Bargaining Power of Suppliers: Industry Comparisons and How Global Events Have Changed the Game

Understanding the bargaining power of suppliers is crucial when analysing business strategy, supply chain management, and industry competition. As one of Porter’s Five Forces, supplier power determines how much control suppliers have over businesses regarding pricing, product availability, and contract terms.

For university students studying business, economics, or supply chain management, this concept is not just theoretical—it directly impacts how industries operate. Some sectors face strong supplier power, forcing businesses to adapt, while others have weaker supplier influence, allowing companies to dictate terms.

Additionally, recent global events like COVID-19, supply chain disruptions, and geopolitical tensions have shifted supplier power dynamics, altering how businesses interact with their suppliers.

This article will explore:

• How supplier power differs across industries.
• How global events have reshaped supplier power in the past few years.

By the end, you will have a clearer understanding of how businesses strategically manage supplier relationships to stay competitive in an evolving global economy.

Comparative Case Studies: How Supplier Power Differs Across Industries

Different industries experience varying degrees of supplier power based on availability of suppliers, dependency on specialised resources, and switching costs. Below is an industry-by-industry comparison of how supplier power shapes business decisions.

Aviation Industry: Strong Supplier Power

• Example: Aircraft Manufacturers (Boeing & Airbus) vs. Airlines
• Airlines have few options when purchasing aircraft because only a handful of companies (mainly Boeing and Airbus) dominate aircraft manufacturing.
• Since airlines cannot easily switch suppliers, Boeing and Airbus have strong bargaining power over pricing, delivery schedules, and customisation.
• Additional Challenge: Airlines depend on engine manufacturers like Rolls-Royce and GE, further increasing supplier power in aviation.
• How Airlines Reduce Supplier Power: Some airlines lease aircraft instead of purchasing them, giving them more flexibility and reducing dependency on manufacturers. Others negotiate long-term contracts to secure better pricing.

Retail & Fashion: Moderate Supplier Power

• Example: Uniqlo’s Supplier Relationships
• Fashion brands like Uniqlo source from multiple suppliers across different countries, giving them more leverage to negotiate prices and production terms.
• However, raw material suppliers (such as cotton producers and textile manufacturers) still hold some power, especially during supply chain disruptions.
• Additional Challenge: Ethical sourcing and sustainability concerns mean that fashion retailers must work with responsible suppliers, reducing their ability to switch freely.
• How Retailers Reduce Supplier Power: Many brands diversify suppliers across multiple countries to avoid over-reliance on a single region. They also invest in vertical integration, controlling parts of their supply chain to reduce dependence.

Telecommunications: Strong Supplier Power

• Example: Singtel’s Dependence on Network Equipment Providers
• Telecom companies rely on specialised technology providers (e.g., Huawei, Nokia, Ericsson) for network infrastructure and equipment.
• These suppliers have high bargaining power because telecom companies cannot easily replace them without massive costs.
• Additional Challenge: 5G rollout has increased supplier power as few companies have the necessary expertise and technology.
• How Telecom Companies Reduce Supplier Power: Some companies develop in-house network solutions or invest in alternative suppliers to reduce dependency. Governments also play a role by encouraging local alternatives to reduce reliance on foreign suppliers.

Food & Beverage: Weak Supplier Power

• Example: Singapore’s Food Industry and Import Dependence
• Singapore imports over 90% of its food, but because there are many suppliers available globally, supermarkets and restaurants have strong negotiating power.
• Food suppliers cannot dictate prices too aggressively because businesses can switch to competitors.
• Additional Challenge: Food security is a concern, meaning businesses must secure reliable supply chains even if supplier power is low.
• How Food Businesses Reduce Supplier Power: By sourcing from multiple countries, businesses ensure stable supply chains and avoid over-reliance on one region. Some also invest in local urban farming initiatives to reduce import dependency.

Now that you have a clearer picture of how supplier power varies across industries, let’s explore how global events have reshaped these dynamics in recent years.

How Global Events Have Reshaped Supplier Power

Supplier power is not static—it shifts based on economic conditions, global crises, and geopolitical factors. Here are some major events that have influenced supplier power across industries.

COVID-19 Pandemic: Supply Chain Disruptions & Price Surges

• The pandemic caused factory shutdowns, labour shortages, and shipping delays, making suppliers more powerful, particularly in industries that relied on global supply chains.
• In the aviation industry, aircraft manufacturers delayed production, forcing airlines to accept longer delivery wait times and higher costs.
• In the fashion industry, disruptions in textile manufacturing led to raw material price increases, limiting retailer bargaining power.
• Additional Impact: Shipping container shortages led to rising transportation costs, further strengthening supplier control.
• How Companies Adapted: Many businesses shifted to regional suppliers to avoid dependence on international supply chains. Some invested in automation to reduce reliance on human labour.

Geopolitical Conflicts: Uncertainty in Key Supply Chains

• US-China trade tensions and the Russia-Ukraine war have had significant impacts on industries that rely on energy, technology, and manufacturing.
• The telecommunications sector was affected when the US banned Huawei, forcing telecom companies to find alternative network equipment providers.
• The food industry saw price spikes as the war in Ukraine disrupted global wheat and sunflower oil exports.
• Additional Impact: The semiconductor industry faced shortages due to export restrictions on critical materials like rare earth metals.
• How Companies Adapted: Businesses started reshoring manufacturing and diversifying suppliers to reduce risks from political instability.

Technology & Semiconductor Shortages: The Rise of Supplier Dominance

• The global chip shortage gave semiconductor manufacturers (e.g., TSMC, Intel) immense power over automakers, tech firms, and telecom companies.
• Automakers like Toyota and Tesla had to slow down production because they could not secure enough microchips.
• Additional Impact: Countries are now prioritising domestic semiconductor production to regain control over supply chains.
• How Companies Adapted: Governments invested in local semiconductor production to reduce reliance on dominant suppliers. Some companies stockpiled critical components to prepare for future shortages.

Final Thoughts

• Supplier power varies across industries, with sectors like aviation and telecommunications experiencing strong supplier dominance, while industries like food retail have weaker supplier control.
• Global events have significantly altered supplier power dynamics, forcing businesses to rethink their supply chain strategies.
• Understanding these shifts is crucial for students, as it helps in analysing business strategies, industry trends, and case studies for assignments.

The next time you examine an industry’s supply chain, consider how supplier power affects business decisions—and how companies adapt to global challenges to stay competitive.