Bargaining Power of Customers

Topics: 21st century, Bargaining, Customer Pages: 2 (502 words) Published: August 25, 2013
Bargaining Powers of Customers

Porters’ competitive factors theory is a framework for industry analysis and corporate strategy development. It draws an overview picture that industry rivalry is affected by five main forces, which are bargaining powers of customers, bargaining powers of suppliers, threat of new entrant and threats of substitute products. Relating Porters’ thesis and the topic of managing customers, element named bargaining powers of customers, which can be briefly understood as the ability of customers putting to put firm under pressure, is the most important. To be more details, customers who finally consume products has bargaining power refer to the potential of buyers to bargain down the prices charged by the firms in the industry or to increase the firms cost in the industry by demanding better quality and service of product. Strong customers can extract profits out of an industry by lowering the prices and increasing the costs. (Porter, 2008) However, in the 21st century economic context, customers do not only want low price but they also desire to bargain on other aspects such as delivery, supports and performance.

Firgure 1: Porters’ Five Competitive Factors

Applying Porters’ model to Microsoft, as a company provide software, Microsoft’s customers always demand convenience package of product with affordable price, provision of products, technical supports, products’ performance also efficiency, especially for the group of customers are business as well as enterprises, which can considered as strong customers having direct influence to the company (may be stock price on the market). As is known, human beings want is unlimited so it is easy to understand that customer can bargain on price and quickly delivery at the same time due to the century of technology also faster and faster pace of life. In addition, some customers totally concentrate on requirements of products’ quality and effectiveness in order to minimise the repeating...
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