Under what conditions the bargaining power of suppliers increase?

Suppliers or sellers in an industry may affect profit potentials, cost structure, and competitive position of a firm. Bargaining power of suppliers increases under the following conditions -

• Dominance by a few suppliers and lack of substitute product in the market,
• Greater concentration among suppliers than among buyers,
• Relative lack of importance of the buyers to the seller group,
• Importance of suppliers product to the buyer,
• High differentiation by the suppliers and high switching cost for the buyer,
• Credible threat of forward integration by suppliers.

 

The aforementioned conditions may lead the suppliers or the sellers to increase their bargaining power.