Bargaining Power in the Supply Chain
The supply chain is an extremely important part of any business. It plays a large role in determining the success of a company because of its effects on prices and net revenue. This article, Fast Food Industry: The Bargaining Power of Suppliers, discusses the effects of bargaining power in the fast food supply chain. It emphasizes how a new company considering entering into the industry must be wary of the bargaining power of the suppliers in the industry. Suppliers as a whole have a lot of power in supply chains because they control the prices of the raw materials, which in turn effects the prices that retailers can sell their product at. However since there is usually more than one supplier for an entire industry, competing suppliers alter the power of each other. In general, the lesser the amount of suppliers, the more bargaining power they have. Bargaining power of suppliers is also affected by their branding. If a supplier is thought to have higher quality products than others that sell similar products, they will more power.
This information relates to what we learned in class if we think about the supply chain as a power network. If a potential owner is looking to get into an industry with many suppliers, his power in the price of materials he gets will be higher, because he has many outside options to bargain with. Therefore each supplier in this market will have less power than one with few suppliers, because their connected nodes have many outside options. Also, the stronger the brand of a supplier, the more power they have in a trade. One could also look at a supply chain in a very simplified version as a bipartite graph. If we ignore wholesalers and manufacturers, like it may be in the food industry, then there are groups of buyers and sellers, as owners and suppliers. Therefore in the supply chain there will be preferences for different suppliers based on costs and other things like transportation. People looking to start a business would be better off if they were to understand these basic network interactions.
Source: https://smallbusiness.chron.com/fast-food-industry-bargaining-power-suppliers-78188.html