Switching Costs are High

• Switching costs are high. Suppliers have power when the cost of switching to an alternative supplier is

expensive. Many businesses stay with Microsoft products because to do otherwise means that they would

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have to repurchase new hardware and software for the entire organization.

Problems may also arise from a heavier reliance on one customer in the supply chain. Even large

companies need to be aware of their relative strength in the supply chain. Rubbermaid is the

most admired corporation in America, as voted by Fortune magazine in 1993 and 1994, yet it

had significant difficulties when dealing with one of its major customers—Walmart. In the early

1990s, Rubbermaid found that the cost for a key ingredient—resin—had increased by 80

percent. [2] Walmart’s almost total focus on lowering its prices led it to drop many of

Rubbermaid’s products. This began a downward spiral for Rubbermaid, which led to its

acquisition by Newell Inc. Rubbermaid went from the status of the most admired corporation to

being a basket case because it failed to recognize its excessive dependence on one customer. Web Resources

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