Question

• Question (1)

Which condition places the supplier in a position of power in the supplier/buyer relationship?

a. There is a lack of substitute products.
b. There are many suppliers producing the product.
c. Suppliers' have the ability to integrate backward.
d. Switching costs for the buyer are minimal.

• Question (2)

What does the term "switching costs" describe?

A situation whereby a business can produce its goods or services at a lower cost because they are producing high volumes.
a. The expense incurred by customers when moving from one provider or product to another.
b. The existence of a well-established, dominant player or players in the industry.
c. The heavy development and advertising costs necessary to establish the uniqueness of competitors' products.

• Question (3)

"It is easy for new competitors to enter the marketplace. The competitive environment then becomes very intense. This typically has a negative effect on profitability, cash flow, and liabilities repayment. Market (industry and business) risk is high, lending risk increases, and the return is diminished." What degree of "barriers to entry" is described by this paragraph?

a. Very high.
b. Very low.
c. High.
d. Moderate.

• Question (4)

In which scenario would a buyer most likely have a reason to purchase from a particular business?

a. Products are not differentiated.
b. Slow-growing industry.
c. Industry with high switching costs.
d. Industry with many competitors.

In which scenario would a buyer be least likely to have a reason to purchase from one particular business?

a. Industry with high switching costs.
b. Fast-growing industry.
c. Industry with many competitors.
d. Products are differentiated.

• Question (6)

What is the impact of a single buyer emerging as a dominant player in a market?

a. Seller's profitability increases and cash flow decreases.
b. Seller's profitability decreases and cash flow increase.
c. Seller's profitability and cash flow decrease.
d. Seller's profitability and cash flow increase.

Answer 1

1) When there is a lack of substitute products, the supplier in a position of power in the supplier/buyer relationship. Lack of substitutes make demand for the product inelastic and as a result this induces suppliers to charge higher price. Hence the answer is option (a).

2)Switching cost is the expense incurred by customers when moving from one provider or product to another. Higher switching cost makes switching less attractive. It is due to this, consumer satisfaction results fail to predict future purchasing behavior. Hence the answer is- The expense incurred by customers when moving from one provider or product to another.