3.

6 ROLE OF BUYERS

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Buyers
- are objects of desire of
businesses competing in the
same segment industry
For strategists, buyers are
not simply target markets
but they also constitute a
sector acting as a driving
force that can disturb
competition or market
conditions.
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 3.6.1 COMPETITIVE FORCE OF THE BUYER

DRIVING FORCES BROUGHT ABOUT BY BUYERS’CONCERNS:

◦ They buy in large quantities

◦ They can integrate backward
◦ Industry’s product is standardized
◦ Their costs in switching to substitutes or other brands are low
◦ They can purchase from several sellers
◦ They have high purchasing power
◦ Bargaining leverage
◦ Buyer concentration versus firm concentration

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 DRIVING FORCES CONTINUED…

◦ Buyer switching cost relative to firm’s switching cost

◦ Buyer information
◦ Availability of substitute products
◦ Price sensitivity
◦ Product difference
◦ Brand identity
◦ Impact on quality and performance
◦ Buyer profits
◦ Decision-maker incentives
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 3.6.2 WHEN IS BARGAINING POWER OF BUYERS
WEAK?

Buyers are considered weak under the following

scenarios or situations:
• Buyer switching cost to competing brands are high

• There is a surge in buyer demand

• Seller-buyer collaboration or partnering provides attractive win-win

opportunities

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 3.6.3 DEALING WITH THE COMPETITIVE FORCE OF
BUYERS
Influence of the buyers are leveraged or anchored upon any of the following:

• The price buyers have to pay for the product – make it affordable

• The quality of the product sold to buyers – make it acceptable to

“ their standards and expectations

• Services buyers can expect from the business – be sure after sales
services are available whenever needed

• Other conditions of the sale – make sure that there are other
attractive conditions that come with the selling effort

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3.7 POTENTIAL AND
NEW ENTRANTS

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Potential and New Entrants
- considered threats to existing business concerns
in Porter’s business competition model

- refer to business organizations attempting to or

have now joined the market trying hard to make a
name for their product and the business organization
as a whole.

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3.8 BARRIERS TO
NEW ENTRANTS

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 New entrants face the following entry barriers:
{William, Jenkins, et al. (2004)}

• Economies of sale
• Access to secret technology
• Brand recognition
• Capital cost entry
• Access to distribution
channels
• Lack of experience in carrying
operational activities leading to
learning gaps, producing cost
disadvantage
• High customer switching cost
• Access to low cost inputs
• Legislative barriers entry

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