SEVI 3013 Strategic Management | Questions
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Latest Update 2024
Porters 5 Forces Model - ✔✔- Five forces shape industry structure.
- If all five forces are favorable (that is, their intensity is low), then the industry is
profitable. If even one force is adverse then the industry is not very profitable.
- Examine the current and future profitability of the industry - so also examine
the likely force-intensity in a few years.
In order to determine the intensity of any force - ✔✔A variety of factors
influence the intensity of each force
-Examine which factors are relevant
-Examine each relevant factor for the impact on a given force today, and how
its influence on the force may alter in a few years.
,Threat of New Entrants - ✔✔barriers of entry
- economies of scale: refers to the decline in per unit product costs as
the absolute volume of production per period increases
- production differentiation: the extent of a product's perceived uniqueness
- capital requirements: required investment for manufacturing, R&D, advertising,
field sales and service
- switching costs: the costs of changing suppliers or products
- distribution channels: are there current distribution channels available with
capacity?
- government policy: are there regulations in place that restrict competitive entry
- cost advantages independent of scale economies: is there access to raw
materials, large pool of low-cost labour, favourable locations, and
government subsidies
- competitor response: how will the market react in anticipation of increased
competition within a given market
, Suppliers exert power in the industry by: - ✔✔- threatening to raise prices or
to reduce quality.
- Powerful suppliers can squeeze industry profitability if firms are unable
to recover cost increases
Suppliers are likely to be powerful if - ✔✔-Supplier industry is dominated by a
few firms
-Suppliers' products have few substitutes
-Buyer is not an important customer to supplier
-Suppliers' product is an important input to buyers' product
-Suppliers' products are differentiated
-Suppliers' products have high switching costs
general environment - ✔✔is composed of dimensions in the broader society
that influence an industry and the firms within it.
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