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Porters Five Forces – MTQ 6 Kaplan

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Porters Five Forces – MTQ 6 Kaplan

  • This topic has 0 replies, 1 voice, and was last updated 1 year ago by ThomasMcAlisterUnLtd.
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  • Author
    Posts
  • January 20, 2022 at 8:58 am #647040
    ThomasMcAlisterUnLtd
    Member
    • Topics: 7
    • Replies: 5
    • ☆

    Hi Ken,

    I came across the following question. Could you give a bit more of an explanation as the book only gives the answers and I’m still a bit confused….

    MBV is a manufacturer of fine furniture based in country G. MBV’s managers have identified
    that the company’s results for the past three years have been declining. They feel that this is
    due to changes in the external environment – in particular within MBV’s industry.

    The managers wish to use Porter’s five forces model to understand the problems the
    company is facing, but are uncertain of its proper use. They have undertaken some analysis
    and identified a number of key issues (summarised below) but cannot decide which of the
    five forces each issue relates to.

    Level
    High Low
    Force
    New entrants A B
    Power of buyers C D
    Power of suppliers E F
    Power of rivals G H
    Substitutes I J

    For EACH of the following issues, identify which force they relate to and whether the
    strength of the force is high or low, by choosing ONE letter from A to J.

    Issue 1 – MBV’s employees are heavily unionised, making it difficult for the company to
    change their terms and conditions. (answer is E but I can’t see how this links to power of suppliers)

    Issue 2 – MBV’s products are sold through two main retail chains in country G. Each
    retailer sells approximately equal amounts of MBV’s furniture.(answer is C but unclear why)

    Issue 3 – MBV is much larger than any other fine furniture manufacturers in country G, which has given it an advantage due to significant economies of scale. MBV still retails its products at a similar price to its rivals (answer H but unclear why)

    Issue 4 – The market for fine furniture in country G is growing very slowly. (answer B – I think this is because its growing slowly new entrants would be less likely to be attracted into the market?)

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