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High industry fixed costs and Porter's 5 forces

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA BT – FIA FBT › High industry fixed costs and Porter's 5 forces

  • This topic has 2 replies, 2 voices, and was last updated 6 years ago by draiells.
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  • December 27, 2018 at 1:26 pm #499325
    draiells
    Member
    • Topics: 123
    • Replies: 141
    • ☆☆☆

    How does high industry fixed cost affect each of the Porter’s five forces?

    December 27, 2018 at 7:35 pm #499344
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10591
    • ☆☆☆☆☆

    New entrants: high fixed costs imply considerable amounts of building, plant and machinery (eg depreciation and rent). If so, the capital investment needed would tend to be a barrier to entrance.

    Rivalry: high fixed costs imply that, to cover these, the company will need to operate at high capacity and this is likely to intensify competition.

    Customers and suppliers: if they know you have to cover your high fixed costs, this can give them a lever.

    Substitutes: I don’t think this is consistently affected by high fixed costs (the substitute might or might not also have high fixed costs).

    December 28, 2018 at 2:08 am #499360
    draiells
    Member
    • Topics: 123
    • Replies: 141
    • ☆☆☆

    Thank youuu, you’re the best!

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    Posts
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  • The topic ‘High industry fixed costs and Porter's 5 forces’ is closed to new replies.

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