargaining power of buyers and suppliers, the same
set of questions can be applied to both.

If the industry’s Buyers/ Suppliers show the following characteristics

when compared to the industry, their bargaining power tends to be high:
• They are large and concentrated compared to the industry
• The industry needs them more than they need the industry
• Switching costs work in their favour
• Differentiation works in their favour

Bargaining Power of BUYERS and SUPPLIERS