CA Intermediate · Financial Management and Strategic Management · Strategic Analysis: External Environment
A leading Indian packaged-snacks maker finds that a few large organised-retail chains account for most of its sales and can demand lower prices, longer credit and promotional support because the maker has no other equally large outlets and switching to rivals' products is easy for them. Which Porter force is most directly illustrated?
The scenario shows high bargaining power of buyers. A few large retail chains buy most of the output, can switch to rival brands easily, and therefore press for lower prices, longer credit and promotional support. Supplier power would concern input providers, not customers.
- ABargaining power of buyersCorrect
- BBargaining power of suppliers
- CThreat of new entrants
- DThreat of substitutes
Explanation
Buyers concentrated in few large chains, buying in volume, with low switching costs, can force down prices and extract better terms. This is high bargaining power of buyers. Supplier power concerns input providers, which the scenario does not describe.
Did you get it right without looking?
One question tells you little. A timed set on Strategic Analysis: External Environment shows your real accuracy, how long you take and where you lose marks.
More Strategic Analysis: External Environment questions
- A packaged water brand finds that consumers are increasingly switching to home water purifiers and reusable bottles that serve the same basi…
- A packaged-snacks company in India is studying the broad forces outside its control that affect the whole industry, such as tax policy, cons…
- Bharat Beverages studies its industry and finds that the market is in the growth stage of its life cycle. Which feature is most typical of t…
- Which of the following is a component of the macro-environment analysed through a PESTEL framework, rather than a force of Porter's Five For…
- In Michael Porter's Five Forces model, which of the following situations most clearly indicates HIGH bargaining power of buyers for a packag…
- A packaged-foods company in India is studying its industry. It finds high capital requirements, strong brand loyalty to existing players, an…