What impact does a small number of suppliers have on a buying industry?

A small number of suppliers in a buying industry primarily leads to diminished competition. When there are only a few suppliers available, they face less pressure to improve their offerings or lower prices, as buyers have limited alternatives to choose from. This lack of competition can result in higher costs for products or services, as well as potentially lower levels of innovation, since suppliers do not have to compete aggressively for market share or customer loyalty.

In contrast, a competitive market with many suppliers tends to encourage better pricing, improved quality, and innovation, as companies strive to attract and retain customers. With fewer suppliers, the dynamics shift towards those suppliers having greater control over pricing and terms, negatively impacting the buying industry's ability to negotiate favorable conditions.