Strategic Responses to Supplier power

Strategic Responses to Supplier power - RespondingtoBuyers,

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Responding to Buyers,  Suppliers, Substitutes Manec 387 Economics of Strategy
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What can be done to neutralize the  bargaining power of suppliers? 1. Buy or ally with a supplier,  or develop exclusive  sourcing arrangements with them to assure access  to the factor at the lowest possible cost, greatest  value 2. Develop alternative sources  of supply 3. Narrow the sell options  of the supplier through  market consolidation, merger or alliances  4. Innovate  to change the specific nature of inputs and  thus neutralize the power of specific suppliers 5. Diversify product base  to diminish dependence of  your business on any particular supplier
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1. Buy a supplier or alliance The buyer merges with the supplier Reduces supply price risk  Reduces risk that a competitor will tie up  the supply through a similar acquisition Also called “vertical integration” An alternative approach is to pursue a  “cooperative strategy” of forming a  mutually beneficial alliance
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Example: Verticle Integration or  Cooperative Alliance IBM launches a semiconductor unit for  memory manufacture to assure supply to its  new IBM PC in the 80s
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Strategic Responses to Supplier power - RespondingtoBuyers,

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