The Bargaining Power of Suppliers by Van Thompson - Updated September 26, The bargaining power of suppliers in the fast-food industry varies significantly from business to business and across time and location. Brand Names Brand-name suppliers tend to have more bargaining power. These suppliers have more bargaining power, because if they stop supplying restaurants, the restaurants may lose money or be forced to change their marketing strategies. Restaurants can simply switch to another supplier offering the same product.
Suppliers may work with multiple buyers in the same area, giving them leverage in contract negotiations with an individual restaurant. Potential restaurant owners should consider the bargaining power of suppliers when deciding whether to enter the industry.
If the suppliers have heavy influence on the market, income projections may need to be adjusted to account for increased supply prices. Effects of Powerful Suppliers The bargaining power of suppliers is one of the five factors that control the amount of competition in a particular industry.
The other four factors are the bargaining power of buyers, industry rivalry, barriers to entry and the threat of substitutes. As suppliers gain bargaining power, they drive down the potential profits for the industry as a whole. A group of suppliers can threaten to reduce the quality of products or raise prices, which makes it hard for restaurants to make up for cost increases by raising their own prices.
Internal Factors Suppliers with few customers may be more likely to give in to a buyer's demands than a supplier with a large customer base. A supplier with many customers can weather the loss of one buyer's account without being financially crippled.
The supplier's financial stability and cash flow also affect its bargaining power.
Supplier Competition Competition between suppliers decreases their overall bargaining power. Fast food restaurants can choose another vendor if there are multiple options for purchasing the same product.
|Limited buyer choice Fast Food Industry When customers have limited choices they end up paying more for the choices that are available|
|Table 2 Evaluation of the key strategic resource and capabilities The above listed six resources or capabilities are the source of the sustainable competitive advantage and superior performance of the McDonald because they are valuable, rare, inimitable and non-substitutable.|
|Fast Food Industry: The Bargaining Power of Suppliers | ashio-midori.com||All industries need raw materials as inputs to their process.|
To combat this, an individual supplier must offer something special to stand out from the crowd, such as a lower price, faster delivery time, more flexible credit terms, higher product quality or volume discounts. If the supplier group is smaller and more concentrated than the buyers in the industry, the suppliers will have extra bargaining power.
Suppliers can set the industry standard, and the restaurants have no choice but to adapt. Brand Recognition Suppliers with their own established brands may have more bargaining power than those that only sell generic products.
The power becomes even greater if the restaurant is using the supplier's brand in their marketing plans to attract customers. Customers in the food industry are loyal to the brands they like. Many people will travel to a particular fast food restaurant just because it has a certain supplier's product.
For example, some restaurants are known for only selling Coke products instead of Pepsi and vice versa.
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Her areas of expertise are business, law, gaming, home renovations, gardening, sports and exercise.In this article, we will look at 1) understanding suppliers, 2) bargaining power of suppliers, 3) effect on target market, 4) example - the diamond industry, and 5) example - the fast food An important force within the Porter's Five Forces model is .
Fast Food in Korea. the country has favorable demand environment for the fast food industry in Asia.
Although China and Singapore’s economies grew at seven and ten percent, respectively, within the last year, the former is too undeveloped for a company with no operations in Asia and the latter represents a market that has been saturated.
. Fast-Food Industry: The Bargaining Power of Suppliers by Van Thompson - Updated September 26, The bargaining power of suppliers in the fast-food industry varies significantly from business to business and across time and location.
If suppliers are concentrated compared to buyers – there are few suppliers and many buyers – supplier bargaining power is high.
Conversely, if buyer switching costs – the cost of switching from one supplier’s product to another supplier’s product – are high, the bargaining power of suppliers is high.
Bargaining power of suppliers is low in the fast food industry in China for two major reasons: on one hand, the materials provided by the suppliers to the fast food firms such as flour are mostly standard products with a large number of suppliers concentrating on the production of these products; on the other hand fast food chains such as McDonald are large in purchasing volume which help increase their .
The bargaining power of suppliers can affect a fast food restaurant's ability to make a profit. Photodisc/Photodisc/Getty Images.