Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Which of the following is NOT one of Porter's Five Forces?

1. Rivalry

2. Market Demand

3. Power of Buyers

4. Threat of New Entrants

The correct answer is: Market Demand

Porter's Five Forces model is a framework used to analyze the competitive environment of an industry. It identifies five key forces that can influence the strength and dynamics of competition within that industry. The forces included in this model are: 1. **Rivalry Among Existing Competitors** - This force examines the intensity of competition among current players in the market. High rivalry can limit profitability as companies compete on price, quality, and innovation. 2. **Threat of New Entrants** - This force considers how easy or difficult it is for new competitors to enter the market. Barriers to entry, such as capital requirements and regulations, can deter new entrants and protect existing businesses. 3. **Power of Buyers** - This force assesses the influence that customers have on a business. When buyers have considerable power, they can dictate terms and prices, affecting the profitability of companies within the industry. 4. **Power of Suppliers** - This force looks at how much power suppliers have to set prices and control the supply of goods and services. A few dominant suppliers can impose higher costs on companies. Market Demand is not one of the forces in this framework. It relates more to consumer behavior and economic conditions than to the competitive dynamics analyzed by Porter. In this context,