NISM Certifications · NISM-Series-XV: Research Analyst · Industry Analysis
Under Porter's five forces framework, which situation most clearly increases the bargaining power of buyers in an industry?
Buyer power rises when a few customers buy a large share of output and can switch suppliers cheaply, because they can demand lower prices or better terms. Differentiation, high switching costs and fragmented buyers weaken it.
- AFew customers purchase a large share of the industry's output and switching costs are lowCorrect
- BProducts are highly differentiated and switching costs are high
- CMany small customers each buy a tiny quantity
- DThe industry has strong patent protection
Explanation
Buyers gain power when they are concentrated, buy in volume and can switch easily, forcing lower prices. Differentiation, high switching costs and fragmented buyers reduce buyer power.
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