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CS Professional · Strategic Management and Corporate Finance · Competitive Positioning

A company that depends on a single supplier of a specialised component, with no alternative source and high switching costs, is most directly exposed to which force?

The company faces strong bargaining power of suppliers. With one supplier of a specialised component, no alternative source and high switching costs, the supplier can raise prices or dictate terms, which squeezes the buyer's profit margins in Porter's model.

  1. AStrong bargaining power of suppliersCorrect
  2. BStrong bargaining power of buyers
  3. CHigh rivalry among existing competitors
  4. DLow threat of substitutes

Explanation

Supplier power is high when few suppliers exist, inputs are specialised, switching costs are high and no substitute input is available. The company can be pushed into paying higher prices or accepting poorer terms. The facts say nothing about buyers or rivalry.

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