Bargaining Power of Buyers

Buyer groups are likely to be powerful if :

Buyer are concentrated or puchases are large relative to seller's sales
- Purchase accounts for significant fraction of suppier's fees
- Products are undifferentiated
- Buyers face few switching costs
- Buyers industry earns low profits
- Buyer presents a creabile threat of backward
- Product unimportant to quality
- Buyer has full inforamtion

Buyers comete with supplying industry

* Bargaining down prices
* orcing higher quality
* Playing firms off other


Porter Five Forces Model of Competition

Threat of new Entrants
Bargaining Power of Buyers
Bargaining Power of SUpplier
Threat of Substitute Products


Threat of Substitue Product
- Key to evaluate substitue products
- Products with improving price / performance tradeoffs relative to present industry products
- Products with similar function limit the prices firms can charge

Example:
Electronic security systems in place of security guards
Fax machines in place of overnight mail delivery