Bargaining Power of Customers

Bargaining Power of Customers

Similarly, the bargaining power of customers determines how much customers can impose pressure on margins and volumes. Customers bargaining power is likely to be high when

• They buy large volumes; there is a concentration of buyers
• The supplying industry comprises a large number of small operators
• The supplying industry operates with high fixed costs
• The product is undifferentiated and can be replaces by substitutes
• Switching to an alternative product is relatively simple and is not related to high costs
• Customers have low margins and are pricesensitive
• Customers could produce the product themselves
• The product is not of strategical importance for the customer
• The customer knows about the production costs of the product
• There is the possibility for the customer integrating backwards.