The threat of direct competition tends to be high when
A) there are few firms in an industry and these firms tend to be unequal in size.
B) the industry growth rate is higher.
C) firms are unable to differentiate their products.
D) production capacity can be added in small increments.

Question

Quizplus · Accepted Answer

When firms are unable to differentiate their products, it becomes easier for new entrants to enter the market and directly compete with established players. This is because customers in such markets are more price-sensitive, and new entrants can gain market share by offering lower prices. In such a situation, the threat of direct competition is high.

The Threat of Direct Competition Tends to Be High When