Five Forces/PEST Analysis

Question 1

Existing Rivalry

Answer 1

What kind of competition would we have to face and how hard would it be to squeeze the profit potential out of an industry

Question 2

Rivalries: The Concentration and balance of Competitors

Answer 2

what is your competitors overall strength in the industry compared to your own

Question 3

Rivalries: Industry Growth

Answer 3

are you facing a young and growing industry with lots of buyers or a old and declining industry with fewer buyers that you must fight over with competitors

Question 4

Rivalries: Product/ Service characteristics

Answer 4

one characteristic is commodity product, in which buyers don’t see or care about the differences of a product and default to price for their decision. You can avoid this by create differentiation.

Question 5

Rivalries: Fixed or storage costs/perishable goods

Answer 5

How costly is it to store goods and if it is alot then they will respond by slashing their prices

Question 6

Rivalries: Capacity

Answer 6

Products are made in large batches as it brings down the costs for its producers, they will then make more products than there is a demand for them and with the excess it will lead to them having to slice prices lowering profit potential.

Question 7

Threat of New Entrants

Answer 7

Company’s entering the market bringing new capacity, a desire to increase market share, and substantial resources

Question 8

Entrants: Economies of scale

Answer 8

Cost Adv due to large size of production, research or marketing

Question 9

Entrants: Existing Brand Loyalties

Answer 9

Brand preferences and customer loyalty to brand or product

Question 10

Entrants: Capital Requirements and/or other specialized resources requirements

Answer 10

Requirements to do business in the industry, not only for fixed facilities, but also for R&D and marketing

Question 11

Entrants: Cost and resources disadvantages independent of size

Answer 11

Familiarity with the industry (learning and experience curve); relationship with suppliers, favorable locations

Question 12

Entrants: Access to distribution channels (Think new show)

Answer 12

Being able to secure distribution for products, having to persuade retailers to carry products through price breaks or other means.

Question 13

Entrants: Government policies (Think license)

Answer 13

Special approval needed before being permitted to compete in an industry

Question 14

Threat of substitute products

Answer 14

A product that can perform the same function as your product by comes from a different industry

Question 15

When are substitute products a strong force?

Answer 15

If they are readily available, attractively priced, and if they are comparable or better

Question 16

Power of Suppliers

Answer 16

When organizations supplying raw materials or services to an industry raise the prices or reduce the quality or quantity of goods or services.

Question 17

Power of the Buyers

Answer 17

The power of the buyer/customer influences the terms and conditions of a sale. when they have more power they can barging for lower prices and better quality at the same price/ additional services.

Question 18

When do Buyers have power?

Answer 18

When they are switching to competing brands or substitutes, have a large presence, large volume purchases are important to sellers, few buyers exist, and buyers have ability to postpone purchases

Question 19

What are the strategic implications of the forces?

Answer 19

by understanding when a competitive environment is unattractive or attractive from a standpoint of earning good profits

Question 20

What does PEST Stand for and are they Micro or Macro focused?

Answer 20

• Political
• Economic
• Socio Demographic
• Technological
  Macro Focused

Question 21

What are the Five forces and are they Micro or Macro focused

Answer 21

• Buyer
• Supplier
• New Entry
• Existing Rivals
• Substitutes
  Micro focused