The presence of competitive rivalry and buyer power works in opposite direction. While competitive rivalry works best in the presence of collusion between the many companies working in the industry, on the other hand, the presence of buyer power works to strike at such form of collusion and bring about greater level of competition. There is a strong dominant force whereby buyer power strikes at the power of collusion within the working of the banking market (Fuertes & Heffernan, 2009).
The determination of competition is an important aspect for the development of efficiency of the market. There is a need for the development of market forces for bringing along improvement in innovation and efficiency. Such forces are dependent on the need to have strong competitive rivalry among the players for the sake of long-term development (Fuertes & Heffernan, 2009).
Buyer power provides the overall background using which competitive forces can be increased in the market. It means that with the development of higher degree of buyer power, the presence of collusion between the various players of the banking industry can be managed and its intensity can be reduced. Buyer power provides the basis for the competition development in the market. As market players firm up their plans regarding the strategies in line with the buyer power, it creates a strong influencing factor. This means that buyer power creates the enabling environment which develops a system to reduce the impact of the competition and ensures that the provisions of collusion are absent in the market (Inderst & Ottaviani, 2012).
Strong buyer power provides reduced scope for the presence of collusion among the players of the market. There is a need for them to have development of norms which are likely to create ensure reduced chances of collusion as the buyers exert pressure on the market participants to innovate and reduce the costs of operations. There is a strong incentive and need which exists within the market for the need to have innovation among the players which can be seen and developed on the basis of the buyer power. As banking players continue to progress and respond to the changes in the buying preferences, there is a strong possibility that they are unable to create partnerships which aim to reduce competition. The provisions of competition get a boost with the development of strong buyer power (Inderst & Ottaviani, 2012).