Question

The threat of suppliers in the hardwood furniture can best be described as

A) low because there are a large number of suppliers selling an undifferentiated product.
B) high because there are a large number of suppliers selling an undifferentiated product.
C) moderate because the large number of suppliers is offset by the undifferentiated products they are selling.
D) moderate because of the slowing growth rate in the industry and the commodity nature of the products produced by suppliers.

Answer 1

The threat of suppliers in the hardwood furniture industry is low, due to a large number of suppliers and undifferentiated products which limits their influence on market pricing. So the correct answer is option A.

Step-by-step explanation:

The threat of suppliers in the hardwood furniture industry can best be described as low because there are a large number of suppliers selling undifferentiated products. A competitive market with an abundance of suppliers offering similar products means that no single supplier has significant pricing power or influence over the market, leading to a low threat level for the industry regarding supplier power.

Given the economies of scale and market dynamics, the furniture industry often involves competitive pricing, with suppliers having limited ability to impose high costs. Additionally, the presence of imperfect information can often lead to buyers being reluctant to pay premium prices, thus further reducing supplier power.

The ability of firms to derive profits from timber is challenged both by economic incentives and market competition, which often dictates unsustainable harvesting practices, particularly in situations where there are no disincentives for 'hit-and-run' operations.