Part 1

Question 1

Porters Five Forces

Answer 1

1. Rivalry among existing competitiors
2. Threat of new entrants
3. Bargaining power of buyers
4. Threat of substitute products or services
5. Bargaining power of suppliers

Question 2

Industry structure

Answer 2

• is defined by the five forces, are they strong or weak?
• Strong: high competition ⇒ low profitability
• Weak: low competition ⇒ high profitability

“Industry structure drives competition and profitability, not whether an industry is emerging or mature, high tech or low tech, regulated or unregulated.”

Question 3

Barriers to entry & Expected retaliation

Answer 3

• Advantages of existing competitors against new entrants
• 7 major sources:
  
  1. Supply-side economies of scale
  2. Demand-side benefits of scale
  3. Customer switching costs
  4. Capital requirements
  5. Incumbency advantages independent of size
  6. Unequal access to distribution channels
  7. Restrictive government policy
• Expected retaliation of existing competitors