- 15 Marks
PM – Nov 2016 – L2 – Q6 – Strategic Management Accounting
This question discusses how firms can monitor buyer bargaining power, reduce threats of new entrants, and reasons for continuing operations in low-return industries.
Question
Michael Porter, in his book “Competitive Advantage: Creating and Sustaining Superior Performance,” suggested that a firm must assess the industry’s market attractiveness by considering the following:
- The extent of the rivalry between existing competitors;
- The bargaining power of suppliers;
- The bargaining power of buyers;
- The threat of substitutes; and
- The threat of new entrants.
Required:
a. Recommend FIVE factors that should be included in the monitoring system implemented by the firm if a firm wishes to monitor the bargaining power of buyers. (5 Marks)
b. Explain FOUR different methods whereby a firm can reduce the threat of new entrants to an industry. (7 Marks)
c. Explain the reason why firms often continue to operate in an industry that is generating below-normal returns in the short run. (3 Marks)
Find Related Questions by Tags, levels, etc.
Report an error