You know the market that a business operates in is going wrong when suppliers of a product or service have more power than the customer of the product.

You naturally would expect it to work the opposite way around with suppliers looking to sell their products / services to customers at any given chance. Typically this could lead to bartering over the price to secure the sale and custom.

However the news is littered with fairly modern examples of this not being the case. The first example I remember was that of Heinz and Tesco, in which Tesco were demanding a reduction in the unit cost of each item and Heinz was reluctant to give them this. The end result was Heinz not being sold in Tesco for a short period of time, until the supplier (Heinz) came back to the table and came somewhere close to Tesco’s demands.

Supplier power was also blamed for the demise of Phones4U. The mobile network of O2 and Three withdrew from selling their phones though the company, leaving them dependent on the deals they had with EE and Vodafone. Once both of these networks decided they did not wish to supply Phones4U, effectively that was the end of their business model. This of course also enabled the larger mobile phone companies to remove a competitor from the market as well.

Clearly all of this links in with the topic of Porters 5 Forces. I have a video tutorial on this via my YouTube Channel which you may find useful in trying to apply to the short situations that have been covered above.


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