Saturday, December 24, 2011

Under what conditions the bargaining power of suppliers increase?

Suppliers or sellers in an industry may affect profit potentials, cost structure, and competitive position of a firm. Bargaining power of suppliers increases under the following conditions -

  • Dominance by a few suppliers and lack of substitute product in the market,
  • Greater concentration among suppliers than among buyers,
  • Relative lack of importance of the buyers to the seller group,
  • Importance of suppliers product to the buyer,
  • High differentiation by the suppliers and high switching cost for the buyer,
  • Credible threat of forward integration by suppliers.
 
    The aforementioned conditions may lead the suppliers or the sellers to increase their bargaining power.

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