Cost of Doing Business
In setting out an examination of his “five forces model” which includes suppliers and customers, Poeter argues that the bargaining power that each has in respect of a company can have a limiting effect on profitability, if not success. When a venture is new and relatively small, suppliers enjoy a sonior position in the bargaining process. Suppliers, for example, can offer few or no discounts, often require require material purchase on a C.O.D. basis and have been known to favour the competitor over the entrant. A western producer of cotton apparel found that the Quebec supplier for raw cotton material placed no priority and offered no assistance with purchases made by the west coast manufacturer. A major customer of the Montreal supplier was a direct competitor with the British Columbia firm that ultimately closed its doors.