Bargaining power is a party’s ability to set or shift the terms of a deal in its favour, such as prices, fees, revenue shares or access. In ecosystems it depends on how hard each side’s contribution is to replace and who needs whom more.
Table of Contents
Types of bargaining power
- Buyer power: customers or distributors push prices down or demand better terms, because the seller needs their volume or their access to end customers.
- Supplier power: a supplier sets the terms because its input is scarce, hard to replace or essential to the buyer’s own offer.
Key factors
- Uniqueness. A contribution that is hard to replace carries power. A generic one that rivals can supply carries little.
- A credible exit. Power comes from being able to walk away. A partner whose customers also use other channels can survive being cut off.
- Portability. Spreading across several platforms helps only when your data, investment and reputation can move with you.
- Distance from the end customer. Firms with no direct customer contact lose power unless their expertise is distinctive.
- Collective action. Small players gain power when they act together and keep up the pressure for years. Fragmented groups rarely manage it.
Examples
Tesco. In late June 2022 Tesco, the UK’s largest supermarket, refused price rises from Kraft Heinz that it called unjustifiable. Kraft Heinz stopped supplying products such as baked beans and ketchup. The two settled in early July 2022 without disclosing terms. Tesco’s buyer power rested on the share of UK shoppers it reaches.
Disney. On 31 August 2023 Charter Communications lost Disney’s channels, including ESPN, for about 14.7 million Spectrum TV customers. In the deal reached on 11 September, Charter dropped eight smaller Disney channels and won ad-supported Disney+ for some customers. Each side held something the other could not easily replace.
Frequently asked questions
What is the difference between bargaining power and strategic dependency?
Strategic dependency is how exposed one party is to another. Bargaining power is the advantage the less dependent party draws from that exposure when the terms of a deal are set.
How do small suppliers gain bargaining power over a large platform?
By offering something hard to replace and selling through several channels, so no single buyer controls them. Joining others to press for rule changes, through trade bodies, regulators or public pressure, adds more.
Why do published commission rates mislead about bargaining power?
Large partners often negotiate lower rates in private deals. Comparing what different partners actually pay shows where power sits more accurately than the headline rate does.
How has regulation changed bargaining power in digital markets?
The EU Digital Markets Act, applying to gatekeepers since March 2024, bans terms such as price-parity clauses and rules that stop business users steering customers elsewhere. That gives smaller firms more room to negotiate or leave.