Question

1. How do the five competitive forces in Porter’s five forces model affect the profitability of the industry? For example, in what way might strong forces increase industry profits, and in what way do strong forces reduce industry profits? Identify an industry in which many of the competitors seem to be having financial performance problems. Which of the five forces seem to be strongest?
2. How do you conduct a competitor analysis? What components are necessary to conduct a competitor analysis? List something about a competitor in your simulation industry that you learned from analysis?

answer any one of these

Answer 1

Porter's five forces model is itself a Competitor Analysis where these forces have a great impact over business .

Side by side I am going to tell you how these forces can help one increase industrial profits and can decrease industrial profits .

1. Competitive Rivalry ;

Large no. Of competitors with equivalent service and products they are offering ,lesser will be the power of company to hold market .

Whereas if competitive rivalry is low a firm can charge more from it's customers and can earn huge profits .

2. Potential of New Entrants into an economy ;

It's easy for new industry to enter in market and being an effective competitor a time will come when your company's position will significantly weakened .

Whereas a company having strong barriers and rule over market policies can make the coming Industry leave the idea of entering into new market ,which will lead to monopoly and easy earnings .

3. Power of Suppliers ;

Input cost which company bears at time of purchase is through suppliers . Gaining trust of suppliers takes time .Suppliers have the part of industries business ,as cost and price of product depends upon the input .Changing suppliers requires huge cost and wastage .

To make competition some suppliers sell products at cheap price to firms which makes rivalry in between market .

So ,a firm must have good relationship with suppliers .

4. Power of Customer ;

Customer is the kingpin of market .A companies position is defined by how much customer it have .Each customer has power to negotiate .

So a company must charge reasonable price to earn the trust of customers .

If company charges higher prices for the product , customer will shift to another firm which is not good to work for long run .

5. Threat of Substitute's ;

Availability of Substitutes in market makes one difficult to run it's firm. As on basis of taste and preference customer can easily shift to another substitute .

Whereas if no such substitute for your product or service is available, than its in firms hand to develop easy monopoly and charge high .

According to Potter “ Competitive rivalry ” in competing firms is most powerful out of the five competitive forces .