NISM Certifications · NISM-Series-XV: Research Analyst · Industry Analysis
Under Porter's five forces framework, a sector in which customers can easily switch between suppliers at almost no cost and a few large buyers account for most of the sales is most directly affected by which force?
The situation points to high bargaining power of buyers. When a few large customers account for most sales and can switch suppliers at no cost, they can force down prices and demand better terms, which compresses industry profitability.
- ALow bargaining power of buyers
- BHigh bargaining power of buyersCorrect
- CLow threat of substitutes
- DHigh barriers to entry
Explanation
Concentrated buyers and low switching costs let customers push down prices and demand better terms, so buyer bargaining power is high. This squeezes industry margins. The other options describe forces that would favour the industry, or are unrelated to the facts given.
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