How to prevent the supplier from having too much

PowerHow does contractual management protect the interests of buyers? What does the bargaining power of suppliers mean? The bargaining power of suppliers is part of porter's 5 forces competitive analysis framework, proposed by economist and harvard business school professor, michael porter. The term is defined as the pressure that suppliers can put on companies by increasing their prices, decreasing their quality, or reducing the availability of their products. This model is used to investigate the opportunities and threats in a given industry and helps establish its attractiveness. The other forces are rivalry between competitors, the bargaining power of buyers, the threat of new competitors and the threat of new substitute products. In which cases does the bargaining power of suppliers exceed that of buyers? According to the writer joan magretta (in her book understanding michael porter: the essential guide to competition and strategy) you can determine if suppliers “have the power” when they can negotiate prices to their benefit and thus increase the profitability of their company.



The bargaining power of suppliers can be exercised in 3 ways: increasing prices, decreasing quality, and reducing product availability. That's not all, powerful suppliers who are able to raise prices in their favor can reduce the profitability of the industry. Furthermore, the bargaining power of suppliers can directly affect competition between buyers and the sector. In an industry, the bargaining power of the supplier affects the competitive environment and the profit potential of buyers. The buyers are the companies and the suppliers are those who supply the companies. According to magretta, there are certain factors that can affect buyers: if a supplie Phone Number List represents a large percentage of sales in a specific sector. The departure of a supplier can significantly affect buyers. If there is no immediate substitute from a certain supplier for the buyer. Other relevant factors to consider are: the existence of an excess in demand in relation to supply. This occurs when there are few sellers of the inputs in relation to demand, which allows the supplier to have greater influence in establishing the prices of said input. Be the only supplier of the input, that is, operate as a monopoly . Since there is no competition, it has the advantage of being able to sell the input by establishing its price and quality.









The supplier becomes a competitor . There is the possibility that the supplier evolves and begins to develop a structure to produce and sell the product that the company markets in the market. Due to the abrupt changes generated in the last two years, today it is especially important for companies to focus more than ever on analyzing and understanding how the bargaining power of customers influences. It is no longer enough to offer competitive prices or faster deliveries, it is a process that covers the entire purchasing cycle. How to analyze or measure the bargaining power of suppliers there are several factors that can be considered to analyze or measure the bargaining power of suppliers: concentration: if there are few suppliers in a market, they have more bargaining power. Importance to the buyer: if a product or service is essential to the buyer, the supplier has more bargaining power. Switching cost: if the cost of switching to another supplier is high, the current supplier has more bargaining power. Market presence: if a supplier is known and has a strong presence in the market, it has more negotiating power. Barriers to entry: if there are high barriers to entry in a market, current suppliers have more bargaining power. These factors can be evaluated and weighted to determine a supplier's bargaining power.