Power Of Suppliers And Power Of Buyers

Power Of Suppliers And Power Of Buyers

Length: 1682 words (4.8 double-spaced pages)

Rating: Excellent

Open Document

Essay Preview

More ↓
A Porter analysis examines five different forces that affect the success of a particular industry. This analysis is then used to establish if a certain industry is attractive to potential shareholders and investors. The following will elaborate on the power of suppliers and the power of buyers in the "family restaurant" industry; including restaurants such as: Boston Pizza, East Side Mario's, and etcetera. The different strengths and weaknesses of these forces depend on many different factors that will also be summarized. Finally the overall influence of each force on this industry will be specified to give a greater understanding of the strength of this industry in relation to its suppliers and buyers.
Firstly, the power of suppliers in the "family restaurant" industry will be discussed. In order to be successful a restaurant business must have the proper equipment, the desired furniture, decorations and dinnerware, and of course the proper food. Other companies supply all of these products to this industry. Nonetheless in North America and around the world there are many different companies that are in the business of selling supplies to restaurants. With this many different companies having the same intention, the restaurant industry has a large degree of choice in whom to buy from. For example, if a restaurant is not happy with one company's price for bar stools, the owner can easily find a different company with a better price for bar stools. The excess of companies to supply restaurants reveals that these suppliers do not have a large influence on the success of the restaurant industry.
In addition the majority of supplies that are needed for the restaurant industry are not unique from restaurant to restaurant. Different companies do not need different types of plates in order to be successful. The lack of rareness that is apparent in all types of restaurant supplies, from food to furniture, proves that once again the power of suppliers is weak in this aspect.
Moreover, if a restaurant is unhappy with a certain product, many other suppliers are available to choose from, as stated previously. Say a company like Boston Pizza decides to buy pizza crust from a different supplier because of a rise in prices of their current supplier. This change requires the company to find a supplier with a similar type of pizza crust at a better price. This change in suppliers is relatively easy for Boston Pizza because of the large amount of other companies that supply pizza crusts to restaurants at competitive prices.

How to Cite this Page

MLA Citation:
"Power Of Suppliers And Power Of Buyers." 123HelpMe.com. 25 Sep 2018

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

Publix Super Markets: The Five Forces Model of Competition Essay

- Publix Super Markets Inc Super Markets are few and far between in the south. There are plenty of different variations within a very small region that when one becomes your favorite it’s usually because if convenience. However throughout the local community of Jacksonville and most of Florida, Publix Super Markets have made a very valuable impression on its current consumers. Founded by George W. Jenkins on the idea of what makes a company successful is how they takes care of their customers but also their employees....   [tags: markets, suppliers, buyers]

Research Papers
1209 words (3.5 pages)

Threat of New Entrants to Retail Business Essay

- Threat of New Entrants The barriers to entry in the retail industry are manageable and possible to overcome. However, independent retailers, those businesses that started from scratch, might find it hard to compete with established retail giants. This makes the retail industry attractive for retail giants but unattractive for independent retailers Bargaining Power of Suppliers In the retail industry, suppliers tend to have very weak bargaining power. Retail giants tend to drop suppliers if their demands are not met....   [tags: buyers, suppliers, competition]

Research Papers
695 words (2 pages)

Essay about Eco Powered Engines Five-Force Theory

- Threat Of New Entrants The barriers to entrants deter new competitors from entering the market and creating more competition for established firms. Profitable markets attract new entrants, which erodes profitability, unless incumbents have strong and durable barriers to entry. There are several major barriers to entry and they include economies of scale, the capital requirements, and product differentiation, switching cost and government policy. In regards to our Eco Powered Engines, the most crucial barrier to enter this business is patent protection....   [tags: competitors, suppliers]

Research Papers
910 words (2.6 pages)

The Power of the Customers in the Automobile Industry Essay

- ... Therefore, the car manufacturers face the challenge to conform to changing demands quickly and meet the requirements in order to win the order. However, in some cases the particular company fails to keep up, as a result, the consumers become disappointed with offered products. Due to the low switching costs and quite standardized nature of product consumer has the possibility to search for alternatives. The report from American Consumer Satisfaction Index in 2011 announced that the buyers of foreign-built models were more satisfied with their purchases than those who bought the American vehicles....   [tags: manufacturer, price, buyers]

Research Papers
731 words (2.1 pages)

TJD International Holding Company Performs Analysis on the Apparel Manufacturing Industry

- ... Therefore, TJD has identified the top three firms in the market by asset size. According to Bloomberg.com, Meisheng Cultural & Creative Corp Ltd (China), Nagaileben Co Ltd (Japan), and Virat Industries Ltd (India) are the top apparel manufacturing leaders as it relates to published revenue reports (bloomberg.com). The apparel manufacturing industry includes the production of yarn, and cloth and the subsequent design or manufacture of clothing and their distribution. The raw material may be natural or synthetic using products of the chemical industry....   [tags: exporters, marketing, buyers]

Research Papers
2622 words (7.5 pages)

Essay on PC Industry versus Apple Analysis

- Apple Case Analysis In today’s society, there is an ongoing interest in the study of the forces that can provide competitive advantage to organizations. In 2008, Michael Porter wrote an article called “The five competitive forces that shape strategy.” In this article, he wrote about the five different forces that deal with the attractiveness of an industry. All of these forces shaped every single industry’s behavior in the competitive market in today’s society. In order to better understand the PC industry structure, using this Five Force Analysis would be very beneficial....   [tags: economy, five, force, industry, suppliers]

Free Essays
574 words (1.6 pages)

Essay about The Indian Big Bazaar

- Big Bazaar As one of the pioneers in India retail with multiple retail formats, they unite a diverse and eager community of Indian buyers, sellers and enterprises. The combined impact on business is intense: Around 300 million customers to go into their stores each year, and select more than 30,000 small, medium and large business owners and manufacturers from all over India delivered products and services. This number is finally set to grow. You have 35,000 people from every area of our company is engaged....   [tags: Indian buyers, sellers and enterprises]

Research Papers
1366 words (3.9 pages)

Actual Benefits of Information Technology Outsourcing Essay

- 1) Critically evaluate the competitive advantage that can be gained by companies through IS/IT outsourcing. Provide suitable example to support your answer. Introduction Outsourcing is an arrangement in which one company provides services for another company that could also be or usually have been provided internal. As we know, outsourcing is a development that is becoming further common in information technology or information system and other industries for services that have usually been regarded as basic to managing a business....   [tags: companies, indonesia, buyer, suppliers]

Research Papers
2256 words (6.4 pages)

Essay on Michael Dell and his Computer Manufacturing Company

- Michael Dell had steered his company through many phases and obstacles, making it one of the first computer manufacturers in the world. Basing the company on a direct sales model, with Dell being the only company in the beginning to do so, he grew the business many fold and simultaneously kept cost and inventory levels at a minimum (Days of inventory at 6 days, the lowest amongst peers). This formula worked well for the company till the market dynamics were more or less the same. Dell believed in selling computers as products and relied on branding based on the ability to sell computers effectively....   [tags: sells model, supplies, bargaining power]

Research Papers
1317 words (3.8 pages)

The Five Forces Model of Evaluating Business Segments by Michael Porter

- Companies make decisions all the time. Sometimes if the company is a big one, then the decisions are usually big ones too. One of these large decisions is the choice of if a company should enter into a new business segment or not. There is a very useful theory by Michael Porter who developed the Five Forces Model of Evaluating Business Segments. (Batlzan,Detlor,Welsh 2012) In today’s business top managers need structure when making decisions and this helps, but they also need accurate and up to date information from all parts of the business process....   [tags: buyer power, supplier power]

Research Papers
1205 words (3.4 pages)

This shows that for the restaurant industry it is easy and cost efficient to switch from one supplier to another, depending on the product, because of the vast rate of competition between the supplying companies.
Another factor affecting the power of suppliers is the threat of forward integration. The restaurant industry does not have to fear this at all. A restaurant prepares and sells meals and provides an amiable atmosphere for the public to dine in. Suppliers of restaurants do not intend to sell these products, but intend to sell the products that are used to cook these meals and used to create an environment that is enjoyable to dine in. Thus the threat of forward integration is not evident in the restaurant industry.
In most cases companies that supply the restaurant industry do not require these restaurants in order to be successful. If a supplier cannot sell its furniture, decorations and dinnerware to a restaurant, that supplier will simply supply these products to other industries such as department stores. Also, the supply of restaurant food or equipment can be easily sold to other types of restaurants such as "fast food" or "fine dining" establishments. The ability for these suppliers to find other markets shows that "family restaurants" are insignificant to them, giving them a slight degree of strength.
In summary the restaurant industry has a large number of companies to choose from to find restaurant supplies. Also, the supplies used in most "family restaurants" are not unique from restaurant to restaurant and the companies that supply these products have competitive prices for the restaurant industry to choose from if a switch is necessary. In addition the threat of forward integration is irrelevant because of the different customer needs that the restaurant industry has in comparison to its suppliers. However it is obvious that the "family restaurant" industry is insignificant to its suppliers. With all of these factors being discussed above it is shown that, with only one exception, the power of suppliers is very low in the "family restaurant" industry.
Secondly, it is important to describe the power of buyers in the "family restaurant" industry. The goal of the restaurant industry is to cook and serve meals to the public and provide them with an atmosphere that they can enjoy while eating their specific meals. Thus the buyer group of this industry is consumers who have the need to eat, the desire not to cook and the need to relax in an enjoyable atmosphere. With this being said it is clear that the products are not bought in large volumes because, in most cases, one meal is bought for each person. This creates a weak characteristic of the power of buyers in the restaurant industry.
The restaurant industry's major products are the meals that it sells. These meals are similar in all types of "family restaurants" but different in comparison to "fast food" or "fine dining" meals. Also the atmosphere that is established in a "family restaurant" cannot be found in other industries. The uniqueness of this industry's meals and surroundings shows that the buyers have another weak feature in this industry.
Additionally, the income of the buyers must be examined. Consumers in North America have many expenses that take up a large proportion of their income; a meal at a "family restaurant" is not one of them. This means that, for the most part, consumers in North America do not worry about the cost of a meal at a restaurant because of the many other, much more expensive, costs of living such as car insurance or a mortgage. In simpler terms the consumers of the restaurant industry are not price sensitive, thus, once more, the buyers are weak in the "family restaurant" industry.
In comparison the consumer will not try and find the best prices for a meal. When this is the case the restaurant industry does not need to strive to get as many customers as it can. The consumers show incredible weakness at this point because they are not forcing the industry to attempt to acquire customers with such things as promotional offers or price cuts. If the consumer showed more effort in choosing which restaurants to eat at than they would be a much stronger force than they are shown to be in the above explanation.
The price of consumers cooking their own meals must also be stated. It is well known that buying the ingredients of meals in "family restaurants" from grocery stores and cooking the meal yourself is less expensive than buying the meal at a restaurant. This being said shows that; if the buyers did not want to spend extra money to have their meals cooked for them than they would save more money. This factor gives the buyers power in this industry.
Also the restaurant industry provides a product that is not essential for the lives of its consumers. The most attractive factor of the "family restaurant" industry is that consumers do not have to cook for themselves. However people can get food from a different type of restaurant with a different atmosphere or they can cook their own food that they bought from grocery stores. This shows that a consumer can do without this product thus making the buyers strong.
Finally, the threat of backwards integration is not a factor in the restaurant industry. In order for a consumer to backward integrate into this industry they would need to start a new restaurant or buy a franchise such as Boston Pizza. In order to do this the consumer would require a large amount of money and a lot of experience in the field, which most individuals do not have. For this reason the power of buyers is shown to be weak.
In general the consumers of the "family restaurant" industry include the individuals, and groups of individuals, who dine at these different restaurants. The fact that the consumers do not buy in large volume, they are not price sensitive, they do not try to find the best prices and the products sold are unique shows that the power of buyers is low in this industry. Also the threat of backwards integration is not evident which shows that the power of buyers is, yet again, low. Nevertheless the fact that consumers would save more money and would survive if they did not buy meals from these restaurants makes the power of buyers stronger. This evidence shows that the power of buyers is low in the "family restaurant" industry
In conclusion, the above data provides a more in-depth look at the affect that the power of suppliers and power of buyers has on the "family restaurant" industry. The factors that determine the strength of these forces have also been noted along with a brief summary of the overall strength or weakness of both forces. With this data it is shown that in the "family restaurant" industry the power of suppliers is very low and the power of buyers is low. With this information and the examination of three other forces, a full Porter analysis will be completed and the actual strength of the "family restaurant" industry will be realized.


Backward integration. (1999). Retrieved October 6, 2006, from Investopedia Inc.
Web site: http://www.investopedia.com/terms/b/backwardintegration.asp

Montreal restaurant suppliers. (1999). Retrieved October 2, 2006, from HighwayHome.
Web site: http://www.highwayhome.com/travel/tourismbycity/montreal/restaurant_equipment/restaurant_suppliers.html

Porter 5 forces analysis. (n.d.) Retrieved 0ctober 5, 2006, from Wikipedia The Free
Encyclopedia. Web site: http://en.wikipedia.org/wiki/Porter_5_forces_analysis

The essential resource for the catering trade. (n.d.) Retrieved October 2, 2006, from Web
site: http://www.sugarvinetrade.com/
Return to 123HelpMe.com