CA Intermediate · Financial Management and Strategic Management · Strategic Analysis: External Environment
Customers of a regional online grocery firm can easily switch to rival apps at no cost, they are price sensitive, and they buy in small amounts but the platform depends on repeat orders. Applying Porter's Five Forces, which conclusion is most appropriate?
Buyer bargaining power is high. Customers can switch to rival apps at no cost and are price sensitive, so they can pressure the firm on prices and service; small individual order sizes do not offset this ease of switching.
- ABuyer bargaining power is high because switching costs are low and price sensitivity is highCorrect
- BBuyer bargaining power is low because each customer buys in small amounts
- CSupplier power is high because customers can switch easily
- DThreat of substitutes is low because rival apps exist
Explanation
Low switching costs and price sensitivity raise buyer power. Small purchase size alone does not lower it here, since the many easily switching customers collectively push the firm on price and service. Rival apps are direct competitors, not a measure of substitutes, and supplier power is unrelated.
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