Analysis. In his book Competitive Strategy‚ Harvard professor Michael Porter describes five forces affecting the profitability of companies. These are the five forces he noted: 1. Intensity of rivalry amongst existing competitors 2. Threat of entry by new competitors 3. Pressure from substitute products 4. Bargaining power of buyers (customers) 5. Bargaining power of suppliers These five forces‚ taken together‚ give us insight into a company’s competitive position‚ and its
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discover a way in which it could gain a competitive advantage. Is the industry accessible; is it a realistic place for a new venture to enter? Walmart was entering the retail industry that did not have many discount retail goods stores. The barrier to entry was relatively high at the time‚ so it seemed to be a realistic place for them to begin their business venture but it would not be as easy. Does the industry contain markets that are ripe for innovation or are underserved? The retail industry
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Threat Of New Entrants A major force shaping competition within an industry is the threat of new entrants. The threat of new entrants is a function of both barriers to entry and the reaction from existing competitors. There are several types of entry barriers: Economies of scale. Economies of scale act as barrier to entry by requiring the entrant to come on large scale‚ risking strong reaction from existing competitors‚ or alternatively to come in on a small scale accepting a cost disadvantage. Economies
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Low industry growth rates § High exit barriers § Undifferentiated supply of products § Price wars to cover high fixed costs Threat of new entrants The threat of new entrants is usually based on the market entry barriers‚ which can be said to provide obstacles for newcomers to gain a foothold in any given industry. These barriers can take many different forms. Briefly‚ it can be said that entry barriers exist whenever it is difficult or not economically
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are namely; Risk of Entry by potential competitors‚ Rivalry amongst established companies‚ Bargaining power of buyers‚ bargaining power of suppliers‚ Substitute products and Competitors. A strong competitive force can be regarded as a threat as it decreases profits while a weak competitive force can be regarded as an opportunity as it allows companies to earn greater profits. A Cellular Network Providers industry will be used to explain these forces. • Risk of entry by potential competitors
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willing to pay P1 for Q1. Unit costs are only P2 so the firm is making an abnormal profit of (P1-P2)*Q1 The four key characteristics of monopoly are: (1) a single firm selling all output in a market‚ (2) a unique product‚ (3) restrictions on entry into and exit out of the industry‚ and more often than not (4) specialized information about production techniques unavailable to other potential producers. These four characteristics mean that a monopoly has extensive (boarding on complete) market
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because the structure of an industry determines the nature of the competition and the form that a sustainable competitive advantage takes and the industry structure is determined by the five competitive forces; the treat of substitute‚ the treat of entry‚ bargaining power of buyer‚ and bargaining power of supplier and the intensive of rivalry. Porter work simplified to identify five forces and then‚ to select one of the generic strategies. Last step of his framework is using the value chain from
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industry is different from satellite providers‚ Internet service providers‚ or VoIP services‚ whose main difference is in infrastructure. Main players in the cable industry operate on a nation-wide basis. The biggest threat to this industry is high barrier to entry. This is due to a number of factors. First‚ capital requirements are high because infrastructure is costly such as the fiber-optic lines that have been introduced to offer customers higher-priced‚ enhanced or bundled services. There is a medium
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What three barriers might a new entrant have to overcome when entering the retail apparel industry? Explain why they could be barriers. Three barriers that a new entrant might have to over come when entering the retail apparel industry are resource ownership‚ government restrictions‚ and start-up cost. Identifying new entrants is important because they can threaten the market share of existing competitors. One reason new entrants pose such a threat is that they bring additional production capacity
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considerable amount of power over metal can manufacturers. Barriers to entry 1. The capital investment is low. A typical two-pieces can line cost between $20 and $25 million‚ and a three-pieces can line cost approximately $1.5-$2 million. So the capital is not the barrier to entry. 2. The efficient scale is not more than 15 lines‚ so the economy of scale is low and can put barrier to entry 3. There are no switching barriers because the products are indifferent and buyers don’t have
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