In what situation is supplier bargaining power likely to be high?

Supplier bargaining power is likely to be high when the supplier's product is vital to the buyer. In this scenario, the buyer relies heavily on the supplier's product, which means the supplier can exert significant influence over pricing and terms of the contract. When a product is essential to the buyer's operations or services, the supplier has more leverage because the buyer may be willing to accept less favorable terms in order to secure the necessary goods or services.

Additionally, when there are limited alternatives available, or when switching suppliers would be costly or disruptive for the buyer, the supplier's power in negotiation increases even further. High importance of a supplier's product creates a scenario where the buyer may not have many options for substitutes, essentially locking them into a more dependent relationship with the supplier.

In contrast, situations where there are several substitute products available, the buyer has multiple suppliers, or the buyer's purchase represents only a small fraction of the supplier's total sales typically indicate lower bargaining power for the supplier. These circumstances tend to give buyers more options and leverage in negotiations.