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ACCA Strategic Professional · Strategic Business Leader · Competitive forces

Marlowe Brewing operates in a market where a single firm, Hopsource, supplies the specialist malt that cannot be replaced, and Marlowe is a small customer of Hopsource. Hopsource is considering integrating forward into brewing. Which analysis best reflects Porter's Five Forces?

Supplier power is high. Hopsource is the sole source of an irreplaceable input, Marlowe is a small customer, and the supplier could integrate forward into brewing. These factors all strengthen the supplier's bargaining position, so the correct reading is high supplier power reinforced by the integration threat.

  1. ASupplier power is high, and forward integration is a credible threat that further strengthens itCorrect
  2. BBuyer power is high because Marlowe is purchasing a vital input
  3. CThreat of substitutes is high because malt has no alternative
  4. DRivalry is low because the supplier is a monopolist

Explanation

A concentrated supplier of a unique input to a small customer has strong power, and a credible threat of forward integration adds to it. Option B confuses the direction of power. Lack of an alternative input means low, not high, substitute threat in that sense, and supplier monopoly says nothing about brewing rivalry.

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