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The presence of powerful suppliers reduces the profit potential in an industry. Suppliers increase competition by threatening to raise prices or reduce the quality of goods and services. As a result, they reduce profitability in industries where companies cannot recover cost increases in their own prices. The bargaining power of suppliers is one of the five forces that determine the intensity of competition in an industry. The others are barriers to entry, industry rivalry, the threat of substitutes and the bargaining power of buyers. Power of supplier groupThe following conditions indicate that a supplier group is powerful:
How to mitigate a strong bargaining power of supplier
A careful examination of the cost and value of your supply chain is required to assess your suppliers’ bargaining power in your business, which can be identified and mitigated by considering one or more of the following options:
Which of the following situations leads to an increase in the bargaining power of suppliers in an industry?If suppliers are concentrated compared to buyers – there are few suppliers and many buyers – supplier bargaining power is high. Conversely, if buyer switching costs – the cost of switching from one supplier's product to another supplier's product – are high, the bargaining power of suppliers is high.
In which of the following situations is the power of suppliers high in an?Supplier industry is more concentrated than the industry it sells to. Suppliers tend to gain high power in an industry when they are more concentrated than their industry counterparts.
Which of the following are forces in Porter's five forces model check all that apply?According to Porter, there are five forces that represent the key sources of competitive pressure within an industry They are:. Competitive Rivalry.. Supplier Power.. Buyer Power.. Threat of Substitution.. Threat of New Entry.. Which of the following is the objective of five forces analysis?The Five Forces primary purpose is to determine the attractiveness of an industry. However, the analysis also provides a starting point for formulating strategy and understanding the competitive landscape in which a company operates.
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