CAF-7 · Chapter 4 · Question 13 of 15
Which of Porter’s Five Forces is most intensely elevated when an industry suffers from high fixed costs, low product differentiation, and high exit barriers?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Competitive rivalry
Explanation
High fixed costs force firms to sell high volumes to break even. When combined with undifferentiated products and high exit barriers (meaning failing firms cannot easily leave), it results in fierce price wars and intense competitive rivalry.
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