Bargaining Power Of Buyers And Dependence Relationship With Buyers

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3. Bargaining Power of Buyers (Power/Dependence Relationship with buyers) In automotive industry, the direct buyers mostly are dealerships, but the indirect buyers are the consumers who purchase vehicles from the dealers. There are several factors that determine the buyers’ negotiating capability toward the automakers. Porter (2008) reveals those factors as follow: • Number of buyers: The enormous number of buyers in automakers, either the number of dealers or targeted consumers can drive the price down or demand better quality (that means higher costs). Consumers can easily switch from one dealer to another auto dealer, with little costs, to get the best choice. The choices the buyers have on competing auto companies within the industry make the bargaining power of buyers becomes high, especially for direct consumers. However, as the dealerships buy vehicles directly to the auto manufacturers in a huge amount (Bloomberg), their purchasing can give significant impact to the automakers’ inventory and revenue if they reduce the buying quantity. The net effect for buyers’ power is moderate. • The standardization of industry product: Vehicles products are standardized even though we still can find some differentiation between auto companies. For the consumers who feel they can find the equivalent vehicles between companies, they will compare them. However, since there are brand loyalty among the consumers in choosing a vehicle related to its differentiation, the switching

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