ACCA Applied Knowledge · Business and Technology · Competitive factors
Which of the following would typically make supplier power HIGH for a firm?
Supplier power is high when the input is unique and switching to another supplier is costly. The firm then has few alternatives and must accept the supplier's terms. Many identical suppliers, or the firm being a major customer of each supplier, would reduce supplier power instead.
- AMany alternative suppliers offering identical inputs
- BThe firm's purchases are a large proportion of each supplier's sales
- CThe input is unique and switching to another supplier is costlyCorrect
Explanation
Suppliers are powerful when inputs are unique or differentiated and switching costs are high, as the buyer has little alternative. Many identical suppliers, or a buyer who is a major customer of the supplier, shift power to the buyer.
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