Which of the following firms most likely has the lowest bargaining power as a buyer?

• A. A multinational automobile manufacturer buying steel from several competing suppliers
• B. A small local bakery purchasing flour from a large national supplier
• C. A large supermarket chain sourcing produce directly from multiple farmers
• D. A technology company negotiating with several software vendors for cloud services

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of bargaining power in microeconomics, which refers to the ability of a buyer or seller to influence the terms and conditions of a transaction, such as price, quality, and delivery. Buyers with high bargaining power can negotiate better deals, while those with low bargaining power have less influence.
2. Step 2: Analyze the market structure and the number of suppliers available to each buyer. Buyers who purchase from many competing suppliers generally have higher bargaining power because they can switch easily between suppliers and leverage competition.
3. Step 3: Consider the size and importance of the buyer relative to the supplier. Large buyers who purchase in bulk or represent a significant portion of the supplier's sales tend to have more bargaining power, while small buyers purchasing small quantities usually have less power.
4. Step 4: Apply these principles to each option: a multinational automobile manufacturer buying steel from several competing suppliers likely has high bargaining power due to size and multiple suppliers; a large supermarket chain sourcing produce from multiple farmers also has high bargaining power; a technology company negotiating with several software vendors similarly has options and size advantage; a small local bakery purchasing flour from a large national supplier is small and dependent on a large supplier, indicating low bargaining power.
5. Step 5: Conclude that the firm with the lowest bargaining power as a buyer is the small local bakery purchasing flour from a large national supplier, because it is small, has fewer alternatives, and faces a large supplier with more market power.