IV. Supplier Power
A producing industry requires raw materials - labor, components, and other supplies. This requirement leads to buyer-supplier relationships between the industry and the firms that provide it the raw materials used to create products. Suppliers, if powerful, can exert an influence on the producing industry, such as selling raw materials at a high price to capture some of the industry's profits. The following tables outline some factors that determine supplier power.
|Suppliers are Powerful if: |Example |
|Credible forward integration threat by suppliers |Baxter International, manufacturer of hospital supplies, acquired American |
| |Hospital Supply, a distributor |
|Suppliers concentrated |Drug industry's relationship to hospitals |
|Significant cost to switch suppliers |Microsoft's relationship with PC manufacturers |
|Customers Powerful |Boycott of grocery stores selling non-union picked grapes |
|Suppliers are Weak if: |Example |
|Many competitive suppliers - product is |Tire industry relationship to automobile manufacturers |
|standardized | |
|Purchase commodity products |Grocery store brand label products... [continues]
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(2011, 03). Porter's Five Forces－a Model for Industry Analysis-2porter's Five Forces－a Model for Industry Analysis-2. StudyMode.com. Retrieved 03, 2011, from http://www.studymode.com/essays/Porter-s-Five-Forces-a-Model-For-Industry-636854.html
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