CFA Level I · CFA Level I Exam · Industry and Competitive Analysis
In Porter's five forces framework, an industry in which many small buyers each purchase a tiny share of a supplier's output and switching between suppliers is costly for them would most likely exhibit:
The industry would most likely show weak buyer bargaining power. Buyers that are numerous, buy small volumes and face high switching costs have little leverage over price or terms, whereas concentrated, large-volume buyers with low switching costs would be powerful.
- Aweak buyer bargaining powerCorrect
- Bstrong threat of substitutes
- Cintense rivalry among existing competitors
Explanation
Buyer power is high when buyers are concentrated, purchase large volumes, or face low switching costs. Fragmented buyers with small purchases and high switching costs have little leverage, so buyer power is weak. The other options are separate forces not implied by the facts.
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