Question

Consider the external environment and relevant factors in the Macro-Environment in your company and respond to the following questions: “How Strong Are the Industry’s Competitive Forces?” DO you think that the “Collective Strength of the Five Competitive Forces Conducive will lead you to Good Profitability?”

Answer 1

My Company is a Technology firm and is relatively strong in the Industry which could be understood as under:

1. Threat of new entrants:

My Firm can frighten off new entrants due to:

• Their need to enter on a large scale in order to be cost competitive

• The time it takes to move down the learning curve

Hence, when my Firm established in the market, it created such a targeted market, that could give us a competitive advantage over others by entering into the market with large scale operations of technology that helps in being cost-competitive. For example, we introduce a smart phone that has a unique feature in it that distinguishes it from the rest and the pricing of the product being reasonable may pose a threat to the new entrants in the market.

2. Bargaining Power of Buyers:

We could mitigate buyer’s power by driving prices far below our competitors that can cause an exit or shift power back to the firm.

A price penetration strategy use by our firm, is so competitive in nature that it could be priced much lesser than the other competitors thereby helping us to gain a better market share making it the feasible to mitigate the buyer’s power. For example, the unique feature offered by the smart phone could be priced at such a range that the buyers may be compelled to purchase the same without dictating their desirable prices to be in the position to buy the same.

3. Bargaining Power of Suppliers:

We could mitigate supplier’s power by being able to:

• Absorb cost increases due to low cost position
• Make large purchases, reducing chance of Supplier using power.
• As our technological firm had already taken the advantage of economies of large scale production that helps them remain cost-effective in the market, any changes in the cost especially a hike in prices may still not affect the growth of this firm owing to higher absorption power of cost increase than others.

4. Threat of Substitute Products:

Our Firm is well positioned relative to substitutes because:

• Make investments to create substitutes first
• Buy patents developed by Potential substitutes
• Lower prices to maintain Value Positions
• In our production of smart phones offered in the market, there were also some alternative products offered to the consumers in the similar line as well. But even in case the other players position their substitutes as against our product, we are in the state to back-up for the same. Also our substitutes may attempt taking away the market share of the other product leaders too such as non-android smart phones offered in the market of android players to make a difference.

5. Rivalry with existing competitors:

We could use Cost-leadership strategy to advantage since:

• Competitors avoid price wars with Cost leaders, creating higher profits for the entire industry.

We did have some existing rivalries with other players in the market that can only be coped with producing quality products at competitive prices. It is only in case of niche markets such as Apple offering i-phones, that the market anyway has cost-advantage in spite of high pricing products.

Hence upon comprehending the above, I do think that the “Collective Strength of the Five Competitive Forces Conducive will lead you to Good Profitability” because it does show you the ways to survive in the market. More the forces on our side, better the chances to win the market share and consecutively, the hearts of the consumers. Better the consumer response to our products, more the establishment of sales thereby leading to better profits for our Firm.