Bargaining Strength of Buyers

Bargaining Strength of Buyers

Buyers can be competitive threat when they demand better quality and additional services or when they force down prices. Whereas weak buyers provide opportunity to the firm to increase prices and earn better returns. According to Porter buyers are most powerful in the following cir-cumstances.

(1)When the suppliers are composed of small companies and their number is very high and the buyers are few in number and are large in size.
When the buyers purchase the goods in bulk quantities.

(iii) When the suppliers are dependent upon buyer for a large percentage of total orders.

(iv) When the buyer can switch order between supply companies at a low cost and encourage competition amongst each other to force down prices.

v.When it is economically feasible for the buyers to purchase the raw material from several companies at the same time.

(vi) When the buyer can supply its own needs through vertical integration.