Strategy toward Buyers and Suppliers

Buyer selection

“different purchasing needs are one reason why buyers have different structural bargaining power.”

“the costs of servicing individual buyers differ..as a result.. buyer selection- the choice of target buyers- becomes an important strategic variable.”

“Buyer selection with attention to structural considerations is an especially important strategic variable in mature industries and in those where barriers caused by product differentiation or technological innovation are hard to sustain.”

“Structural position- a criterion to determine quality of buyers- includes intrinsic bargaining power, and a propensity to exercise this bargaining power in demanding low prices.”

“..unexercised power is a threat that can be unleashed by industry evolution.”

Price sensitivity of buyers

“If buyers are very well informed about the state of demand and suppliers’ costs, they can be ruthless price bargainers.”

“The motivation of the actual decision maker (buyer) is not narrowly defined as the cost of inputs.”

“large buyers are not necessarily the most price sensitive..they might be willing to pay a premium for reliability and for keeping service costs limited to one supplier.”

Buyer selection and strategy

“A firm with high product differentiation may be able to sell to good buyers that are unavailable to many of its competitors..”

“Without a cost advantage, the firm must focus its efforts on buyers who are less price sensitive if it is to outperform the industry average.. if the firm cannot achieve cost leadership, it must be careful not to become stuck in the middle by selling to powerful buyers.”