Alternative products buyer earns low profits buyer

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Unformatted text preview: seller’s output Purchase represents a significant fraction of buyer’s costs or purchases Purchase standard or undifferentiated product Easy for buyer to switch to alternative products Buyer earns low profits Buyer could backward integrate Bargaining Power of Suppliers • Powerful suppliers can force higher costs on to pp industry firms • Supplier power is “HIGH” if: – – – – – – Few suppliers No substitutes for input substitutes for input Suppliers have differentiated product Costly to switch suppliers The supplier’s product is an important input to buyers’ business Supplier could manufacture product (forward integrate) Threat of Substitutes • The competitive pressure provide...
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This note was uploaded on 08/16/2011 for the course MGMT 110 taught by Professor Zhang during the Spring '11 term at UC Irvine.

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