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CS Professional · Strategic Management and Corporate Finance · Competitive Positioning

Which of the following would reduce the threat of new entrants in an industry, according to Porter's Five Forces Model?

Significant economies of scale among existing firms reduce the threat of new entrants. A newcomer must either enter at large scale or accept higher unit costs. Low capital needs, easy distribution access and weak brand loyalty lower entry barriers and therefore increase the threat.

  1. ASignificant economies of scale among existing firmsCorrect
  2. BLow capital requirements
  3. CEasy access to distribution channels
  4. DAbsence of brand loyalty

Explanation

Economies of scale force a new entrant to come in at large scale or accept a cost disadvantage, so they are a barrier to entry. Low capital needs, easy distribution access and weak brand loyalty all lower barriers and raise the entry threat.

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