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Under the Five Forces framework, how can the market power of customers impact a seller's profitability?

A. The market power increases the total number of customers, raising market demand.
B. Customers with market power can use their leverage to lower the selling price that sellers charge.
C. The market power reduces the total number of customers, raising market demand.
D. They can raise the selling price sellers charge.

Answer :

Under the Porter's Five Forces Framework, the power of customers could impact a seller's profitability because the customer with market power can use their leverage to lower the selling price that sellers change (B).

Porter's Five Forces is a model used by a company to identified the threat and opportunity it has within the industry it operates. Five Forces allows a company to analyze five competitive forces and helps a compay to determine the industry's weaknesses and strengths.

Porter's Five Forces consist:

  1. Competition in the industry
  2. Threat of new entrants
  3. Power of suppliers
  4. Power of customers
  5. Threat of subtitute products

Competition in the industry represents the number of competitors and their ability to compete with each others. Competition in the industry represents the industry's competitive rivalry and the potential of a company to dominate the industry.

Threat of new entrats picturizes the entrance barrier of the industry. If the entrance barriers of an industry is low, new players would be easily enter the industry and making the competition within the market more crowded. However if the entrance barrier of an industry is low, new players would be difficult to enter the industry, giving more security for the already-in players.

Power of suppliers could affect the company's well being because they have power to decide the raw materials prices. Suppliers also have power to decide how many inputs they want to provide for a company. The more suppliers within an industry, the lower the power they have because a company could easily change its suppliers from one to another. However if the suppliers in the industry is limited, hence the company becomes more dependend to its suppliers because it has no opportunity to change suppliers.

Power of customer could affects directly to the company's profitability. Power of customer is not only relaed to how big is the industry's market customer but also how significant the customer is, and how much it would cost for a company to find new customer if the current customer change their preferrences and left the market. Customers may decide to reject to buy a product and look for another subtitite product if its price is too high for them.

Threat of Subtitution represents threats of a subtitute could bring into the industry. If there is direct subtitution product to the industry, customer could easily change their preferrences and jump into the subtitute's market. If the subtitution products is far and difficult to find, the customer tends to be loyal to the current industry's products because it is difficult for them to look for anther option.

Learn more about Porter's Five Forces here: https://brainly.com/question/24933496

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