Rising private investment in machinery and equipment is projected to drive up prices.
Los Angeles, CA (PRWEB) June 04, 2014
Machine shop services have a buyer power score of 3.4 out of 5. This score indicates that neither buyers nor suppliers have a distinct advantage in negotiations. However, there are factors present that work in favor of buyers and suppliers. According to IBISWorld procurement analyst Jeffrey Cohen, “suppliers benefit from the fact that there is a high level of product specialization and no direct substitutes for the services they provide.” Factors that boost buyer power include low market share concentration and moderate switching costs.
The average price for machine shop services has been increasing during the three years to 2014 due to the economic recovery in the wake of the recession. As the economy rebounded, industrial production and private investment in industrial equipment and machinery increased, which fueled demand for machine shop services. “These strengthening demand trends encouraged suppliers to push up the prices they charged for their services,” says Cohen. The high level of product specialization, which results from buyers requiring customized services for their specific applications, gives buyers less leverage during the purchasing process, thereby reducing buyer power. The fact that there are no direct substitutes also harms buyer power because it leaves buyers with less ability to negotiate with suppliers in terms of price with regard to specific services.
The fragmented nature of the market positively affects buyer negotiating power. Buyers have many options when choosing a supplier, and can pit suppliers against one another. Therefore, intensified price competition enables buyers to receive an optimal price from the supplier of their choice. The moderate switching costs aid buyers because there are several suppliers that have years of experience and are willing to provide machine shop services to buyers located anywhere throughout the United States.
For more information, visit IBISWorld’s Machine Shop Services procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of machine shop services. Service providers cut raw materials into buyer-specified shapes and sizes. This report includes the servicing of metal, plastic and composite materials. This report excludes metal forming and metal forging services.
Recent Price Trend
Product Life Cycle
Total Cost of Ownership
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Market Share Concentration
Buying Lead Time
Key RFP Elements
Buyer Power Factors
About IBISWorld Inc.
IBISWorld is one of the world's leading publishers of business intelligence, specializing in Industry research and Procurement research. Since 1971, IBISWorld has provided thoroughly researched, accurate and current business information. With an extensive online portfolio, valued for its depth and scope, IBISWorld’s procurement research reports equip clients with the insight necessary to make better purchasing decisions, faster. Headquartered in Los Angeles, IBISWorld Procurement serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.