New entrants in an industry push prices downward and squeeze margins, resulting in reduced industry profitability.

Question

Quizplus · Accepted Answer

This phenomenon is known as the "threat of new entrants" in Porter's Five Forces analysis and is one of the factors that can affect the profitability of an industry. The entry of new competitors increases competition, which leads to price competition and potentially lower profit margins.

New Entrants in an Industry Push Prices Downward and Squeeze