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 Sukanya Samriddhi Yojana.
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 so.