Global Journal of Management and Business Research, B: Economics and Commerce, Volume 22 Issue 4

does supplier power. Contrary to Kelly & Gosman (2000), Schumacher (1991) recognized that exceedingly concentrated buyers display substantial power to weaken profitability particularly in oligopolistic industries specializing in consumer goods. Gabel (1983) demonstrated that the growth in seller profitability is directly proportional to the extent to which buyers are disseminated across numerous industries, nevertheless that no other buyer attribute applies a substantial effect on either the concentration or the profitability of the selling industry. According to Porter (1980), a buyer group will be influential if it buys substantial volumes in relation to the total revenue of the seller, so it becomes financially crucial to the seller to retain the big buyer’s business. This position was corroborated by Snyder (1996), who demonstrated that big buyers obtain lesser prices from sellers, given that suppliers compete more aggressively for the business of larger buyers, creating an opportunity for big buyers to pay lesser than their smaller rivals. Buyers can seek to enhance their power. Porter (1980) highlighted that if buyers are either previously partly integrated or can credibly signal a robust threat of backward integration, then their bargaining power is strengthened. Inderst & Shaffer (2007) demonstrated that, in the aftermath of a merger, a retailer might be motivated to boost its buyer power by pledging to a ‘single-sourcing’ procuring strategy. The absence of influential buyer groups or price discrimination may lead to diminishing competition in the buyers’ industry. Grennan (2013) found that a greater degree of uniform pricing is unfavorable to hospitals resulting in softer competition. Buyers can sometimes seek to match the degree of concentration within the ranks of suppliers. However, on some other occasions, they implement strategic actions to boost their productivity. Lustgarten (1975) postulated that buyer concentration was definitely associated with seller concentration and undesirably associated with the cost margin of seller prices. Snyder (1996) demonstrated that buyers’ mergers increase profit for all buyers, not just the merging pair, at the expense of the sellers. On the contrary, he further specified that the organic growth of buyers are detrimental to buyers that do not experience growth and is advantageous to sellers. Chambolle & Villas-Boas (2015) asserts that competing retailers may elect to differentiate their suppliers or supplying manufacturers, even at the cost of reducing the value of the goods proffered to consumers, in a bid to enhance their buyer power. Chipty & Snyder (1999) showed that cable operators integrated horizontally in order to achieve productivity gains rather than to improve their bargaining position against suppliers of programs. Finally, the bargaining power of purchasers can also be a function of the importance of the supplier’s product in the buyer’s operations or business and the switching costs that must be incurred in a bid to change suppliers (Porter, 1980). Bedre-Defolie & Biglaiser (2017) postulated that in markets characterized by long- term contracts, early-termination or breakup fees, a form of switching cost, are gainfully exploited to preclude entry, notwithstanding the new entrant's productivity advantage or switching costs levels, with accompanying effects of a reduction in the welfare of consumers. b) The Power of Suppliers Several studies corroborate these postulations. Cool & Henderson (1998) found the occurrence of various power concepts in the samples they studied. Additionally, they demonstrated that the effects of industry characteristics are more significant than the effects of organizational factors in accounting for the profitability of a seller and recommended that supplier power explains a substantial proportion of variation in seller profitability. Neumann, Böbel & Haid (1979) observed that market structure and risks existing within the ranks of suppliers account for a major fraction of the profitability of joint stock firms of German origin. Cowley (1986) observed that the profitability of a sample of firms studied are favorably related to the concentration of sellers. Porter (1980) paid close attention to the power of employees and identified labor as a specific form of supplier. He posited that labor exerts great influence in numerous industries, and that the potential for labor to exert tremendous influence is dependent on the scarcity and skill of labor, the capacity for expansion of the scarce varieties of labor, the unionization of labor and the extent of organization of labor. Other factors can consolidate or enervate the power of employees in influencing the attractiveness of industries. Employee wages, organizational culture, and employees’ organizational commitment can be a source of value creation and can vary across industries. Dickens & Katz (1986) observed that even after controlling for an extensive array of individual features and geographic location, a significant amount of individual wage discrepancy could be accounted for by industry disparity among non-union employees. Chasserio & The Determinants of the Attractiveness of an Industry: An Extension of The Porter’s Five-Forces Framework 84 Global Journal of Management and Business Research Volume XXII Issue IV Version I Year 2022 ( ) B © 2022 Global Journals Porter (1980) highlighted that suppliers could wield competitive power in an industry by elevating prices or diminishing the standard of quality of the goods they sell, squeezing the profitability of adjacent industries in the supply chain. Porter (1980) further argued that the factors that deepen supplier’s power include; the domination of the supplier group by a limited number of firms and the supplier industry possessing a greater degree of industry concentration than the industry it sells to; suppliers wielding a reliable threat of frontward integration; suppliers not having one specific industry representing a substantial part of sales; the ability of the supplier to differentiate its products and establish switching costs.