ACCA Applied Knowledge · Business and Technology · Competitive factors
A manufacturer buys a specialised component from only one supplier. The component is a critical part of its product, no substitute exists, and the supplier could start making finished products itself. Which conclusion is most consistent with Porter's model?
Supplier power is high, and the supplier threatens forward integration. A single source of a critical, non-substitutable component can dictate price and terms, and its ability to enter the manufacturer's market strengthens its position further.
- ASupplier power is high, and the supplier poses a threat of forward integrationCorrect
- BSupplier power is low because the manufacturer is a loyal customer
- CThreat of substitutes is high because the component is specialised
- DCustomer power is high because the manufacturer buys in small volumes
Explanation
A sole supplier of a critical input with no substitutes has strong bargaining power, and the credible threat of moving forward into finished products raises it further. Loyalty does not reduce power; specialisation with no alternative lowers, not raises, the substitute threat.
Did you get it right without looking?
One question tells you little. A timed set on Competitive factors shows your real accuracy, how long you take and where you lose marks.
More Competitive factors questions
- A manufacturer moves its production to several countries and also designs a standard product sold under one brand worldwide, to gain economi…
- According to Porter, which of the following is a generic strategy that a business can adopt to gain competitive advantage?
- In the Boston Consulting Group matrix, a product with a low relative market share in a high-growth market is classified as a:
- A regional airline operates on a route where passengers can easily switch to a rival airline at no cost and prices are transparent online. W…
- A small number of large airlines dominate a region. When one cuts fares, the others quickly match it, and they prefer to compete through loy…
- Which of the following would most likely REDUCE the threat of new entrants into an industry?