ACCA Applied Knowledge · Business and Technology · Competitive factors
A regional airline operates on a route where passengers can easily switch to a rival airline at no cost and prices are transparent online. Which of Porter's Five Forces is most directly strengthened by this situation?
The bargaining power of customers is strengthened. When buyers can switch suppliers at no cost and compare prices easily, they can demand lower prices or better service, which squeezes the airline's profitability on that route.
- ABargaining power of customersCorrect
- BThreat of new entrants
- CBargaining power of suppliers
- DRivalry among existing competitors in the supply chain
Explanation
Low switching costs and price transparency allow buyers to compare and move easily, which increases their bargaining power and pushes prices down. Threat of new entrants concerns barriers to entry, not buyer switching behaviour, so it is not the force directly affected.
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