According to Roy, buyer power is the overall impact of consumers on a producing industry. The strong power of buyers implies increased production levels and there by increased suppliers, thus creating a situation where there are many suppliers supplying to a single customer. The advantage of such a market to the buyers is that they are the price determiners. However in reality, hardly do such markets exist in the current business world, with only there being an existence of an asymmetry between the producers and buyers. Strong buyers are characterized by concentrated buyers who purchase a significant portion of the output and they possess an option of either buying from a producing firm or its rival. However, buyers are weak if they producers threaten to execute a forward integration if there is a significant number of buyers switch costs. Fragmented buyers do not have an influence in the industry, while if the producers supply critical portions of buyers’ input greatly influence the strength of the buyers. Supplier power affects the inputs market for producer firms. A business involved in production business requires raw materials, labor and other production process inputs. This results into a buyer-supplier relationship between the industry and the firm supplying the raw materials used in the creation of the products. If the suppliers are powerful, they can have a significant impact in the producing industry. Such influences include selling the products at a higher price to share in the industry’s profits. The threat of new entrants and entry barriers poses a threat to firms in an industry since it influences the competition of the industry. This is possible in a free market economy where there is free entry and exit of firms in the industry. However, industry possesses certain characteristics that act as a shield to the high profitability levels of firms in the market, inhibiting new entrants into the market. The barriers of entry are a lot more than the normal equilibrium adjustments made typically by the markets. These barriers are unique to a particular market are responsible in defining a market.
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