CFA Level I · CFA Level I Exam · Industry and Competitive Analysis
A regional cement industry has high fixed costs, slow demand growth, and products that buyers view as undifferentiated commodities. Which force is most likely the strongest in this industry?
Rivalry among existing competitors is most likely the strongest force. High fixed costs encourage price cutting to fill capacity, slow growth makes competitors fight for share, and undifferentiated products leave price as the main basis of competition, all of which intensify rivalry.
- ARivalry among existing competitorsCorrect
- BBargaining power of suppliers
- CThreat of new entrants from consumers' loyalty
Explanation
High fixed costs push firms to fill capacity by cutting prices, slow growth means gains come at rivals' expense, and undifferentiated products make price the main basis of competition. All three intensify rivalry. Nothing in the facts points to supplier power or brand-loyalty barriers.
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