Facts of suppliers to use substantial bargaining power

Question

Determine the facts of suppliers to use substantial bargaining power.

Answer 1

The facts that determine whether one of the suppliers to an industry is in a position to use substantial bargaining power or leverage are fairly straightforward:

a. Whether the item being supplied is a product that is readily available from a lot of suppliers at the leaving market cost.

b. Whether only some large suppliers are the primary sources of a particular product.

c. Whether it is tricky or expensive for industry members to switch their purchases from one supplier to other or to switch to attractive substitute inputs

d. Whether certain needed inputs are in short supply

e. Whether certain suppliers give a differentiated input that increase the performance or quality of the industry’s product

f. Whether certain suppliers give equipment or services that deliver important cost-saving efficiencies to industry members in operating their production processes.

g. Whether suppliers give an item that accounts for a sizable part of the costs of the industry’s product.

h. Whether industry members are major clients of suppliers.

i. Whether it makes fine economic sense for the industry members to integrate self-manufacture and backward items they have been buying from suppliers.