Question

Suppliers are more likely to be powerful relative to the firms to which they sell their goods and services if: 1) differentiation among existing suppliers is high. 2) the suppliers' industry is highly fragmented. 3) existing suppliers lack economies of scale. 4) the suppliers' industry is dominated by a few companies. 5) cost advantages independent of size are negligible.

Answer 1

Suppliers are more likely to be powerful relative to the firms to which they sell their goods and services if the suppliers' industry is dominated by a few companies.

Answer: Option (4)

Explanation:

When the supplier industry is dominated by only few companies ,it means that Suppliers' industry is highly concentrated.There exist concentration of power.It will give a chance to suppliers to become powerful and they can take decisions very easily but with that they might also rule the industry and can control the supply of a particular product as their own requirements .

In that case the buyer will have limited say.He will have to remain dependent upon the supplier firms for the supply of product.Price of the product supplied will also be controlled by the suppliers not by the buyers.Supplier will charge more price and in case buyer refuses they might limit the supply of the product,or lower the quality of product supplied.

Suppliers will get more bargaining power.It will make the industry more competitive and reduce the profits of the buyers.