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ACCA Strategic Professional · Advanced Performance Management · Strategic management accounting

Marlow Foods is assessing the competitive position of its ready-meals division. Suppliers are fragmented, buyers are a few large supermarkets who can switch easily, entry requires little capital, and many rivals compete on price. Which conclusion using Porter's five forces is most appropriate?

Profitability is likely to be under pressure. Powerful, concentrated buyers who switch easily, low entry barriers and intense price rivalry outweigh the benefit of weak supplier power, making the industry relatively unattractive under Porter's five forces.

  1. AProfitability is likely to be under pressure, with buyer power and threat of entry as key concernsCorrect
  2. BProfitability is likely to be high because supplier power is low
  3. CCompetitive rivalry is unimportant since buyers are concentrated
  4. DThe threat of substitutes is the only relevant force

Explanation

Concentrated buyers with low switching costs have strong bargaining power, low capital barriers mean high entry threat, and price rivalry is intense. Low supplier power helps but does not offset these forces, so industry attractiveness is low.

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