Bargaining Power of Suppliers

Suppliers can exert pressure for higher prices.

The ability of suppliers to get high prices depends on several factors:

(a) Whether there are just one or two dominant suppliers to the industry, able to charge monopoly or oligopoly prices.

(b) The threat of new entrants or substitute products to the supplier’s industry.

(c) Whether the suppliers have other customers outside the industry, and do not rely on the industry for the majority of their sales.

(d) The importance of the supplier’s product to the customer’s business.

(e) Whether the supplier has a differentiated product which buyers need to obtain.

(f) Whether switching costs for customers would be high.


(source: BPP Learning Media)



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