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NISM Certifications · NISM-Series-XV: Research Analyst · Company Analysis - Business and Governance

Under Porter's five forces framework, which situation indicates HIGH bargaining power of buyers for a company's product?

Buyer bargaining power is high when a few large customers account for most sales and can switch suppliers easily, because they can then demand lower prices or better terms. Patents, many small buyers or high switching costs weaken buyer power.

  1. AA few large customers account for most of the company's sales and can easily switch suppliersCorrect
  2. BThe product is patented and has no substitutes
  3. CCustomers are numerous and each buys a very small quantity
  4. DSwitching to another supplier is very costly for customers

Explanation

Buyer power is high when customers are concentrated, purchase large volumes and can switch easily, letting them press for lower prices. Patents, fragmented buyers and high switching costs reduce buyer power.

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