Question

Which one of the following statements concerning the strength of competitive pressures stemming from buyer bargaining power is incorrect?

a. Buyer bargaining power is stronger when buyers are well informed and have compared the product offerings of industry members regarfing prices, product features, quality,buyer review, and other pertinent factors.
b. Buyer bargaining power is stronger when the products of industry members are strongly differentiated
c. Buyer bargaining power is weaker when buyers are not overly concerned about or sensitive to the prices industry members are changing.
d. Buyer bargaining power is stronger when a buyer's identity adds prestige to the seller's list of customers.
e. Buyer bargaining power is weaker when there is no credible threat of buyers integrating backward into the business of industry members.

Answer 1

The incorrect statement is that buyer bargaining power is stronger when the products of industry members are strongly differentiated. This is false because product differentiation usually reduces buyer power by decreasing the comparability of alternatives.

Step-by-step explanation:

The student's question revolves around identifying which statement about the strength of competitive pressures from buyer bargaining power is incorrect. In the context of competitive strategy, buyer bargaining power can dictate the competitive dynamics and potential profitability within an industry. Considering the options provided:

• Buyer bargaining power is indeed stronger when buyers are well informed about products, prices, and quality.
• Buyer bargaining power is stronger when products are not differentiated, which makes 'b' the incorrect statement, as differentiation tends to reduce buyer power.
• Buyer power is weaker when buyers are less price-sensitive, which implies a lower degree of bargaining power.
• Having prestigious buyers can enhance a seller's reputation, indeed increasing the buyer's bargaining power.
• Finally, the lack of a credible threat of backward integration by buyers can also weaken their bargaining position.

These points reflect how much market power each firm possesses, the similarity of firm products, market entry difficulty, and whether firms compete on price, advertising, or other product differentiators.