NISM Certifications · NISM-Series-XV: Research Analyst · Industry Analysis
In the Porter framework used for industry analysis, which of the following would most directly increase the bargaining power of buyers in an industry?
Buyer bargaining power increases when there are few buyers who each purchase large volumes. The seller then depends heavily on them for revenue and must accept pressure on prices. High switching costs, differentiation and fragmented small buyers all reduce buyer power.
- AHigh switching costs for customers
- BFew buyers who purchase large volumes of the productCorrect
- CHighly differentiated products with no close substitutes
- DCustomers being widely scattered with small purchase sizes
Explanation
Buyer power rises when buyers are concentrated and purchase in large volumes, because the seller depends on them for a big share of revenue. High switching costs, differentiated products and scattered small buyers all weaken buyer power.
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