CHAPTER 7-Porters five forces

Question 1

what can porters five forces show a business?

Answer 1

the state of market and the way to get a competitive advantage.
how profitable the market is

Question 2

what are the five forces?

Answer 2

Entry threat 
Buyer power
Supplier power
Substitute Threat 
Rivalry

Question 3

what factors influence how easy it is to enter a market?

Answer 3

• if the market is very profitable then it will be harder to get into
• if a retaliation by existing competitors is expected then entry threat is lower
• when conditions change in a market eg. the expiry of patents

Question 4

when is buyer power strongest?

Answer 4

when there are few buyers and alot of suppliers

Question 5

when is buyer power also strong?

Answer 5

when a product is standard because they are confident that they will be able to find a alternative supplier

Question 6

when is supplier power strongest?

Answer 6

when there are fewer suppliers and lots of firms buying from them

Question 7

what can suppliers do to increase there strength over buyers

Answer 7

• increase the difficulty of switching suppliers by tying customers into long term contracts
• by setting up their own retail outlets
• protect product with patents so they are the only one selling that thing

Question 8

what is important to consider in terms of substitute threat?

Answer 8

• the price and quality because most people are not going to change to a poor value product
• the threat is higher for standardized products than for unique products

Question 9

what are the strategies to reduce the threat of substitutes?

Answer 9

• can make it difficult for customers to switch to a substitute
• Businesses can create brand loyalty

Question 10

when is rivalry intense?

Answer 10

in a market with lots of equally sized competitors

Question 11

what are the types of products which have the the highest rivalry?

Answer 11

standardized products
Industries with high fixed costs
young industries

Question 12

what are the strategies used to reduce the effects of rivalry?

Answer 12

• businesses might try to reduce the hassle of switching between standardized goods eg. banks will offer incentives for you to join them
• Businesses with a bigger promotional budget might do better in markets with intense rivalry

Question 13

give an example of a business that is an entry threat to the car industry?

Answer 13

Tesla