![]() ![]() ![]() Economies of scale because new entrants sell lower volumes and face higher costs per unit.It is hard to enter an attractive industry, but once a company is able to enter, it is in a good shape. Hence, an attractive industry usually has high entry barriers. The lower the barriers for market entry, the easier it is for new competitors to enter the market thus leading to higher competition and thereby increasing the risk of price wars and a lower margin. Better or easy alternatives for buyers to switch.Large volumes of products bought by a single buyer.High concentration of customers or a only a few customers relative to number of suppliers.High danger of backwards integration or an ability of buyers to produce the product easily.Following are some signs that a buyer has a high negotiating power: If buyers have a lot of negotiating power, it generally implies strong leverage to enforce low prices. ![]() This concept is analogous to the supplier power discussed above. Highly specialized supplies, no substitutes for the supplied good.Availability of only few suppliers (or high concentration of few suppliers).High switching costs for a buyer to change suppliers.Relatively lower threat for a supplier to get acquired by another company.Following are some signs that a supplier has a high negotiating power: A high negotiating power often leads to higher prices or lower quality, thereby lowering the potential margin of the industry. The negotiating power of suppliers is defined as the amount of leverage the suppliers have for selling their products. Porter’s Five Forces Negotiating Power of Suppliers ![]()
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