7 - Competitive Environment

Question 1

What Is Porters 5 Forces Model?
(2 Points)

Answer 1

~ Analyses the state of the market, to help managers find a strategy to gain a competitive advantage.

~ Shows how profitable markets are and why.

Question 2

What Is The Importance Of Porters 5 Forces To Managers?
(2 Points)

Answer 2

~ Helps define strategy, to position themselves.

~ Helps decide if it’s worth entering a market.

Question 3

What Are All The Features Of Porters 5 Forces?
(5 Points)

Answer 3

~ Threat of entry.

~ Buyer bargaining power.

~ Suppler bargaining power.

~ Threat of substitutes.

~ Rivalry

Question 4

Describe ‘Threat Of Entry’ As A Force
(3 Points)

Answer 4

~ How easy it is to enter a market.

~ High threat -> more new entrants -> more competitors to deter customers -> may lead to lower profits.

~ Firms would want to make it hard to enter, by increasing barriers to entry.

Question 5

Describe ‘Buyer Bargaining Power’ As A Force
(3 Points)

Answer 5

~ Few buyers and many sellers means increased buyer power. Vice versa.

~ If there are homogenous goods, buyers have increased power.

~ Firms should look to differentiate the product, to increase buyers or increase marketing campaigns.

Question 6

Describe ‘Supplier Bargaining Power’ As A Force
(2 Points)

Answer 6

~ If there a few suppliers and many firms, there is increased supplier power. Vice versa.

~ Firms should look to maximise EOS, long term contracts or merge with suppliers.

Question 7

Describe ‘Threat Of Substitutes’ As A Force
(2 Points)

Answer 7

~ If there are more substitutes, decreased demand for you good.

~ Firms could increase brand loyalty, adopt cost leadership style or target customer needs.

Question 8

Describe ‘Rivalry’ As A Force
(2 Points)

Answer 8

~ Increased level of competition, which could lead to falling profit margins.

~ Firms could use porters generic strategy or increase marketing campaigns.