Powerful suppliers may leverage their bargaining power by raising prices, or by reducing product quality or related services among many possibilities. A supplier is powerful when:
- Its business volume is much larger than its clients’ or there is higher concentration in the suppliers’ side than in the client side.
- It supplies to several industries and therefore its business does not depend on one industry.
- The supplied inputs are critical for the industry.
- Its clients have to face switching costs when changing to another supplier.
- It markets differentiated products.
- Its product has no possible substitutes
- It can seriously threaten its clients to integrate forward into the industry.
In the tourism industry, the main suppliers to be considered are human resources, land owners, energy and utility suppliers and the government as license provider, responsible for urban planning and key infrastructure owner. Besides, every sector may have their specific suppliers related exclusively to their activity. Whenever we are analyzing a sector for a developed destination, in which there is no need to build new accommodation, we may take the accommodation and transport providers as suppliers as long as this sector needs the tour operators to market the destination –because they provide key added value- or the rate of FITs in this sector is insignificant.
What other relevant suppliers would you consider when analyzing this force for a destination?