CA Intermediate · Financial Management and Strategic Management · Strategic Analysis: External Environment
A Pune-based electric scooter maker finds that many customers can easily switch to petrol scooters or to shared mobility apps if its prices rise, and that customers also negotiate hard for discounts because they have many alternatives. Which of Porter's five forces is most directly reflected by the customers' ability to switch to petrol scooters and shared mobility apps?
The switching option reflects the threat of substitutes. Petrol scooters and shared mobility apps satisfy the same transport need in a different form, so they limit the prices the electric scooter maker can charge. Buyer bargaining power is a separate force about negotiating leverage.
- AThreat of substitutesCorrect
- BBargaining power of buyers
- CThreat of new entrants
- DRivalry among existing competitors
Explanation
Petrol scooters and shared mobility apps meet the same customer need through a different product or service, so they are substitutes. The hard negotiation for discounts is the buyer power aspect, but the question asks specifically about the ability to switch to different products. Rivalry refers to competition among firms making the same kind of product.
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