CA Intermediate · Financial Management and Strategic Management · Strategic Analysis: External Environment
An Indian cement company operates in an industry where growth has slowed, product differences are small, competitors have high fixed costs and heavy capacity, and exit is costly because plants are specialised. Which feature of industry structure does this combination most strongly indicate?
The combination indicates intense rivalry among existing competitors. Slow industry growth, little product differentiation, high fixed costs and costly exit due to specialised plants push firms to fight for share, often through price cutting. These are classic conditions that raise competitive rivalry in Porter's model.
- AIntense rivalry among existing competitorsCorrect
- BLow bargaining power of buyers
- CA high degree of product differentiation
- DWeak threat of substitutes
Explanation
Slow growth, low differentiation, high fixed costs and high exit barriers are all conditions that intensify rivalry, leading to price wars and capacity-driven competition. Differentiation is stated as small, so option three contradicts the facts. The data say nothing to establish low buyer power or weak substitutes.
Did you get it right without looking?
One question tells you little. A timed set on Strategic Analysis: External Environment shows your real accuracy, how long you take and where you lose marks.
More Strategic Analysis: External Environment questions
- Himalaya Tea Estates operates in a mature industry. Over the years it has seen: (i) slow market growth, (ii) many equally sized rivals, (iii…
- Aarav Foods, an Indian packaged-snacks firm, observes that consumers are shifting from fried to baked snacks owing to health awareness, and …
- A Pune-based electric two-wheeler maker is studying its environment. It lists: (i) a new central subsidy for EV buyers, (ii) a fall in lithi…
- Anand Motors makes diesel auto-rickshaws. Electric three-wheelers offering lower running costs are gaining customers, and some of its buyers…
- Under Porter's Five Forces model, a mid-sized Indian packaged-snacks maker finds that a handful of large organised retail chains account for…
- Kaveri Motors, an Indian two-wheeler maker, assesses the industry lifecycle. Sales growth has slowed, most buyers are repeat purchasers, pri…