Farley Roofing provides subcontracting services to residential construction firms. There are many firms in the marketplace like Farley, which does about 85 percent of its work for Beltway Builders. Beltway typically negotiates heavily with its subcontractors, which ultimately reduces Farley's profits. This situation is indicative of the high bargaining power of
A) Customers.
B) Suppliers.
C) Substitute companies.
D) Competitors.
E) New construction companies.

Question

Quizplus · Accepted Answer

An organization like Farley is at a disadvantage if it depends too heavily on powerful customers like Beltway. Beltway is powerful because it makes large purchases from Farley, which is evidently replaceable by one of the other firms in the business. Since Beltway is the largest customer of Farley and can likely buy from others, it has power over Farley.

Farley Roofing Provides Subcontracting Services to Residential Construction Firms