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. All industries need raw materials as inputs to their process. This includes labour for some and parts and components for others. This is an essential function that requires strong buyer and seller relationships. If there are fewer suppliers or if they have certain strengths and knowledge, then they may wield significant power over the industry. Depending on the industry, there are various types of suppliers. A list of types includes – manufacturers and vendors, distributors and wholesalers, independent suppliers, importers and exporters, drop shippers. When 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. When a company’s suppliers have significant power over the value chain, it can directly impact how the company serves its own customers. Depending on what power the supplier chooses to exert, a company may have to reflect this through product prices, product quality and quantity available. Too much disruption in any of these areas may even mean that a company is no longer able to stay in business. A company may need to end operations or shift to another industry to avoid being dictated by the whims of a supplier.
The Bargaining Power of Suppliers template consists of four slides that are brightly coloured and have all the tools you need to build a professional presentation. This template will primarily be useful for supply managers or sales managers. You can present your strengths or weaknesses and define your supply strategy. This slide can also be used by purchasing managers. You can define categories for your suppliers, risks of out of stock and price increases. Then you can develop a strategy for working with your suppliers for each category. If necessary, you can independently make changes to the slides of this template in accordance with your corporate requirements.