Imagine you're a buyer for a sports beverage company called “Relentless.” Your Relentless sports drinks have been gaining market share and enjoying increased distribution recently and your company is excited about it’s potential for growth. The secret ingredient in your beverages that provides your customers the extra energy, strength, and endurance that they love comes from the extract of a plant grown only in a specific region of South America. The plant is known as the “Firecracker Cactus.”  

Currently there is only one company in the world that is able to provide you the Firecracker Cactus Extract. They own 100% of the known world’s Firecracker Cactus growing fields and a unique and proprietary means of cultivating the extract.

You’ve noticed that in the past year, Firecracker Inc., has raised your prices on three different occasions, first from 10 cents an ounce to 12 cents, then to 15 cents, and most recently to 20 cents an ounce. In one case they blamed the increase on weather conditions that caused flooding in the growing region which decreased their yield. On a separate occasion they blamed the rising cost of labor in the growing region. Most recently they blamed an increase in the cost of transportation due to rising fuel costs. You are sure that none of these factors could really explain the price increases and that the vendor is acting opportunistically, taking advantage of their sole source status and your growing market position.  

Your vendor has just scheduled another meeting with you for tomorrow and you are certain that another price increase is coming. You have to purchase the Firecracker Cactus Extract in order to maintain the integrity of your product, and it appears you have little in terms of options. But before you throw your hands up in the air and just give up, you decide to spend some time thinking strategically and creatively about how you could create competition for Firecracker Inc., in order to give you the leverage you’d need to negotiate a better price, or a better overall deal than the one you’re getting now. Clearly, if you don’t come up with something, they are going to continue to take advantage of their position in the market and their importance to your success.

Take a few minutes and try to come up with as many forms of “competition” as you can think of for Firecracker Inc., and the Firecracker Cactus Extract in order to increase your power in this negotiation.  

Note that by “competition,” I mean as many different alternative solutions or strategies that you can come up with for solving your problem or otherwise would put pressure on Firecracker to deal with you more reasonably. All of your ideas should be ways of increasing your power in this situation.

Before scrolling further down the page to reveal the answers, take five or ten minutes to see how man answers you can come up with on your own first!

Here's just a few possible ideas among many for how to solve this Relentless problem...

Exercise Conclusion: Creating Power Even When You Feel Powerless

How can you create competition for a sole source vendor who has no competitors? How can you create competition for Firecracker Inc., and for the Firecracker Cactus Extract? Here’s a few ideas:

Alternative Extracts - Begin seeking out alternative extracts with similar properties to the Firecracker Cactus Extract to increase your negotiating power as soon as possible.

Alternative Ingredients - Begin seeking out ingredients other than similar extracts which can serve a similar purpose in the overall formulation of Relentless Energy Drinks.

Find Alternative Growers - Other growers who are in similar regions or within similar growing conditions in different regions might be found capable of growing the Firecracker Cactus and bringing it to market. Begin seeking them out immediately. 

Incentivize Alternative Growers - Go to growers whom you might believe to have the capability of growing Firecracker Cactus and incentivize them to get started with the promise of orders as soon as they get up and running.

Hire Firecracker Inc, Brain Trust - Seek out the people in the know at Firecracker Inc. who have the knowledge of what it takes to grow Firecracker Cactus, deliver the Extract, and put them to work on developing a solution for Relentless Energy Drinks. 

Run a “Virgin Commercial Space Flight” Like Contest - Run a contest for growers and other ingredient providers to come up with a similar or same product that could replace the Firecracker Cactus Extract in your formulation. 

Determine How to Grow It Yourself and Become a Competitor - Buy neighboring growers or develop other means of growing Firecracker Cactus yourself. Then go into business not only as your own supplier, but as a potential supplier to other customers of theirs as well. Your vendor in this case would see the possibility of losing a customer and gaining a competitor. This could easily get them to rethink their pricing strategy.

Buy Firecracker Inc. - Buying key players in your supply chain isn’t a new strategy, but it can be an effective one if the fit is right.

Leverage Other Extracts (Items) You Buy from Them - If you are buying other items from them, then you can often leverage the competition on those items that they are not sole-source providers on and suggest that if you can’t get a better price on the sole-source item that you’ll take the other items out to bid. 

Long-Term Interests vs. Short-Term Interests - Sometimes you can say “If you offer me only this high price, then I can only buy a small number of units from you. Whereas, if you can offer me a lower price, perhaps I can buy twice as many units.” Another scenario might be “If you can only offer me this high price then I’ll buy enough to last me a few months and in the meanwhile, we’ll be looking for a substitute or work around. If you can offer me a lower price, I might be able to agree to a two-year contract without any concern about us looking for substitutes.” In both of these scenarios, the competition you’re creating is the competition between the vendors short-term and long-term interests.  

Let It Be Known That You Are Seeking or Closing-In On Alternatives - If the vendor were to get word that you were actively seeking an alternative or already had one in the works, they may be willing to aggressively discount the price to maintain the business.

Form a Buying Group: All or Nothing - If you can’t get the pricing you need, chances are that Firecracker Inc.’s other customers are having the same problem. By forming a buying group you can align similar customers to increase each member’s leverage in the negotiation. By doing this and by actively seeking alternatives, a powerful system can be put in place to keep your vendor’s pricing in check.

Stockpiling to “Imply” Competition - Consider buying a little more of the Firecracker Cactus Extract than you really need over several ordering periods - enough to last for an extended period of time. The vendor will not notice that you are stockpiling the Extract. For the next several regular order periods, tell the vendor that you do not have a need for their product at this time. In this scenario, the competition you are creating for the vendor is themselves. Unknowingly, the vendor might assume a competitor has broken into the marketplace or that you have discovered a viable alternative. Soon they will be offering you a better deal to win back the business. In reality however, you were working off of the stockpile you accrued.  

Some of the means of creating competition even for a sole-source supplier as listed above are strategic choices that take time to develop, others are things you could implement immediately. Of course these ideas only represent a sampling of the potential solutions available.  

No matter what your situation or how difficult it might appear as a buyer, you always have more power than you think. One reason that this is true, is that you can almost always manufacture attractive alternatives even when it feels like your back is up against the wall and no matter how desperate your situation might seem.

Be resourceful and you’ll never be absent alternatives and thus never absent the ability to increase your power as a negotiator.

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