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Hi sir, based on a case study in my exam kit, i derived the following :
In a light bulb industry for example, the customers are supermarket groups, household product superstores and large electrical chains who will buy in large volumes.Furthermore, there are a number of light bulb providers in the market, to choose from. This means that they have a high bargaining power.
However, the case also states that these light bulbs do not constitute a large sales item for any of these customers. In fact, in a recent report, light bulb sales only contributed less than 0.1% of a supermarket’s revenue.
How will these affect their high bargaining power and why?
It’s not sufficient for me to just state that they have a high bargaining power and end my answer there right.I have to discuss about the latter point also right sir ?
The supermarkets jave high bargaining power because:
1 There are several suppliers
2 Supermarkets are large buyers from the manufacturers’ viewpoin
3 The product is not vital to the supeemarkets.Okay sir. I can also state that since this light bulb sales only represents a small fraction of the supermarkets’ sales, the supermarkets will be less price sensitive to light bulb providers. (Its not an important product to them) So,even though they have a high power to bargain, they are more likely to bargain with food suppliers than light bulb suppliers.
Am i right sir ?
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