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Editor: James W Bronson (The University of Wisconsin, USA)

Contributors: Kellie Goldfien, Ryan Wolford

Reviewer: William A Drago, (University of Wisconsin, USA)

Porter’s five forces, first covered in [link] Chapter 3 as a methodology for assessing industry attractiveness, plays an important role in competitor analysis. The five forces perspective of competitor analysis views each force as a determinant of the level of competition in the industry. The level of competition in turn determines the firm’s ability to operate profitably in the industry.

Bargaining power of buyers

A firm’s buyers or customers have varying needs and wants. Meeting customers’ needs represents a cost to the firm. When the firm can easily meet the customer’s needs the firm’s cost is relatively low. Because the firm can easily give the customer what he/she values, the firm is in a strong bargaining position and sales are likely to generate healthy profits. When the customer’s needs are not easily met, the cost to the firm increases. Because the firm’s product is less attractive to the customer, the firm must lower prices or take other steps to entice the customer to make a purchase. Under these conditions the firm’s profits are likely to be low. Consequently, the firm can be seen as always bargaining with customers for the firm’s potential profits. The firm is in the strongest bargaining position when it understands its buyer’s needs. Understanding buyer needs is the role of marketing and may be viewed as a form of competitive intelligence.

Buyers are in a particularly strong bargaining position when they can easily switch from the firm’s product to a competitor’s equivalent product. For example, a firm that has many competitors offering a similar product will have customers with significant bargaining power. If the customer is not happy with the product offered by one firm, they can simply choose to go to another firm that provides the same item. For this to be a powerful bargaining tool for the customer, the switch from one firm to another must be cost-efficient and easy. Conversely, if a firm has desirable products and competing products are perceived as less desirable, customers will have reduced bargaining power. If it is expensive or burdensome to switch products, customers will also lose bargaining power. A good example of a firm in this coveted position is Apple with their iPod product. While other MP3 players are on the market, none have the market share and desirability enjoyed by iPod.

Customers almost always have choices and they will vote for their chosen firms with their purchases. Customers will vote against firms by simply walking away. It is important to balance the needs of the customer with the goals of the firm.

Questions & Answers

what is variations in raman spectra for nanomaterials
Jyoti Reply
I only see partial conversation and what's the question here!
Crow Reply
what about nanotechnology for water purification
RAW Reply
please someone correct me if I'm wrong but I think one can use nanoparticles, specially silver nanoparticles for water treatment.
Damian
yes that's correct
Professor
I think
Professor
what is the stm
Brian Reply
is there industrial application of fullrenes. What is the method to prepare fullrene on large scale.?
Rafiq
industrial application...? mmm I think on the medical side as drug carrier, but you should go deeper on your research, I may be wrong
Damian
How we are making nano material?
LITNING Reply
what is a peer
LITNING Reply
What is meant by 'nano scale'?
LITNING Reply
What is STMs full form?
LITNING
scanning tunneling microscope
Sahil
how nano science is used for hydrophobicity
Santosh
Do u think that Graphene and Fullrene fiber can be used to make Air Plane body structure the lightest and strongest. Rafiq
Rafiq
what is differents between GO and RGO?
Mahi
what is simplest way to understand the applications of nano robots used to detect the cancer affected cell of human body.? How this robot is carried to required site of body cell.? what will be the carrier material and how can be detected that correct delivery of drug is done Rafiq
Rafiq
what is Nano technology ?
Bob Reply
write examples of Nano molecule?
Bob
The nanotechnology is as new science, to scale nanometric
brayan
nanotechnology is the study, desing, synthesis, manipulation and application of materials and functional systems through control of matter at nanoscale
Damian
Is there any normative that regulates the use of silver nanoparticles?
Damian Reply
what king of growth are you checking .?
Renato
What fields keep nano created devices from performing or assimulating ? Magnetic fields ? Are do they assimilate ?
Stoney Reply
why we need to study biomolecules, molecular biology in nanotechnology?
Adin Reply
?
Kyle
yes I'm doing my masters in nanotechnology, we are being studying all these domains as well..
Adin
why?
Adin
what school?
Kyle
biomolecules are e building blocks of every organics and inorganic materials.
Joe
anyone know any internet site where one can find nanotechnology papers?
Damian Reply
research.net
kanaga
sciencedirect big data base
Ernesto
Introduction about quantum dots in nanotechnology
Praveena Reply
what does nano mean?
Anassong Reply
nano basically means 10^(-9). nanometer is a unit to measure length.
Bharti
do you think it's worthwhile in the long term to study the effects and possibilities of nanotechnology on viral treatment?
Damian Reply
absolutely yes
Daniel
how did you get the value of 2000N.What calculations are needed to arrive at it
Smarajit Reply
Privacy Information Security Software Version 1.1a
Good
how to startup business
Mahesh Reply
A canal is more of a need then a cavity
Commander Reply
what is electronic banking
Segun Reply
what does it mean business eco system?
Mohammed Reply
what is business
Abdul Reply
how can i know my business best resources, cheap and good quality
cabdi Reply
vikash rawat
jagvir Reply
entrepreneurial mobility
Manish Reply

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Source:  OpenStax, Business fundamentals. OpenStax CNX. Oct 08, 2010 Download for free at http://cnx.org/content/col11227/1.4
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