ACCA Applied Knowledge · Business and Technology · Competitive factors
Which of the following is most likely to INCREASE the intensity of rivalry among existing competitors in an industry?
High exit barriers increase rivalry. Firms that cannot leave cheaply stay and keep fighting for share even when profits are poor, leading to overcapacity and price cutting. Rapid growth and strong product differentiation generally reduce rivalry rather than intensify it.
- ARapid market growth
- BHigh exit barriersCorrect
- CHighly differentiated products
- DFew competitors of very different sizes
Explanation
High exit barriers keep struggling firms in the industry, causing overcapacity and price competition. Rapid growth, differentiation and few competitors typically ease rivalry.
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