Marketing Strategy and Competitive Positioning pdf ebook

Suppliers are more concentrated than buyers. Where there are few organisations capable 
and willing to supply, their power over their buyers tends to be greater. Similarly, where 
buyers are more fragmented, and purchase in relatively small quantities, their power 
relative to their suppliers is likely to be low.
● 
Costs of switching suppliers are high. If the supplier provides a key ingredient for the 
purchaser that is difficult or costly to source elsewhere, their bargaining power is likely 
to be greater. Where the supplier provides commodity products that can be easily pur-
chased elsewhere, they will have less bargaining power. Recently, Sainsbury’s and Asda, 
two major supermarket chains in the UK, attempted to merge in an effort to increase 
their bargaining power with suppliers and drive costs down. In their view that would 
have helped them to be more competitive against the discounters such as Aldi and Lidl. 
However, the merger was blocked by the CMA (Competition and Markets Authority) 
because it was felt that the two chains combined would result in higher product prices 
and a reduction in quality and choice for the customer.
● 
Suppliers’ offerings are highly differentiated. Where suppliers’ products are distinct 
and different, either through tangible differences in standards, features or design, or 
through less tangible effects such as branding and reputation, they are likely to hold 

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THE FIVE FORCES MODEL OF INDUSTRY COMPETITION
more bargaining power. The power of Intel, for example, as a supplier of computer chips 
(which are increasingly commodity products) is enhanced through the reputation and 
branding of Intel among the ultimate customers for computers. This pull-through effect 
enhances the power of Intel in supplying to computer manufacturers and assemblers.
Source: TEH ENG KOON/AFP/Stringer/Getty Images.
3.7.5 Bargaining power of buyers
The buyers or customers of the output from an industry also exert pressures that can affect 
the degree of competition within it. Buyers tend to be more powerful in the supply chain 
where the following is true:
●