Jazmina L. Musa, Student (University), Philippines What precisely is bargaining power of buyers? Can you cite an example? Thank you.
Bargaining Power of Buyers harjot, India Let's take an example. Two companies A and B are producing substitutes with nearly equal pricing.
Situation: company A raises its prices because it thinks consumers won't mind since my product is required. But the consumers shift to company B and the sales of company A thus falls. Company A now wakes up to realise this fact and quickly rolls back the price increase. Thus the buyers have bargained and shift back to company A.
Bargaining Power of Buyers Dunstan, Australia It is the power that buyers have over the producer of goods. It can be a threat to producers, especially when there are several producers in the market. These are a few examples of how buyers can exercise their bargaining power:
1) If there are few buyers and they purchase large quantities, they can demand lower prices. (Do you think the producer would like to lose such a customer?)
2) If a single buyer purchases the majority of another company's multiple products (Would you give up a customer that generates a large revenue?)
3) If there are several buyers and several producers of the same product, the buyer can easily switch between producers and ask for better pricing (i.e. could be about maintaining market share for the producers)
4) A purchaser buying the same items from several producers. The producer will tend to increase competition amongst producers. (i.e considering the economies of scale).
Porter's' Five Forces Media Matthews-Williams, Jamaica Simply put the bargaining power of buyers is the ability of the buyer to control prices with their purchasing power and habits / preferences. As is the case with the example given by Harjot.
Example of Bargaining Power of Buyers in the Banking Industry Amos Amodu, USA This is the ability of buyer to dictate what sellers (bank) can do.
A typical example was the attempt by some banks in the United States to charge customers for using their check card (ATM card) to make purchases. The banks were "forced" to rescind (Ed: ~reconsider) that decision as client started closing their accounts and moving to other banks that were not considering charging fee for the use of check card. Buyers exhibited their powers powerfully in this case.