Bargaining Power of Buyers. Examples

Five Forces (Porter) | Five Forces Analysis
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Jazmina L. Musa
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  harjot, Manager, India
 

Bargaining Power of Buyers

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.

  Dunstan
 

Bargaining Power of Buyers

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).

  Media Matthews-Williams, Student (University), Jamaica
 

Porter's' Five Forces

Simply put the bargaining power of buyers is the a (...)

  ujang, Student (University), Afghanistan
 

Bargaining Power in Banking Industry

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  Amos Amodu, Student (MBA)
 

Example of Bargaining Power of Buyers in the Banking Industry

This is the ability of buyer to dictate what selle (...)

 
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