Every business at some point will depend on another business for the provision of goods and services. For many businesses, their relationship with suppliers can be a key factor in their success. The management strategist Michael Porter identified the power of suppliers as one of five forces that determine that development of an industry and the success of a business within it (see Figure 1). In Porter’s model, the power of suppliers is one factor determining the long-run profitability of an industry. The more power suppliers have, the more profits they are likely to make at the expense of their customers. This article discusses how businesses should work with suppliers to ensure the best possible chance of success.
Where there are a number of possible suppliers, it can be a major undertaking to select the right one, particularly when the value of contracts can be worth millions, or even billions of pounds. Typically, a business will prepare a detailed product specification and then invite a shortlist of suppliers to submit a proposal. This practice is known as ‘request for proposal’. It is important to meet suppliers in person but they may also submit a written proposal.
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