BU111 Lecture Notes - Lecture 2: Capital Intensity, Normal Good, Switching Barriers
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Bu111 september 28th: porter"s five forces, suppliers who provides your key inputs. Few suppliers = suppliers end up with negotiating power, they can end up increasing cost of goods sold. Few good substitute suppliers/inputs = ties back into there being few suppliers, few substitutes exist and may not be on par with quality of normal good thus consumer must head back to original supplier with negotiating power. High switching cost = requires large investment (time, effort and money) to switch to new suppliers, suppliers know you have high switching costs therefore you are more reluctant to switch which grants them more negotiating power. Threat of forward integration = suppliers join the market and become your rival causing you to lose market share and may possibly lose supplier. Paying suppliers the price they want causes them to lose incentive to expand.
