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

Which of the following is a feature of Porter's five forces framework when used to assess a company's business environment?

Porter's five forces assesses industry competition through the bargaining power of buyers, bargaining power of suppliers, threat of new entrants, threat of substitutes and rivalry among existing competitors. It is not a liquidity measure, the BCG share-growth matrix, or an internal-only SWOT.

  1. AIt considers the bargaining power of buyers and suppliers, threat of new entrants, threat of substitutes and rivalry among existing competitorsCorrect
  2. BIt measures a firm's liquidity using current assets and liabilities
  3. CIt ranks products by market share and growth rate into four categories
  4. DIt lists internal strengths and weaknesses only

Explanation

Porter's five forces are buyer power, supplier power, new entrants, substitutes and industry rivalry. The category ranking by share and growth describes the BCG matrix, and the internal-only list is part of SWOT, not the five forces.

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