When discussing "industry/ competitive rivalry" in Porter's Five Forces framework, which of the following will result in low rivalry?Group of answer choicesProduct is perishableExit barriers are lowCompetitors are numerous and roughly equal in sizeAll the choices are correct
Question
When discussing "industry/ competitive rivalry" in Porter's Five Forces framework, which of the following will result in low rivalry?Group of answer choicesProduct is perishableExit barriers are lowCompetitors are numerous and roughly equal in sizeAll the choices are correct
Solution
The correct answer is "Exit barriers are low".
Here's why:
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Product is perishable: This would actually increase rivalry because companies would be in a constant battle to sell their products before they spoil.
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Exit barriers are low: This would decrease rivalry because companies can easily leave the industry if it becomes too competitive or unprofitable. This reduces the number of competitors and thus, the level of competition.
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Competitors are numerous and roughly equal in size: This would increase rivalry because there would be many companies fighting for the same market share.
So, the only choice that would result in low rivalry is "Exit barriers are low".
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