A company is debating whether to enter a new industry. The first order of business is to conduct an analysis of the five forces. Why is this a crucial first step in the decision-making process of entering a new industry?

Option A, If the barrier for entry is low, and suppliers and buyers have strong bargaining power, the venture will most likely fail.

Explanation:

Complete question is as follows -

A company is debating whether to enter a new industry. The first order of business is to conduct an analysis of the five forces. Why is this a crucial first step in the decision-making process of entering a new industry?

a. If the barrier for entry is low, and suppliers and buyers have strong bargaining power, the venture will most likely fail.

b. If the barrier for entry is high, and suppliers and buyers have low power, the venture will most likely fail.

c. If the barrier for entry is low, and suppliers and buyers have high power, the venture will most likely succeed.

d. If the barrier for entry is high, and suppliers and buyers have high power, the venture will most likely succeed.

Solution

There are fiver forces which should be assessed while entering into new industry which are as follows -

• Competitive rivalry - Markets with less competiveness are attractive but may not survive long while on the other hand market with high competitiveness reduce the power of new entrant

• Threat of substitute products - Customers may find substitute for the product and services offered by your company in lieu to the changing technology and science

• Bargaining power of buyers - Customers need to be offered with the most reasonable prices or else your business may not work out,

• Threat of new entrants - This always exists as there are lot of angle investor groups in the market that are making the competition fierce by funding the startups easily

• Bargaining power of suppliers - The number of suppliers must be high so that bargaining can be done for raw material and labor.

Hence, option A is correct