Further elaborating on Porter’s Five Forces, I’ll define each of the forces in a separate post. Below I’ll define the Bargaining Power of Suppliers.
The definition is simply how much power does a single supplier have. By supplier I mean the companies that supply the sellers in the industry with the raw materials that the sellers turn into the final product. If an industry has many suppliers than each supplier is very weak. Individually they cannot influence the industry. So a supplier might have to sell their product to the industry sellers at a lower price and/or a higher quality than they would like. This situation is because the suppliers are in competition with each other over the limited number of sellers. The same situation occurs if there are very few sellers as that means the power of each individual seller goes up. If an industry has very few sellers, then each seller is very powerful. They have a lot of influence over the industry so suppliers have to comply with the seller’s demands for they don’t have a choice.
Within the widget producing industry, there is one company (WidgetCo) that monopolizes all the selling. Both Company A and Company B produce widgetonium (the raw material that widgets are made of). Company and Company B need to sell widgetonium to WidgetCo to stay in business. They have to compete with each other over who sells the widgetonium and the loser goes out of business. The Bargaining Power of Suppliers is very weak. If WidgetCo demands a lower price, the suppliers don’t have the power to say no; for if there is no collusion than each company cannot trust the other company to not take the deal at the lower price. The person who says no thereby goes out of business.
|Rate||Assets Under Management|
|1.00%||Between $125,000 and $750,000|
|.85%||Between $750,000 and $1,250,000|
|.80%||Between $1,250,000 and $1,750,000|
|.75%||Between $1,750,000 and $2,500,000|
|.70%||Between $2,500,000 and $3,250,000|
|.65%||Between $3,250,000 and $4,250,000|
A single rate is applied to the entire account. So a person with a $750,000.01 account pays less than a person with a $750,000 account. I will waive personal tax return fees for accounts over $1 million. For accounts that are above $5,250,000, we’ll need to discuss a custom rate.
As I’m writing these to help my readers, I would be very appreciative of any input in regards to what I should write next. If you want me to write about a particular topic, please contact me. Please contact me if you would like to submit a post to my blog.
If anything that I mentioned above interests you, please consider downloading my free e-book. The book contains my thoughts on investment management and some information that I think everyone should know. You can also download it below.
Questions for the comments
Did my explanation make sense? Do you agree or disagree with what I said?