Question

Explain your choice of host country using the Five Forces Model.

REQUIRED

• Draw a diagram of the model and attribute it.
• Write short notes on each part of the model explaining how these impact your host country business.
• Which two of these are most important to the success of your host country business. Give detailed reasons.

Host Country: Seattle USA

Home Country: Japan

Answer 1

Five forces model was Developed by Porter which helps in knowing the intensity of competition in an industry or in a country. For a host country like Seattle, USA. the home country Japan must consider these forces to do business.

1. Threat of new entrants or entry barriers- for doing a business it is necessary to know the barriers to entry , some common barriers like tariffs, government policies, entry and exit costs etc. should be determined for pursuing business in any country, because it will effect the business profitability. Higher the barriers to entry higher will also make exit more difficult.

2. Threat of substitute - higher number of substitute lower will be profits , it includes potential factors like buyers propensity to substitute, buyers switching costs, ease of substitution etc . As the threat of substitute is high then other rivals will offer more attractive low cost products.

3. Bargaining power of buyers or customers- the buyers power will be high if buyers have more alternatives, it includes factors like buyers concentration, buyers price sensitivity, information availability to buyers etc.

4. Bargaining power of suppliers- it explains the market of inputs like raw material, labour , other services like expertise etc. It affects the distribution channel. , Production costs, and differentiation.

5. Competition rivalry- level of competition determination is very important to pursue business in another Country, it will helythe firm to know the level of advertising expenses, profitability, sustainable competitive advantage, firms concentration ratio etc

ANS 2 among the above five forces , for doing business in another country Threat of new entrants and competition rivalry are most important to analyze

because if barriers to entry is difficult and include many hurdles then it will be difficult to start business and if government support new entrants then it will help the business to grow in future as well as the level of competition should also be considered to introduce it's product in that foreign market like USA because if they are already available then the firm will find it difficult to capture high market share , and will earn lower profits . And also the competition rivalry will also help in determining the other forces of model .