business objectives and strategy - Models of strategic choice

Question 1

what is porters 5 forces model?

Answer 1

a framework for analysing nature of competition within an industry

Question 2

what is the purpose of Porter’s 5 Forces Model?

Answer 2

helps to understand and assess industry profitability and attractiveness

Question 3

what are the categories of P5FM?

Answer 3

• threat of new entrants
• bargaining power of suppliers
• bargaining power of buyers/customers/consumers
• threat of substitutes
• degree of rivalry

Question 4

what are low industry profits associated with?

Answer 4

• strong suppliers
• strong customers
• low entry barriers
• many opportunities for substitutes
• intense rivalry
  (opposite for high industry profits)

Question 5

what happens when new entrants move into a market?

Answer 5

gain market share which leads to more rivalry

Question 6

when is the position of existing firms stronger?

Answer 6

when there are high barriers to entry

Question 7

what happens when the barriers to entry are low?

Answer 7

threat of new entrants is high as it is easier to enter a market

Question 8

what happens if a firm’s supplier has bargaining power?

Answer 8

• exercise their power
• sell their products at a higher price
• squeeze industry profits

Question 9

what happens when suppliers force up their prices?

Answer 9

profit will be affected

Question 10

when are suppliers powerful?

Answer 10

• only a few large suppliers
• limited supply of product
• cost of switching suppliers is high
• customer is small and unimportant
• none/few substitutes available

Question 11

what happens when customers have lots of bargaining power?

Answer 11

they are able to exert pressure to drive down the price

Question 12

what is a substitute product?

Answer 12

a replacement for another product that still meets customer needs

Question 13

what happens if there is a threat of substitute products?

Answer 13

• they will limit the price that can be charged and will reduce profits
• customer loyalty/availability will limit the extent of threat

Question 14

what determines the intensity of rivalry?

Answer 14

• number of competitors
• market growth
• product differentiation
• brand loyalty
• capacity utilisation
• cost structure of industry
• barriers to exit

Question 15

how do takers change the bargaining power of stakeholders?

i have no clue what this means sorry

Answer 15

customers and suppliers will have less power as the companies make one big company which means they have less power