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Meridian Components makes bespoke gearboxes for wind turbines. Two turbine manufacturers account for 70% of sales. Both could produce gearboxes in-house, and gearbox cost is 40% of their turbine cost. Meridian's gearboxes are undifferentiated from competitors'. Meridian's board is considering responses. Which response most directly addresses the buyer power identified?

Meridian should broaden its customer base and differentiate its gearboxes. Buyer power arises from customer concentration, in-house production threat, high cost share and undifferentiated products, so reducing dependence and making switching harder directly weakens it.

  1. ASeek long-term supply contracts with a wider range of customers in other industries and differentiate the product through proprietary design and service, to reduce dependence and switching easeCorrect
  2. BMerge with its own raw steel supplier to reduce supplier power
  3. CIncrease prices to protect margins while keeping the customer base unchanged
  4. DCut research spending to lower costs and match rivals' prices

Explanation

Buyer power stems from concentration, backward integration threat, high cost share, and lack of differentiation. Diversifying customers and differentiating reduces dependence and switching ease. Merging with a steel supplier tackles supplier power, not buyer power. Raising prices ignores buyers' leverage, and cutting R&D worsens undifferentiation.

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