CA Intermediate · Financial Management and Strategic Management · Strategic Analysis: External Environment
A packaged snacks company, Crunchkart, finds that large retail chains can demand lower prices because they buy in bulk, can easily switch to rival brands, and have full information about prices. Which of Porter's five forces is most directly described?
This describes the bargaining power of buyers. Large retail chains purchase in bulk, switch easily between brands and know prices well, so they can push the company to cut prices or give better terms. Supplier power would relate to input providers, not customers.
- ABargaining power of buyersCorrect
- BBargaining power of suppliers
- CThreat of substitutes
- DThreat of new entrants
Explanation
Powerful buyers who purchase in large volumes, face low switching costs and are well informed can force prices down. This is bargaining power of buyers. Supplier power would concern input providers, not retail customers.
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