NISM Certifications · NISM-Series-XV: Research Analyst · Industry Analysis
Using Porter's five forces framework, an analyst finds that a cement industry has many small buyers who each purchase little, with no ability to negotiate on price. Which force does this observation indicate is weak?
The observation shows weak bargaining power of buyers. When customers are numerous, small and unable to negotiate prices, they cannot pressure industry margins, which supports profitability. It says nothing directly about suppliers, new entrants or substitute products.
- ABargaining power of buyersCorrect
- BBargaining power of suppliers
- CThreat of new entrants
- DThreat of substitutes
Explanation
Many small, fragmented buyers with no negotiating leverage means buyer bargaining power is low (weak). This is favourable for industry profitability. The other forces concern suppliers, entrants and substitutes, which the observation does not address.
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