According to the Porter Five Forces model, under which condition can a supplier group gain significant power over firms in an industry?

• A. When switching costs for buyers are low
• B. When buyers are highly concentrated and purchase in large volumes
• C. When suppliers depend heavily on the industry for their revenue
• D. When there are few substitutes for the supplier's products

Answer: (D)

Verified step by step guidance

1. Understand the Porter Five Forces framework, which analyzes the competitive forces shaping an industry, including the bargaining power of suppliers.
2. Identify the factors that increase supplier power, such as the availability of substitutes, the concentration of suppliers, and the importance of the supplier's product to the buyer.
3. Recognize that suppliers gain significant power when there are few or no substitutes for their products, because buyers have limited alternatives and must rely on these suppliers.
4. Contrast this with other conditions: low switching costs for buyers reduce supplier power, buyers concentrated in large volumes increase buyer power (not supplier power), and suppliers dependent on the industry for revenue tend to have less power.
5. Conclude that the key condition for supplier power is the scarcity of substitutes, which limits buyers' options and strengthens the supplier's bargaining position.