Explain Why Low Switching Costs and Weakly Differentiated Products Tend

question 13

Essay

Explain why low switching costs and weakly differentiated products tend to give buyers a high degree of bargaining power.

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Definitions:

Unsecured Creditors

Creditors who have lent money without taking collateral. If the borrower defaults, these creditors stand behind secured creditors in the priority of claims.

Stockholders

Investors who own shares of stock in a corporation, holding a claim on its assets and earnings.

Spin-off

The creation of an independent company through the sale or distribution of new shares of an existing part of a parent corporation.

Equity Carve-out

A strategy where a parent company sells a minority interest of a subsidiary to outside investors while retaining control.