John Petersen is thinking about starting a firm in the specialty chemical industry. In the industry analysis John has been conducting, one thing he has noticed is that the specialty chemical industry is characterized by the following factors: high supplier concentration, high switching costs for buyers when they switch from one supplier to another, and no attractive substitutes for the products that most of the suppliers provide. These factors concern John because they tell him that the profitability of the specialty chemical industry is suppressed by the:

Question

Quizplus · Accepted Answer

The high supplier concentration, high switching costs for buyers, and lack of attractive substitutes all indicate that suppliers have a great deal of bargaining power. This suggests that the profitability of the industry is suppressed by the bargaining power of suppliers.

John Petersen Is Thinking About Starting a Firm in the Specialty