CA Inter P6 · Chapter 11 · Question 3 of 11
In Porter's five forces model, the threat of new entrants into an industry is LOW when:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Incumbents enjoy large economies of scale and strong brand loyalty, and capital requirements are high
Explanation
Entry barriers protect incumbents. High barriers include economies of scale, product differentiation and brand loyalty, large capital requirements, switching costs, restricted access to distribution channels and government policy. When barriers are high, the threat of entry is low. The other options describe low barriers.
More Strategic Analysis: External Environment MCQs
- Q5Large retail chains buying standardised packaged rice from many small millers are likely to have high bargaining power mainly because:
- Q6For domestic airlines, the growing use of high-quality video conferencing by corporate clients instead of travelling to meetings represents:
- Q7Rivalry among existing competitors tends to be MOST intense when:
- Q8A strategic group map of an industry is used to:
- Q9Key Success Factors (KSFs) of an industry are best described as: