Strategic Management: Formulation and Implementation

Bargaining Power Of Suppliers

Supplier power refers to the ability of providers of inputs to determine the price and terms of supply. Suppliers can exert power over firms an industry by raising prices or reducing the quality of purchased goods and services, so reducing profitability.

The extent to which this potential impact is realized depends upon a number of factors; in general, a group of suppliers is more powerful if the following apply:

It is important to recognise that labour is a supplier, and may exert a considerable degree of power in some situation. The power of suppliers can be an important economic factor in the marketplace because of the impact they can have on customer profits.