ibps-so 2025 · Question 212 of 271

In an industry where firms face high fixed costs and negligible product differentiation, companies frequently engage in price undercutting. Customers can switch easily, and firms struggle to maintain margins despite stable demand. Which interpretation BEST explains the situation?

1. AHigh threat of substitutes leading to reduced industry attractiveness despite strong brand loyalty
2. BHigh bargaining power of suppliers resulting in increased input costs and reduced profitability
3. CHigh threat of new entrants driven by low capital requirements and minimal economies of scale
4. DHigh bargaining power of buyers due to bulk purchasing and long-term contracts
5. EHigh intensity of competitive rivalry due to structural conditions such as low differentiation and high exit barriersCorrect