Skip to content

CA Intermediate · Financial Management and Strategic Management · Strategic Analysis: External Environment

A packaged-foods company in India is studying its industry. It finds high capital requirements, strong brand loyalty to existing players, and restricted access to retail shelf space. Which Porter force do these findings primarily indicate is LOW in intensity for existing firms?

The threat of new entrants is low. High capital requirements, entrenched brand loyalty and limited access to distribution channels are classic entry barriers that discourage newcomers, protecting existing firms. None of these facts describes rivalry, buyer power or supplier power directly.

  1. AThreat of new entrantsCorrect
  2. BRivalry among existing competitors
  3. CBargaining power of buyers
  4. DBargaining power of suppliers

Explanation

High capital needs, brand loyalty and distribution-access limits are entry barriers. These barriers make the threat of new entrants low. Rivalry and buyer or supplier power are not addressed by these three facts.

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.

Practise Strategic Analysis: External EnvironmentFree diagnostic mock

More Strategic Analysis: External Environment questions