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CA Intermediate · Financial Management and Strategic Management · Strategic Analysis: External Environment

An Indian cement manufacturer operates in an industry with heavy capital investment, high fixed costs, low product differentiation, and slow market growth, so rivals keep operating at full capacity and cut prices to fill it. Which force of Porter's model is intensified by these features?

These features intensify rivalry among existing competitors. High fixed costs force firms to fill capacity, low differentiation makes price the main weapon, and slow growth means one firm's gain is another's loss. This combination typically triggers price cutting and aggressive competition.

  1. ABargaining power of suppliers
  2. BThreat of new entrants
  3. CRivalry among existing competitorsCorrect
  4. DBargaining power of buyers

Explanation

High fixed costs push firms to use capacity fully, low differentiation makes price the main weapon, and slow growth means gains come only at rivals' expense. These are classic drivers of intense rivalry among existing competitors. Entry threat would be linked to barriers, not these conditions.

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