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CA Intermediate · Financial Management and Strategic Management · Strategic Analysis: External Environment

Under Porter's Five Forces model, a mid-sized Indian packaged-snacks maker finds that a handful of large organised retail chains account for most of its sales and can easily switch to rival brands. Which force is most directly high in this situation?

The force that is high is the bargaining power of buyers. When a few large retail chains buy most of the output and can switch easily between brands, they can demand lower prices and better terms, which squeezes the snack maker's margins.

  1. ABargaining power of buyersCorrect
  2. BBargaining power of suppliers
  3. CThreat of new entrants
  4. DThreat of substitutes

Explanation

A few large customers who can switch easily to competitors can push for lower prices and better terms. This is high bargaining power of buyers. Supplier power would apply only if input providers were concentrated.

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