Porters 5 Forces

Question 1

Factors of Competitors

Answer 1

Factors:

• Many Competitors of equal size
• Low industry growth rate ( not a lot of new customers)
• Capacity of competitors (Greater rivalry)
• Low consumer switching costs (PS5-Xbox)
• Products are perishables/commodities (have an expiry)
• Exit Barries are high (harder to leave industry)

Question 2

Solutions of Competitors

Answer 2

Solution:

• Growth
• Acquisition of competitors
• Create/increase consumer switching costs
• Differentiation

Question 3

Factors of Substitution

Answer 3

Factors:

• Many good substitutes
• Low switching costs
• High buyer propensity to substitute
• Improvements in price

Question 4

Solutions of Substitution

Answer 4

Solutions:

• Strong marketing/Differentiation
• Lock in customers (high switching Costs)

Question 5

Factors of New Entrants

Answer 5

Factors - barriers of entry:

• Lack of capital intensity
• lack of specialized assets/networks/knowledge tech
• Low switch costs or lack of brand loyalty

Question 6

Solutions of New Entrants

Answer 6

Solutions:

• Grow and achieve scale
• Control Distribution network
• Lobby Government
• Differentiate; create brand loyalty and identity
• Lock in customer

Question 7

Factors of Suppliers

Answer 7

Factors:

• Few Suppliers
• Few good substitutes
• Low importance
• High switching costs
• Threat of forward integration

Question 8

Solutions of Suppliers

Answer 8

Solutions:

• Form strategic alliances
• Internal Supply
• Long run: redesign product or needed input

Question 9

Factors of Buyers

Answer 9

Factors:

• Standardize products(can find the same product with many companies); low switching costs
• Financially-motivated:
  - Cost significance
  - Profitability
  - Cost savings
• Threat of backward integration

Question 10

Solution of Buyers

Answer 10

Solutions:

• Form alliances with other suppliers
• Strong marketing/ Differentiation
• Create switching costs; lock in customers

Question 11

Effects of Buyers

Answer 11

• Reduces prices that you demand

- Increases costs

Question 12

Effects of suppliers

Answer 12

Cost of inputs

Question 13

Effects of New Entrants

Answer 13

• Can cause big changes in the industry

- Intensifies Competition

Question 14

Effects of Substitutes

Answer 14

• Create price ceilings

- Increase marketing costs

Question 15

Effects of Competitors

Answer 15

• Price competition
• Lower volume
• Increased costs