BU111 Lecture Notes - Lecture 3: Swot Analysis, Globaldata, Switching Barriers
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Substitute products affect profitability too (e. g. you can take public transit to school, or walk, or drive) Suppliers: those who supply your materials and resources. Bargaining power increases costs of inputs: if the supplier has more bargaining power, it lowers your profitability since they"re going to charge more. Solution: create or use barriers = capital intensity, technology, know-how, regulatory approval, brand loyalty, access to distribution. Many substitutes = increased competition: they might have better products = you have to advance your own products. Solution: make buyers believe you are unique, lock them in. Few or concentrated buyers, standardized products, low switching costs, discretionary purchases (products that aren"t necessary) = increased bargaining power for buyer: you have to work harder to attract buyers = increased costs. Solution: alliance with other firms, strong marketing: form alliances so you can work together to have more power = setting the prices yourself. Results in price competition and increased costs.
