Question

The bargaining leverage of suppliers is greater when: Select one: a. Only a small number of suppliers exist and when it is difficult for industry members to switch to attractive substitutes b. A large number of suppliers exist and when it is easy for industry members to switch to attractive substitutes c. Industry members incur low costs in switching their purchases from one supplier to another d. The supplier industry is composed of a large number of relatively small suppliers

Answer 1

Answer:

The correct answer is letter "A": Only a small number of suppliers exist and when it is difficult for industry members to switch to attractive substitutes.

Explanation:

Porter's Five Forces is a study scheme named after Harvard Professor Michael E. Porter (born 1947). It helps managers assess competition within the industry.

• The first force analyzes the ease of marketplace entry for new participants.  
• The second factor measures the number and operation of a company's rivals.
• The third element is the likelihood of a new good or service entering the market that will diminish the sales of existing goods.
• The four-factor is that industry suppliers have negotiating power.
• The fifth factor is the bargaining power of customers.

When the suppliers' bargaining power is higher, there are possibly a few of them in the market. The situation gets worse for manufacturers when switching from one supplier to another represents higher costs or when making the change to substitutes carries a high cost as well.