Which condition makes suppliers powerful?

• A. High switching costs
• B. Dominated by a few large companies
• C. Supplier's goods are not critical to buyers
• D. Can integrate forward

Answer: (B)

Power of suppliers is strongest when the supply side is concentrated. When only a few suppliers control most of the inputs, buyers have limited alternatives. That scarcity gives suppliers leverage to raise prices, impose tougher terms, or demand higher quality and reliability, because switching to other sources is costly or impractical for the buyer. This is why being dominated by a few large companies is the clearest signal of powerful suppliers—the market structure itself gives suppliers bargaining power.

High switching costs can also help suppliers, since they make it harder for buyers to switch, but the most direct and robust indicator is supplier concentration. If the inputs aren’t critical to buyers or there are easy substitutes, supplier power tends to be weaker. Forward integration by suppliers increases their potential power, but concentration remains the fundamental driver.