Idea in Brief

The Problem

The balance of power in an industry can dramatically shift from buyers to suppliers.

The Challenge

Companies that have gotten into a weak position with suppliers need to strategically redefine the relationship, tackling the problem as an enterprisewide challenge.

The Solution

Four approaches:

  • Bring new value to the supplier.
  • Change how you buy.
  • Create a new supplier.
  • Play hardball.

In many industries the balance of power has dramatically shifted from buyers to suppliers. A classic example comes from the railway industry. In 1900 North America had 35 suppliers of cast rail wheels; railway builders could pick and choose among them. A century later no one looking to build a railroad had this luxury, as only two suppliers remained. Today there is just one, which means that railroad builders have no choice but to accept the supplier’s price.

A version of this article appeared in the July–August 2015 issue (pp.90–96) of Harvard Business Review.