What is the Five Forces of Competition Model?

  

“Five Forces of Competition Model”Please respond to the following:From the e-Activity, analyze the industry you selected using the Five Forces of Competition Model to determine the impact of each of the five forces.Based on your analysis, determine if the industry is attractive or unattractive. Explain your rationale.Week 2 eActivityUse the Internet or the Strayer Library to research the industry of your choice in light of the Five Forces of Competition Model. Be prepared to discuss.
Business Administration Capstone
BUS499
The External Environment: Opportunities, Threats,
Industry Competition, and Competitor Analysis
Objectives
Upon completion of this lesson, you will be
able to:
Identify how the six segments of the general
environment affects an industry and its firms
Identify the five forces of competition that
impacts an industry
Analyze the external environment for
opportunities and threats that impact the firm
Supporting Topics
The General, Industry, and Competitive
Environments
External Environment Analysis
Segments of the General Environment
Industry Environment Analysis
Interpreting Industry Analysis
Strategic Groups
Competitor Analysis
Ethical Considerations
General, Industry, and Competitor
Environments
Six Dimensions of Environmental Segments
External Environmental Analysis

Opportunities
Threats
Scanning
Monitoring
Forecasting
Assessing
PROPERTIES
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Segments of the General Environment

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Demographic Segment
Economic Environment
Political/Legal Segment
Sociocultural Segment
Technological Segment
Global Segment
Segments of the General Environment,
continued
Physical Environment Segment
Deals with potential and actual changes in the
physical environment
Business Practices
Environmental sustainability
Energy Consumption
Reduction of Environmental Footprints
Industry Environment Analysis
Industry
Group of firms producing products that are close
substitutes
Five Forces of Competition
Interpreting Industry Analyses
Effective Industry Analyses
End result of careful studying and
interpretation of data
Multiple sources
Unattractive Industry Characteristics
Attractive Industry Characteristics
Strategic Groups
What is a Strategic Group
A set firms that emphasize similar strategic
dimensions
Use similar strategies
Strategic Dimensions in a Strategic Group
Limitations of Forming Strategic Groups
Strategic Groups Implications
Threat of New Entrants
Barriers to Entry
Economies of scale
Product differentiation
Capital requirements
Switching costs
Access to distribution channels
Cost disadvantages independent of scale
Government policy
Expected Retaliation
Bargaining Power of Suppliers
Supplier Group Powerful
Dominated by a few large companies
Substitutes not available
Industry firms not a significant customer
Suppliers goods are critical to success
High switching costs
Credible threat to integrate forward
Bargaining Power of Buyers
Customers Powerful
Large portion of industrys total output
Sales account for significant portion
Switch to another product
Products are standardized
Threat of Substitute Products
Perform similar or the same functions as a
product that the industry produces
Strong Threat
Prices may be lower
Performance capabilities are equal or greater
Intensity of Rivalry Among Competitors
Factors to Affect Intensity
Numerous or equally balanced competitors
Slow industry growth
High fixed costs or high storage costs
Lack of differentiation or low switching costs
High strategic stakes
High exit barriers
Competitor Analysis

Future Objectives
Current Strategy
Assumptions
Strengths and Weaknesses
Ethical Considerations
Following Laws and Regulations
The line between legal and ethical practices
can be difficult to determine
Practices Considered Legal and Ethical
Respect the principles of common morality
and the right of competitors
Appropriate Guidelines
Summary
The General, Industry, and Competitive
Environments
External Environment Analysis
Segments of the General Environment
Industry Environment Analysis
Interpreting Industry Analysis
Strategic Groups
Competitor Analysis
Ethical Considerations

Introduction:

In today’s competitive business world, organizations need to have a clear understanding of their external environment and competitive forces. The Five Forces of Competition Model is a widely used framework that helps firms assess the competition level in their respective industries. In this context, this discussion focuses on analyzing the impact of the five forces of competition on a specific industry.

Description:

The Five Forces of Competition Model consists of five competitive forces that determine the attractiveness of an industry. These forces are the threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products, and intensity of rivalry among competitors. By analyzing the impact of each of these forces, organizations can assess the overall industry attractiveness.

In researching the industry of your choice in the light of the Five Forces of Competition Model, it is important to identify how the six segments of the general environment affect the industry and its firms. This includes demographic, economic, political/legal, sociocultural, technological, and global environment analysis.

Determining the attractiveness of an industry based on the Five Forces of Competition Model involves assessing the presence of barriers to entry, economies of scale, product differentiation, capital requirements, switching costs, access to distribution channels, cost disadvantages independent of scale, government policies, expected retaliation, supplier power, buyer power, the threat of substitutes, and the intensity of rivalry among competitors.

When it comes to competitor analysis, it is necessary to consider various factors such as future objectives, current strategy, assumptions, strengths, and weaknesses. Overall, the Five Forces of Competition Model allows for a comprehensive analysis of the external environment and competitive forces within an industry, and enables organizations to make informed strategic decisions.

Objectives:
– To identify the six segments of the general environment that impact an industry and its firms
– To analyze the five forces of competition that impact an industry
– To conduct an external environment analysis for opportunities and threats that impact the firm

Learning Outcomes:
– Identify the demographic, economic, political/legal, sociocultural, technological, and global segments of the general environment
– Evaluate the impact of each segment of the general environment on an industry and its firms
– Analyze the five forces of competition: threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products, and intensity of rivalry among competitors
– Assess whether the industry is attractive or unattractive based on the analysis of the five forces of competition
– Conduct an external environment analysis to identify opportunities and threats that can impact the firm
– Interpret industry analysis and identify strategic groups within the industry
– Analyze competitor’s future objectives, current strategy, assumptions, and strengths

Heading: Five Forces of Competition Model
Objective:
– Analyze an industry using the Five Forces of Competition Model

Learning Outcome:
– Interpret the impact of each of the five forces of competition (threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products, and intensity of rivalry among competitors)
– Evaluate whether the industry is attractive or unattractive based on the analysis of the five forces of competition
– Determine the potential threats and opportunities that can impact the industry based on the analysis of the Five Forces of Competition Model

Solution 1:

The Five Forces of Competition Model is integral in determining the impact of each of the five forces on any industry. Talking about the healthcare industry, it is evident that competition is fierce. The threat of new entrants is low due to the significant requirements of finance, specialist healthcare services, and stringent government policies. The bargaining power of suppliers is low, but it is likely to increase since a few large companies dominate and there are no other substitutes. Additionally, the bargaining power of buyers is moderately high since they can switch to another product if they are not satisfied. Substitute products pose a significant threat to the industry since they can perform similar functions and offer better prices. The intensity of rivalry among competitors is high due to an increasing number of healthcare providers. Despite the competition, the healthcare industry remains attractive since it offers a lot of growth potential and has a high demand for healthcare.

Solution 2:

Analyzing the fast-food industry using the Five Forces of Competition Model reveals a highly competitive industry. The threat of new entrants is high as the requirements are minimal. The bargaining power of suppliers is low, and there are numerous substitutes for products, such as snacks and energy bars. The bargaining power of buyers is high since they can switch to another product if the prices are not right. Substitute products like energy drinks and sodas pose a significant threat to the industry as they are cheap and readily available. The intensity of rivalry among competitors is high, with many fast-food outlets offering similar kinds of food. Despite the fierce competition, the fast-food industry is attractive since it is fast expanding and offers high profit margins for investors.

Suggested Resources/Books:
1. “Competitive Strategy: Techniques for Analyzing Industries and Competitors” by Michael E. Porter
2. “The Five Competitive Forces That Shape Strategy” by Michael E. Porter
3. “Strategic Management: Theory and Practice” by John A. Pearce and Richard B. Robinson Jr.
4. “Understanding Michael Porter: The Essential Guide to Competition and Strategy” by Joan Magretta
5. “Industry Analysis: The Fundamentals” by Michael E. Porter
6. “Exploring Strategy: Text and Cases” by Gerry Johnson, Richard Whittington, et al.

Similar Asked Questions:
1. What are the six segments of the general environment that affect an industry and its firms?
2. How do the five forces of competition impact an industry?
3. What is environmental scanning and how does it help in assessing the external environment?
4. What are the characteristics of an attractive industry according to the Five Forces of Competition Model?
5. How does competitor analysis help a firm in developing a strategic plan?

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