Question

Apply the Five Forces Model to the industry in which Best Buy is based. What does this model tell you about the nature of competition in the industry?

Answer 1

ans....
Porter's five force model is a tool used to analyze the competition within an industry. According to Porter the five forces that act to determine the competitive position are threat of new entry, threat of substitute products or services, competitive rivalry, bargaining power of suppliers and bargaining power of buyers. Let us check how these five forces act on the imaging and multimedia company Snapchat within social media industry and how these affect the competitive position.
Threat of new entrants
Social media industry posses very negligible amount of barrier for new entrants. The initial investment is also low and there is minimal technology protection. Any one can easily enter into social media industry. Hence the threat of new entrants is comparatively high. But the brand name and mobile friendly nature of Snapchat helps to compete with the new entrants. There is medium pressure from the entry of new companies.
Threat of substitute product or services
The threat of substitutes are comparatively low due to the privacy and the convenience to use. Snapchat is very easy to use for messaging and image sharing. The chats are deleted within a day. The substitutes are face-book, wats-app, email etc which are less convenient compared to Snapchat.
Competitive rivalry
The competition is very tight in social media industry and there are many competitors like instagram and clipchat. The brand loyalty is a major factor in that helps Snapchat to stay within the industry. It's strong emotional appeal using emojis and situation specific snaps add advantage over its competitors. The acquisition of Bitstrips also helps Snapchat to provide services using bitmoji integration. A strong competitor of Snapchat is Instagram which is growing every day. The risk is high in this case.
Bargaining power of suppliers
This force does not affect Snapchat since it doesn't require suppliers to provide its service.
Bargaining power of buyers
Bargaining power of customers is very high in social media industry. There are millions of customers for the company and it needs to have excellent features to maintain and increase the customers since there are many competitors and it is very easy to copy the features. The potential risk associated with bargaining power of buyers is very high.
From the model described we can understand that the position of Snapchat is mainly affected by the customers and rivals like instagram. Hence Snapchat need to focus on its features to attract more customers and take advantage over rivals.