Question

Gruper Home Appliances, Inc., a manufacturer of kitchen appliances, sells 70% of its goods to X-Mart, a large national retailer of consumer durables. Which of the following best describes the reason why Gruper has a low degree of bargaining power with X-Mart?

A.There are no substitutes for the product

B.The suppliers have high variable costs

C.Customers have brand loyalty

D.Products are undifferentiated in the market

Answer 1

When the products are undifferentiated in the market that means that there is a very high rate of substitution of the product and products could easily be substituted with another competitor.since 70% of its product which are undifferentiated in nature are sold to one supplier, it will not have the bargaining power this is because there is a high rate of substitution probability.

There is high number of substitutes available for the product and suppliers does not have variable cost and consumers are also not having any brand loyalty so all first three statements are false.

Only correct option is option (D) which states that products are undifferentiated in the market so there is low degree of bargaining power.