CA Intermediate · Financial Management and Strategic Management · Strategic Analysis: External Environment
A mid-sized Indian two-wheeler maker finds that entry into the electric scooter segment requires heavy capital for battery plants, strong dealer networks and established brand loyalty already held by incumbents. Which Porter force is MOST directly being assessed, and what is the implication?
The force assessed is the threat of new entrants, which is low here. Heavy capital investment, the need for dealer networks and entrenched brand loyalty are entry barriers that make it hard and costly for a newcomer to enter the electric scooter market and compete.
- AThreat of new entrants is low because of high entry barriersCorrect
- BThreat of substitutes is high because electric scooters replace petrol ones
- CRivalry among competitors is low because incumbents are few
- DSupplier power is high because battery makers are concentrated
Explanation
Heavy capital needs, distribution access and brand loyalty are classic entry barriers. These reduce the threat of new entrants for an outsider, so the threat is low. The other options address different forces and are not what the scenario's facts describe.
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