Porter's Five Forces Analysis

The Power of Suppliers. What is it?

Power of Suppliers

Suppliers have the power to influence the price as well as the availability of resources/inputs.  Suppliers are most powerful when companies are dependent on them and cannot switch suppliers because of high costs or lack of alternative sources.

Questions to Ask

Can suppliers affect the company's bottom line?

Who are the major suppliers to the industry?

Are the suppliers concentrated? Must buyers depend on a few key suppliers?

Are the suppliers highly differentiated? Can buyers find alternative products/suppliers?

What are costs of switching suppliers? Does it cost too much to switch?

Are suppliers a threat? Can they forward integrate and produce the buyer's product themselves?

How to Research the Supply Chain

Finding a company's actual suppliers is often very difficult.  Many companies do not want to reveal this information to their competitors.

Two databases have scoured the news for you. Both Bloomberg and Mergent Horizon list suppliers as part of their coverage of company relationships.

In addition, searching SEC filings, the 10-K, 10-Q and 8-K reports, will often result in information about a company's suppliers and partners.

You can also search newspapers and trade journals for mentions of a company's suppliers.

Use News Databases to Identify Suppliers

You can search newspapers and trade journals for mentions of a company's suppliers. Sometimes suppliers are happy to report their relationship or contracts with a major company. Go beyond just searching with the keywords - suppliers or supply chain. Look for mentions of  new contracts, joint ventures, partnerships, or distributors. Other keywords you might use in your search are procurement, purchasing, inventory management, outsourcing, suppliers, warehousing, logistics and operations management. Use these databases:

Use Mergent Online to Identify Suppliers

Mergent Onlne offers public company profiles that highlight the relationships between a company's major customers, suppliers, competitors and partners.

All supplier connections are identified from SEC filings. Suppliers can be named by the company or can be named as customers by other companies.

The Supplier list can be sorted or ranked by revenues or market cap. The list can be filtered by product category or geographic location.

Use Bloomberg to Research the Supply Chain

Bloomberg offers a function for supply chain analysis, SPLC <GO> , that tracks a company's key customers, suppliers and competitors. For example, to find Amazon's suppliers, search by the company ticker and function. You would type: AMZN <Equity> SPLC <Go>

You can view the relationship list in a chart or in a table. Suppliers can be grouped by country to assess geographic concentration in the supply chain. The supplier list can be filtered by industry subgroup or economic sectors.

Find Supplier News by typing: NI SUPPLY <Go> or  NI SPLC <Go>.