A. What firms are suppliers, and how large or concentrated are they?
B. How concentrated is our industry (their buyers) relative to them? That is, how many of us buy what percent of the output?
The buyer group is concentrated, or purchases large volumes relative to the seller’s sales
Products purchased from the industry represent a significant percentage of the buyer’s costs or purchases
Products purchased from the industry are standard or undifferentiated—alternative suppliers are easy to find and competitors are played against each other
Few switching costs exist (little penalty for moving to another supplier)
Profits earned are low (greater incentive to reduce purchasing costs)
Buyers pose a significant threat of backward integration—buyers demand concessions, and may engage in tapered integration (producing some components in-house and purchasing the rest from outside suppliers)
The industry’s product is not important to the quality of the buyer’s products or services
The buyer has full information (their knowledge of demand, market prices and supplier costs provides them with leverage)