Independent Study--Competitive Strategy Chap 6 Strategy Toward Buyers and Suppliers

Most of the industries sell their products or services to different buyers. These buyers have different purchasing needs and structural bargaining power. Buyers have more bargaining power when:Few buyers chasing too many goods,Buyer purchases in bulk quantities,Product is not differentiated,Buyer’s cost of switching to a competitors’ product is low,Shopping cost is low,Buyers are price sensitive,Credible Threat of integration. Moreover, Large buyers, they will have significant leverage to negotiate lower prices and other favorable terms. However, not all buyers will have the same degree of bargaining power or be as sensitive to price, quantity, or service. For instance, apparel makers face significant buyer power when selling to large retailers like Wal-Mart or department stores, but face a much more favorable situation when selling to smaller specialty shops.
Suppliers are more powerful when:Suppliers are concentrated and well organized,a few substitutes available to supplies,their product is most effective or unique,switching cost, from one suppliers to another, is high, you are not an important customer to Supplier. When suppliers have more control over supplies and its prices that segment is less attractive. It is best way to make win-win relation with suppliers. It’s good idea to have multi-sources of supply.