The balance of power between a firm and its customers affects its ability to compete effectively and earn above-average returns.

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The balance of power between a firm and its customers is a crucial factor in determining the firm's ability to compete effectively and earn above-average returns. If a firm has more power or leverage over its customers, it may be able to set higher prices or offer lower-quality products or services, which can negatively impact its competitiveness and profitability. On the other hand, if customers have more power, they can demand lower prices, higher quality, or better service, which may force the firm to lower its prices, improve its products or services, or invest in customer service to retain its customers. The balance of power between a firm and its customers is an ongoing dynamic that can change over time, depending on factors such as market conditions, consumer preferences, technology, and regulatory environment.

The Balance of Power Between a Firm and Its Customers