ACCA Applied Knowledge · Business and Technology · Competitive factors
A small manufacturer of specialised car seats sells almost all of its output to one large vehicle assembler, which can easily negotiate lower prices. Which of Porter's Five Forces is most directly illustrated?
This illustrates the bargaining power of customers. A single large assembler buys most of the manufacturer's output, so it can demand lower prices and better terms, squeezing the manufacturer's profitability. Supplier power would relate to those who provide inputs, not buyers.
- ABargaining power of customersCorrect
- BBargaining power of suppliers
- CThreat of new entrants
- DThreat of substitutes
Explanation
When a few large buyers account for most of a firm's sales, they can press for lower prices or better terms. This is the bargaining power of customers. Supplier power would concern the firm's input providers, not its buyers.
Did you get it right without looking?
One question tells you little. A timed set on Competitive factors shows your real accuracy, how long you take and where you lose marks.
More Competitive factors questions
- Which of the following is a risk specific to a firm pursuing a cost leadership strategy?
- Which factor would most likely INCREASE the intensity of rivalry among existing competitors in an industry?
- Which statement best describes the purpose of the 'margin' in Porter's value chain model?
- A market has many sellers, each offering a slightly different product such as restaurants in a city centre. Each firm has some control over …
- Zenith Bags makes handcrafted leather bags with distinctive designs and sells them only to luxury buyers in a few high-end boutiques, chargi…
- A regional bank finds that customers can easily move their accounts to rival banks because the process is free and takes one day. Which of P…