ACCA Strategic Professional · Strategic Business Leader · Competitive forces
Marenco Telecom operates in a country where entry into mobile services requires a licence, and the regulator has announced it will issue three additional licences next year and relax foreign ownership limits. Using Porter's five forces, what is the most appropriate implication for Marenco?
The threat of new entrants will rise. Licensing and foreign ownership limits are government-policy barriers to entry, and relaxing them makes it easier for new competitors to enter. Marenco should expect more rivalry as a consequence and plan its response accordingly.
- AThe threat of new entrants will rise because a barrier based on government policy is being loweredCorrect
- BThe bargaining power of suppliers will rise because licences become more plentiful
- CThe threat of substitutes will fall because more operators will offer similar services
- DRivalry will fall because the regulator is controlling the number of competitors
Explanation
Licensing and ownership restrictions are government-policy barriers. Issuing more licences and easing foreign ownership rules lowers that barrier, so entry becomes easier and the threat rises. Rivalry is likely to increase later, not fall, as more firms enter.
Did you get it right without looking?
One question tells you little. A timed set on Competitive forces shows your real accuracy, how long you take and where you lose marks.
More Competitive forces questions
- Lumina Rail operates intercity train services between two large cities. Over the past three years, low-cost coach operators and a new video-…
- Dovane Retail sells branded kitchenware. A new online platform allows customers to compare prices instantly and switch suppliers at no cost.…
- Zephyr Brew, a regional coffee roaster, notes that a global retailer is considering entering its market. The retailer would need to build ro…
- Marisol Foods bakes bread and buys flour from three large millers. Flour is 45% of its costs. Marisol's recipes are tied to one miller's spe…
- Brindle Foods sells a novel plant-based snack in a newly created market. Few customers know the product, production volumes are small, unit …
- Calder Rail runs intercity trains. A review shows that low-cost airlines and coach operators now offer the same journeys at lower prices, an…