ACCA Strategic Professional · Strategic Business Leader · Competitive forces

Marisol Foods bakes bread and buys flour from three large millers. Flour is 45% of its costs. Marisol's recipes are tied to one miller's specially treated flour, and changing would require re-testing and new equipment. Which factor most strongly increases that supplier's bargaining power?

High switching costs from reliance on one miller's specially treated flour most strongly raise that supplier's power. Marisol cannot easily move without re-testing and new equipment, so the miller can raise prices or tighten terms without losing the customer, which defines strong supplier bargaining power.

1. AMarisol's high switching costs arising from its dependence on a specific inputCorrect
2. BThe fact that there are three millers in the industry
3. CThe fact that flour is a significant proportion of costs, regardless of switching ability
4. DThe potential for Marisol to sell bread to many retailers