porters 5 forces

Question 1

What is an industry?

Answer 1

a group of firms that market products which are close substitutes for each other… ex car industry

Question 2

why are some industries more profitable than others?

Answer 2

The answer lies in the deep understanding that one will have of the dynamics of the competitive structure in an industry

Question 3

how can the feasibility of an industry be assessed

Answer 3

thinking through how each force can effect you
measure the strength of each force
assess the strength of your position
profitability
can you influence each force to benefit you?

Question 4

Michaels Porters Five Forces?

Answer 4

The most influential model for assessing the nature of completion in an industry

Question 5

Explanation of Porters 5 forces?

Answer 5

there are 5 forces that determines industry attractiveness and in the long run profitability , it is also very useful for assessing the balance of power in more general situations

Question 6

how does porters 5 forces work?

Answer 6

By looking at the 5 important forces that affect competition…….

Question 7

what are the 5 forces that affect competition

Answer 7

supplier power-power of suppliers to drive up the prices of your inputs
buyer power-the power of your customers to drive down your prices
competitive rivalry- the strength of other competition in the industry
the threat of substitution-the extent to which different products can be used in place of your own
the threat of new entry- the ease with which new competitors can enter the market if they see you are making good profits( and drive your process down)

Question 8

how can you asses the strength of your position and ability to make a sustained profit in the industry?

Answer 8

by thinking about how each force affects you and identifying the strength and direction of each force

Question 9

threat of new entrants?

Answer 9

new entrants can raise the competition in an industry and therefore reduce your companies attractiveness…

Question 10

what does the threat of new entrants largely depend on?

Answer 10

the barriers there are to enter the industry

Question 11

what are key barriers to entry?

Answer 11

Economies of scale (demand and supply)
capita; / investment requirements
access to industry distribution channels
the likelihood of retaliation from existing industry players..(take overs or acquisitions)

Question 12

threat of substitutes?

Answer 12

the presence of substitute products can lower industry attractiveness and profitability, because they limit price levels

Question 13

threat of substitution depends on…

Answer 13

buyers willingness to substitute
the relative price and performance of substitutes
the costs of switching to substitutes

Question 14

bargaining power of suppliers?

Answer 14

the cost of items bought from suppliers can have significant impact on the companies profitability…. if suppliers have high bargaining power over a company then in theory the companies industry is less attractive

Question 15

what are suppliers?

Answer 15

they are businesses that supply materials and other products into the industry

Question 16

when will the bargaining power of suppliers be high?

Answer 16

many buyers and a few dominant suppliers (monopolies)
there are undifferentiated highly valued products
buyers do not threaten to integrate backwards into supply
the industry is not a key customer group to the suppliers

Question 17

bargaining power of buyers?

Answer 17

power of your consumers to drive down prices

Question 18

who are buyers

Answer 18

they are the people/organisations that create demand in an industry

Question 19

barging power of buyers is greater when?

Answer 19

there are few dominant buyers and many sellers in the industry
products are standardised
buyers threaten to integrate backwards into the industry
suppliers do not threaten to integrate forwards into the industry
the industry is not a key supplying group for buyers

Question 20

The intensity of rivalry between competitors in an industry will depend on….

Answer 20

the structure of the competition
degree of differentiation
switching costs
strategic objectives
exit barriers

Question 21

the structure of competition?

Answer 21

rivalry is more intense when there are many small or equally sized competitors and it will be less when an industry has a clear market leader

Question 22

degree of differentation

Answer 22

industries where products are commodities(steal or Coal) have bigger rivalry and industries where competitors can differentiate their products have less rivalry

Question 23

switching costs

Answer 23

rivalry is reduced where buyers have high switching costs .. eh.. there is a significant cost associated with with the decision to buy the product from an alternative supplier

Question 24

strategic objectives

Answer 24

when competitors are perusing aggressive growth strategies, rivalry is more intense… where competitors are milking profits in mature industry the degree of rivalry is less

Question 25

exit barriers?

Answer 25

when barriers to leaving an industry are high(the cost of shutting down is to much) the competitors tend to exhibit greater rivalry