ACCA BT · Chapter 2 · Question 8 of 11
A new business wishes to enter an industry where existing firms enjoy large economies of scale, strong brand loyalty and exclusive access to distribution channels. In terms of Porter's five forces, what does this indicate?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) High barriers to entry, so the threat of new entrants is low
Explanation
Economies of scale, brand loyalty and control of distribution channels are classic barriers to entry. High barriers make it difficult for newcomers to enter, so the threat of new entrants is low, which tends to protect incumbent profitability. The scenario says nothing directly about rivalry levels or buyer power.
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