Manag., July-2016-Q39

0. Consider the following statements with reference to Porter’s five forces model of competitive analysis:
(a) As rivalry among competing firm intensifies, generally industry profits decline or in few cases, the industry becomes inherently unattractive.
(b) Whenever new firms are allowed to enter a particular industry, the intensity of competition among firms becomes haphazard.
(c) Generally, competitive pressures arising from the substitute products decrease as the relative price of substitute products decline.
(d) The bargaining power of suppliers affects the intensity of competition.

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Option : B
Explanation : The Five Forces model developed by Michael E. Porter has been the most commonly used analytical tool for gramining competitive environment. According to this model, the intensity of competition in an industry depends on five basic forces. These five forces are:
1. The threat of new entrants
2. The intensity of rivalry among industry competitors
3. Bargaining power of buyers
4. Bargaining power of suppliers
5. The threat of substitute products and services.
Each of these forces affects a firm’s ability to compete in a given market. Together, they determine the profit potential for a particular industry. To Wnderstand industry competition and profitability, one must analyze the industry’s underlying structure in terms of the five forces, as shown in the figure below.

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