CA Intermediate · Financial Management and Strategic Management · Strategic Analysis: External Environment
A packaged-snacks company in Pune finds that a few large retail chains can now dictate prices and demand extended credit because they account for most of its sales. Which of Porter's five forces is most directly illustrated?
The situation shows the bargaining power of buyers. A few large retail chains buy most of the company's output, so they can dictate prices and demand longer credit. Supplier power relates to those who supply inputs, not to customers who purchase the finished product.
- AThreat of new entrants
- BBargaining power of buyersCorrect
- CBargaining power of suppliers
- DThreat of substitutes
Explanation
When a small number of large customers purchase a big share of output, they can press for lower prices and better terms. This is the bargaining power of buyers. Supplier power concerns input providers, not customers.
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 cement manufacturer in Rajasthan buys most of its coal from two large suppliers. Coal has no close substitute for its kilns, and the cemen…
- Vistara Paints operates in an industry where growth is slowing, many competitors of similar size exist, fixed costs are high and product dif…
- Ananya Textiles, an Indian apparel maker, finds that a sharp rise in the share of working women, growing health consciousness and changing a…
- A Pune-based electric scooter maker finds that many customers can easily switch to petrol scooters or to shared mobility apps if its prices …
- A firm studies its industry and finds that the industry life cycle stage shows rapid sales growth, increasing number of competitors, falling…
- A Kolkata-based firm studies how its competitors, customers, suppliers and distributors behave, rather than broad national conditions such a…