ACCA Applied Knowledge · Business and Technology · Competitive factors
Which factor would most likely INCREASE the intensity of rivalry among existing competitors in an industry?
Slow industry growth combined with high fixed costs increases rivalry. Firms must fight for market share to grow and need high volumes to cover fixed costs, so they compete aggressively on price. Differentiation, rapid growth and tacit cooperation soften rivalry.
- ASlow industry growth combined with high fixed costsCorrect
- BHighly differentiated products with strong brand loyalty
- CRapid market growth with many new customers
- DA small number of firms that avoid price competition
Explanation
Slow growth means firms can only gain sales by taking share from rivals, and high fixed costs push them to cut prices to keep capacity filled, intensifying rivalry. The other options reduce rivalry through growth, differentiation or tacit cooperation.
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