Industry Analysis Flashcards
Identify the five forces described by Michael Porter as determining the operating attractiveness and likely long-run profitability of an industry.
Threat of entry into the market by new competitors;
Threat of substitute goods or services;
Bargaining power of customers of the good or service;
Bargaining power of suppliers of inputs used by the industry;
Intensity of rivalry within the industry.
Define an “industry” for purposes of competitive analysis.
An industry consists of those entities that produce goods or provide services which are identical or close substitutes and which compete for the same customers.
Identify factors that would help determine the bargaining power of buyers in an industry.
Extent of product standardization;
Number of suppliers;
Extent to which there are dominant buyers of the good/service;
Extent to which information about the good or service is available;
Cost to buyers of switching suppliers.
Identify factors that would help determine the level of rivalry in an industry.
Relative size of competitors in the industry;
Degree of product differentiation;
Cost structure of the industry;
Strategic objectives of firms in the industry;
Cost to customers of switching providers;
Cost associated with exiting industry.
Identify factors that would help determine the extent to which new competitors are likely to enter an industry.
Capital investment required;
Access to raw materials, technology and suppliers;
Economies of scale required for profitability;
Customer loyalty and customer cost of switching providers;
Access to distribution channels;
Governmental impediments to entry.
Identify factors that would help determine the bargaining power of suppliers in an industry.
Extent of substitutes for the product or service;
Relationship between the number of users (buyers) and suppliers (sellers);
Ability of supplier to move downstream in the distribution/sales channel;
Extent to which supplier is unionized.
Identify factors that would help determine the level of threat posed by substitute goods or services.
Availability of substitutes;
Ease of use of substitutes;
Relative price and performance of substitutes;
Buyers’ brand loyalty;
Cost to buyers of switching to substitutes.
___ ___ ___ focuses on the industry in which an entity operates or may operate.
Five forces analysis
The bargaining power of suppliers is ___ when there are few substitutes for the product supplied.
greater
The ___ ___ ___ ___ of a product can influence the ability of a provider to determine the price of that product.
bargaining power of buyers
The number of ___ ___ for a good produced by an industry affects the competitive attractiveness of the industry.
acceptable substitutes
___ ___ ___ indicate that the higher the level of output, the lower the cost of production.
Economies of scale
New entrants into an industry are more likely when access to___ and ___ ___ is readily available.
inputs and process technology
The highest intensity of rivalry should be in an industry with a ___ ___ ___ ___, in which producers seek to operate at ___ ___, and a ___ ___ of product differentiation, which results in products having ___ ___.
high fixed cost structure; full capacity; low degree; many substitutes.
A company would most likely use ___ ___ ___ to assess the competitive nature of the industry it is considering entering.
five forces analysis
