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NISM Certifications · NISM-Series-XV: Research Analyst · Company Analysis - Business and Governance

A research analyst evaluating a company's competitive position uses Porter's framework. A new entrant would find it hardest to enter an industry when:

Entry is hardest when capital requirements and economies of scale are high and customers face significant switching costs. These are barriers to entry that lower the threat of new entrants, whereas undifferentiated products, open channels and cheap licences make entry easier.

  1. ACapital requirements and economies of scale are high and switching costs for customers are significantCorrect
  2. BProducts are undifferentiated and customers switch freely
  3. CDistribution channels are open to all participants
  4. DRegulatory licences are freely available at nominal cost

Explanation

High capital needs, scale economies and customer switching costs are barriers to entry, so the threat of new entrants falls. The other options describe conditions that ease entry and thereby raise the threat.

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