Five Forces of Marketing

Threat of Entry Example

Apple entering the music industry

How does being price sensitive benefit buyers?

it gives them bargaining power over other industry players to lower prices

How does an industry distance itself from substitutes?

marketing and product performance

What is a price sensitive buyer?

when the product being purchased is a large portion of a budget (example: buying house is gonna use up most of your money, so you are gonna bargain more) the buyer earns low profits (costs are too high so they are shopping around for lower options) the quality of product is low product has little affect on the buyers other costs(it isn't a magic product that will help make their other expenses lower)

What type of suppliers make the most profit?

differentiated suppliers pharmaceutical companies that make specific, not generic drugs

How do buyers use the bargaining power of customers?

drive down prices demanding better quality (increases cost) playing industry players off one another

Threat of Substitutes example

email vs mail travel vs zoom plastic vs aluminum

Barriers to Entry definition

anything that stops a firm from entering an industry

What is likely to happen if many new business firms enter a market? Industry profits will rise Industry capacity will fall Competitive rivalry will intensify Barriers to entry will rise

Competitive rivalry will intensify

Which of the following represents the presence of supplier power in Porter's Five Forces Model? High when the supplier has a proprietary technology in its manufacturing Low when buyers have few choices of whom to buy from and low when their choices are many High when buyers have many choices of whom to buy from and low when their choices are few High when buyers have few choices of whom to buy from and low when their choices are many

High when buyers have few choices of whom to buy from and low when their choices are many

When is price competition most likely to occur?

Products and services are nearly identical and there are few buyer switching costs Fixed costs are high and marginal costs are low (steal incremental customers from competition) Capacity must be expanded in large increments to be efficient the product is perishable

When is the threat of substitutes high?

The substitute offers an attractive price-performance trade-off. The buyer's cost of switching to the substitute is low

Which of these situations is likely to result in high bargaining power of suppliers? A few large suppliers dominate the market supply of inputs There are many alternative sources of production inputs Resource inputs are not essential to product quality Many customers with low brand loyalty

a few large suppliers dominate the market supply of inputs

When is rivalry amongst competitors high?

a lot of competitors equal in size and power industry growth is slow - more competition for market share exit barriers are high rivals have high commitment firms don't read each others signals well

If the threat of substitute products of services is low, it is a(n) Advantage to the supplier indication of high competitive rivalry Disadvantage to the supplier Advantage to the buyer

advantage to the supplier

When buyers are able to join together to put pressure on a supplier, this is a description of which of Porter's Five Forces? Competitive rivalry Threat of new entrants The threat of substitute products Bargaining power of customers

bargaining power of customers

Which of the following forces is commonly reduced through the use of a customer loyalty program Buyer power Rivalry among existing competitors Threat of new entrants Supplier power

buyer power

When do buyers have bargaining power?

few large-volume buyers not differentiated industry low switching costs threat to enter the market as a producer

Elements of Industry structure

growth rate technology and innovation government complementary products

An industry is attractive for suppliers when the rivalry among existing competitors is High Low Cost-based Fragmented

high

If entry barriers are low, the threat of entry is __________ (low/high)

high

If newcomers expect retaliation from competitors, the threat of entry is (low/high)

high

A customer goes the a supermarket and has many choices for branded toothpaste, i.e., Crest, Colgate, Tom's, etc.. This is an example of Competitive entry High buyer power Threat of substitutes High supplier power

high buyer power

When WalMart requires its suppliers to include RFID tags to the products it sells WalMart, this could be an example of Competitive rivalry Threat of substitutes High Buyer power High supplier power

high buyer power

How can suppliers capture more value for themselves?

higher prices limited quantity of good or services shifting costs to other industry participants

When do suppliers want to help an industry?

if one industry accounts for most of the suppliers volume/profit

How do you combat the threat of entry?

invest more and hold down prices Starbucks invests a bunch of money in modernizing and revamping the menu

According to Porter, which of the following is most important to achieving a competitive advantage? Serving all customers equally rather than simply targeting the most profitable Operating at lower cost, commanding a premium price, or both Focusing on becoming the most competitive business within the sector/market Outsourcing activities that enhance/refine your competitive advantage

operating at a lower cost, commanding a premium price or both

A market will usually be more difficult to enter if there is Low brand loyalty Common technology Wide access to distribution channels Patented or proprietary know-how

patented or proprietary know-how

Examples of Rivalry Amongst Competitors

price discounting introduction of new products advertising campaigns service improvements

Identify which of the following forces does not form part of Porter's Competitive Forces Analysis Threat of Substitutes Power of Buyers Risk of losses Competitive Rivalry

risk of losses

Who do high switching costs benefit?

supplier protects them from industries playing off more than one supplier because they have infrastructure and investment tied up with one supplier

Barriers to Entry examples

supply side economies of scale buyer side benefits of scale customer switching costs capital requirements incumbency advantages unequal access to distribution channels restrictive government policy

Threat of Entry

the risk that potential competitors will enter an industry

Porter's Five Forces

threat of entry threat of substitute supplier power buyer power competitive rivalry

Streaming video represented a severe threat to companies like Blockbuster which rented videos to consumers. Which of Porter's Five Forces did this threat arise from? Competitive rivalry Consumer buyer power Threat of substitutes Threat from new entrants

threat of substitutes

When suppliers are limited or inputs are scarce, which of Porter's five Forces are at play? Bargaining power of suppliers Bargaining power of customers Threat of substitute products Threat of substitute products

bargaining power of suppliers

What is the main purpose of Porter's Five Forces Model? Manage product portfolios inform investment appraisal decisions Decide which products to focus on Analyze competition in a market

Analyze competition in a market