Industry: Automobiles Role: Bargaining Power of Suppliers According to Michael Porter, the bargaining power of suppliers is mainly affected by three important factors namely: the number of suppliers, replaceability of supplies and exclusivity of supplies. In an automobile industry, there are numerous suppliers all over the world, dominated by Eastern Europe and China with a percentage of 33% and 17% respectively. Rapidly advancing innovation in technology opens up doors for businessmen to set up a new supplying business, the increasing demand for automotive parts and engines also increases businesses opportunities. However, this industry is hard to penetrate into since big firms are already significant in size and has already partnered with well-known brands such as BMW, Ford, Toyota and VM. Another factor is what Porter called the replaceability of supplies. In this industry, the option of firms to replace their suppliers may be an open door due to the presence of other suppliers that may offer better overall products and cost-efficient at the same time. Suppliers are now then motivated to come up with up-to-date and innovative products to catch up with the climbing advancement of technology. Suppliers are then faced with strategies to gain a huge share in the market. One way is through owning an Intellectual Property, this plays a crucial role in a supplier’s advantage. They have the power to protect their automotive designs legally which can be a crucial advantage for them since they are the only one offering a specific type, version or design of a certain invention. With this, the intensity of the bargaining power of suppliers is strong which means that firms are then forced to collaborate to minimize cost and maximize profit. Furthermore, suppliers and their clients can enter into an exclusive supply or purchase agreements, which is a contract that prevents a supplier from selling inputs to another buyer, this can build client loyalty and trust between the two parties. Overall, automobile is an industry that is challenging to penetrate. With the immense clout of big firms, existing suppliers may find it hard to catch up with the demands of their clients due to the forever advancing innovation in this industry that even the entrance of new suppliers might me impenetrable. Uniqueness of product design, cost-efficiency and the ability to substitute are the crucial factors that influence the power of suppliers to bargain. Reference: https://study-aids.co.uk/dissertation-blog/five-forces-model-automobile-industry/ https://notesmatic.com/automotive-industry-five-forces-analysis/ https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/single-firmconduct/exclusive-supply-or
