Scribd Logo
Upload

Welcome to Scribd!

  • 21 views

    Capstone 1

    Uploaded by

    marcowong233
    Porter's Five Forces model analyzes five forces that determine the competitive intensity and attractiveness of an industry: the threat of new entry, the power of suppliers, the power of buyers, the threat of substitutes, and competitive rivalry within an industry. The model helps explain why some industries are more profitable than others. It also shows that the profitability of an industry depends on these five forces and how strong each force is. Understanding these forces can help companies improve their competitive position.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Capstone 1

    Uploaded by

    marcowong233
    21 views1 page
    Porter's Five Forces model analyzes five forces that determine the competitive intensity and attractiveness of an industry: the threat of new entry, the power of suppliers, the power of buyers, the threat of substitutes, and competitive rivalry within an industry. The model helps explain why some industries are more profitable than others. It also shows that the profitability of an industry depends on these five forces and how strong each force is. Understanding these forces can help companies improve their competitive position.

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Porter's Five Forces model analyzes five forces that determine the competitive intensity and attractiveness of an industry: the threat of new entry, the power of suppliers, the power of buyers, the threat of substitutes, and competitive rivalry within an industry. The model helps explain why some industries are more profitable than others. It also shows that the profitability of an industry depends on these five forces and how strong each force is. Understanding these forces can help companies improve their competitive position.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    21 views1 page

    Capstone 1

    Uploaded by

    marcowong233
    Porter's Five Forces model analyzes five forces that determine the competitive intensity and attractiveness of an industry: the threat of new entry, the power of suppliers, the power of buyers, the threat of substitutes, and competitive rivalry within an industry. The model helps explain why some industries are more profitable than others. It also shows that the profitability of an industry depends on these five forces and how strong each force is. Understanding these forces can help companies improve their competitive position.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 1

    Capstone Part I #Five Forces

    Porter’s Five Forces Model was introduced to help companies better understand what leads to higher
    profitability and analyze why firms differ in their profitability and the business environment of the
    industry they work in. There are five components in the Five Forces Model. The first one is the Threat of
    New Entry. Determined by the barrier to entering the industry, this force prevents current companies
    from changing too much due to the concern of raising potential competitors’ ability to enter the
    industry. The second force is the Bargaining Power of Suppliers. When suppliers of the industry are
    powerful, the profitability could decrease, and the cost could increase. The bargaining power of
    suppliers is high when there is a large degree of supplier concentration, a high switching cost, and a
    limited amount of substitute products. The third force is the Bargaining Power of Buyers. The logic is
    quite similar to that of suppliers. When the customers are concentrated or significant in the industry,
    and when switching costs, as well as the amounts of substitutes, are favorable for customers, their
    bargaining power is increased, limiting the ability for sellers’ price setting and decreasing profit in the
    industry. The fourth force is Threat of Substitute, which, compared to the above forces, performs a
    similar but very different function. The substitutes mainly come from outside the industry of the
    analyzer, sometimes even the whole industry can be toppled by revolutionary changes, making it
    incredibly baffling to foresee such a threat. The last of the five forces are Competitive Rivalry, which can
    diminish profitability since competition can force firms to lower price and increase costs to surpass rivals
    in innovation and marketing etc.

    Industry can be defined as groups of productive firms or organizations that generate or provide goods,
    services, or income sources (Nijholt, 8b.3 Industry Life Cycle). Therefore, from the perspective of the
    primary supplier of FWD, namely the producer of steel, drawing consideration on its chief product of
    steel raw material and the set of competitors providing identical raw materials products and services,
    we can define its industry as steel and metal raw materials manufacturing.

    In the steel manufacturing industry, FWD is at the buyer’s end. Thus, David’s effort has changed the
    bargaining power of buyers. As stated in the case, David’s effort has coordinated orders of different
    regional branches and combine the volume (case, p2), we can infer that the level of concentration of the
    company has been increased and the position of the firm in the industry has been strengthened.
    Therefore, the bargaining power of buyers has grown in a positive direction.

    The case states that small changes in steel price can greatly change the prospect of the company,
    suggesting the high price sensitivity of the company, which could be caused by the fact that FWD has a
    relatively low margin owing to the fierce competition with RiverTech, and that the products delivered
    have a large share in the cost structure of clients. These have driven the price sensitivity high, further
    increasing the bargaining power of buyers.

    You might also like