According to Michael Porter, the weaker each of the competitive forces, the more limited companies are in their ability to raise prices and earn greater profits. True False

Question

Mollie Silva

Business

3 February, 13:59

According to Michael Porter, the weaker each of the competitive forces, the more limited companies are in their ability to raise prices and earn greater profits. True False

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Answers (1)

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Beanie · Answer 1

False

Explanation:

According to Michael Porter in an industry the larger the number of competitors the larger the number of equivalent products, and the less the power of the company to increase price of its products. This is because there are wide range of products that can substitute theirs.

On the other hand when there is weak competition, the number of subsititute products will be low and the company can increase price and make profit.

So the argument that the weaker each of the competitive forces, the more limited companies are in their ability to raise prices and earn greater is false.