Pressure exerted by suppliers on companies Show
What is Bargaining Power of Suppliers?The Bargaining Power of Suppliers, one of the forces in Porter’s Five Forces Industry Analysis Framework, is the mirror image of the bargaining power of buyers and refers to the pressure that suppliers can put on companies by raising their prices, lowering their quality, or reducing the availability of their products. This framework is a standard part of business strategy. The bargaining power of the supplier in an industry affects the competitive environment and profit potential of the buyers. The buyers are the companies and the suppliers are those who supply the companies. The bargaining power of suppliers is one of the forces that shape the competitive landscape of an industry and help determine the attractiveness of an industry. The other forces include competitive rivalry, bargaining power of buyers, the threat of substitutes, and the threat of new entrants. Learn more in CFI’s Corporate & Business Strategy Course. Types of SuppliersDepending on the industry, there are various types of suppliers. A list of types includes:
Determining Factors: Bargaining Power of SuppliersThere are five major factors when determining the bargaining power of suppliers:
When is Bargaining Power of Suppliers High/Strong?
When is Bargaining Power of Suppliers is Low/Weak?
Purpose of Bargaining Power of Suppliers AnalysisWhen doing an analysis of supplier power in an industry, low supplier power creates a more attractive industry and increases profit potential, as buyers are not constrained by suppliers. High supplier power creates a less attractive industry and decreases profit potential, as buyers rely more heavily on suppliers. Learn more in CFI’s Corporate & Business Strategy Course. Bargaining Supplier Power in the Fast Food IndustryTo determine whether McDonald’s faces high or low bargaining power from suppliers in the fast-food industry, consider the following analysis:
Overall, McDonald’s faces low bargaining power of suppliers. Therefore, supplier power is not an issue for McDonald’s in the fast-food industry. However, the bargaining power of suppliers alone does not determine the overall attractiveness of an industry. The remaining forces (bargaining power of buyers, rivalry among existing competitors, the threat of new entrants, and the threat of substitutes) must be taken into consideration when determining overall industry attractiveness. More ResourcesThank you for reading CFI’s guide on the Bargaining Power of Suppliers. To learn more and advance your career, see the following CFI resources:
What are the reasons for the growth of direct marketing?5 Main Reasons for Growth in Direct Marketing Activity are as follows:. Purchase over telephone or by post (mail) or via the internet.. A request for catalogue or sales literature.. A request for product demonstration.. A request for a salesman's visit.. Which of the following is an advantage of direct marketing?More Personalized Communication
Another advantage of using direct marketing for your business is you can provide personalized communication to your customers. More often than not, a direct marketing campaign includes personalization elements. These allow them to resonate with a particular segment of your audience.
What are the advantages of direct selling?Consumers benefit from direct selling because of the convenience and service it provides, including personal demonstration and explanation of products, home delivery, and generous satisfaction guarantees.
Which of the following is a disadvantage of direct marketing?Competition: It can be hard to make your messages stand out when the recipient receives high number of marketing emails or direct mail. Cost: Tactics like telemarketing and direct mail may have high financial and resource costs. Legal issues: There are laws relating to privacy and data protection in direct marketing.
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