Question

With the Five Forces Model, companies should watch the forces in the market. If the forces are strong competition generally increases and if the forces are weak competition typically decreases.

a. True.
b. False.

Answer 1

The correct answer is letter "A": True.

Step-by-step explanation:

American economist Michael E. Porter (born in 1947) proposed the Five Forces Model to explain what factors contribute to changes in industries and how. Those forces are:

1) The ease of entry for new participants in the marketplace.

2) The number and activity of a company's rivals.

3) The possibility of a new good or service coming onto the market and eroding sales of established products.

4) The bargaining power of industry suppliers.

5) The bargaining power of consumers.

According to Porter, the strongest the forces are the more competitive the market becomes. As the forces are weak, a company will have more chances to increase the price of the products offered since there will be less competition.