CA Intermediate · Financial Management and Strategic Management · Strategic Analysis: External Environment
A company studying its industry finds that the industry is growing slowly, fixed costs are high, exit barriers are significant and competitors are of similar size. Which Porter force is most likely to be intense?
Rivalry among existing competitors is likely to be intense. Slow growth forces firms to fight for market share, high fixed costs push them to fill capacity, high exit barriers keep weak players in, and similar size makes competition balanced. These are standard drivers of strong industry rivalry.
- ABargaining power of suppliers
- BThreat of substitutes
- CRivalry among existing competitorsCorrect
- DBargaining power of buyers
Explanation
Slow growth means firms can gain share only by taking it from rivals. High fixed costs push firms to run at full capacity, and high exit barriers keep weak firms in the market. Similar-sized competitors make the fight more even. All of these intensify rivalry.
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