If there are a few large firms responsible for the majority of market purchases then their power is likely to be enhanced vis-a-vis suppliers. The major automobile assemblers have a great deal of power over component suppliers. The supplier can be threatened with a loss of business if they refuse to co-operate. They are usually desperate to avoid losing a substantial proportion of their sales.
The product is standardised or undifferentiated. If the product is much the same as that supplied by other companies, then buyers will be confident that they will always be able to obtain the product if a particular supplier refuses to reduce prices or add service features. They are then in a position to play one company against another. This is a particular problem for suppliers of some raw materials.
If the product accounts for a large proportion of buyers' costs. Purchasers are likely to expend more energy driving down the price of larger-cost items than the price of a product that has an insignificant effect on their overall costs. Buyers are less price-sensitive with incidental products.
If the buyer has low switching costs. If it is costly for buyers to change suppliers then the suppliers' bargaining power is enhanced. Buyers suffer from low profitability. Vehicle assemblers frequently announce that they have developed a plan for survival and for a return to profitability. Invariably, as part of the package of measures, they declare that they have reached an 'agreement' with their suppliers to cut billions of pounds from the components bill.
One can only guess at the negotiating stance taken, but it probably goes along the line of 'If you don't reduce prices then we will shut down plant, and even go bankrupt, and you will lose an important customer.' If buyer firms are highly profitable they are less likely to be focused on cost-cutting and may take a greater interest in preserving the long-run health of their suppliers. If buyers can integrate backwards. If buyers can credibly threaten to make the product themselves they may have greater leverage over the suppliers. Paint manufacturers are often in a position to manufacture resin themselves should they choose to do.
In April 2000, Nuovo's sleekly designed Nokia phones arrived in Hollywood ... The 'first fashion phone' [the Nokia 8860] appealed to the exclusive yet rapidly expanding membership of the 8860 club in which Vogue [magazine] listed Lauryn Hill ... Toni Cruise, Nicole Kidman, Janet Jackson, Barbara Walters, Minnie Driver, Paul Newman, Toni Hanks ... [and] Steven Spielberg ... Many of these celebrities provided the stage for a carefully orchestrated marketing campaign in which opinion leaders encouraged the use of Nokia phones among their fans. Hence, cameos of the 8860 appeared in income tax slab everything from Sex and the City, a suggestive TV show, to Hanging Up, a recent Diane Keaton movie. In addition Nokia gave its 8860 phones as gifts to all the presenters at the Emmy Awards. The 8860 was preceded by the 8210, which was introduced in Members of Paris during Fashion Week.
That's our haute couture phone', said Novo, who described the objective of his design team as 'humanized technology'. For him, the goal was to meld style and reliability:9 To take things even further, Nokia also recognized and capitalized on the highly self-expressive nature of mobile phones by creating a. new and highly profitable market in accessories. Interchangeable coloured faceplates, personal ringtones and downloadable icons were first introduced by Nokia and became extremely popular because they allowed people for the first time to be creative with this technology by customizing their phones according to their own preferences and tastes. Nokia also included games and other non-phone functions on their handsets, recognizing that such features would tap into the 'segmentation by lifestyle' marketing that has characterized the personal communications revolution. Nokia also went beyond the aesthetics of its hardware to radically rethink the user interface design of the mobile phone. Previously handsets tended to require customers to remember special key codes and to work with small and unfriendly screen displays in order to access the features and functions.