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CS Professional · Strategic Management and Corporate Finance · Analyzing the External and Internal Environment

Which situation would most strongly increase the bargaining power of buyers in an industry?

Buyer power is highest when products are standardised and switching costs are low, since buyers can easily move to another supplier and force down prices. Numerous small buyers, unique inputs or patented technology weaken buyers and strengthen suppliers instead.

  1. ABuyers are numerous and each purchases a small quantity
  2. BSwitching to a rival supplier costs the buyer very little and products are standardisedCorrect
  3. CThe product is a unique input with no close substitutes
  4. DThe supplier has a patented technology the buyer needs

Explanation

Buyers gain power when products are undifferentiated and switching costs are low, because they can easily play suppliers against each other. Many small buyers reduce power, while a unique or patented input shifts power to the supplier.

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