FIVE FORCES ANALYSIS
Template for 5 Forces Analysis
Example from a Disney Movies report
Five Forces
Analysis: Movie Production East Asia Region
Power of Substitutes: Strong
Low-cost switching:
The speed with which the new, alternative formats undermined the existing format, sometimes despite higher prices and switching costs, indicates that buyers found the substitutes highly advantageous.
Buyers are prone to switch between players.
Buyers, such as multiplex cinemas, may experience a certain degree of loyalty to certain producers of films, if they have a history of producing popular and successful films.
Cheap alternative:
Form of distribution substitute can also be carried out illegally which can affect filmmaker revenues.
Consumers can illegally buy films that have just left the cinema that are not available to buy legally.
Piracy is a big problem in India, with the International Federation of the Phonographic Industry estimating that more than half of users of the internet access unlicensed services on a monthly basis.
Power of Buyers: Moderate
Low cost switching: Brand loyalty is weak, with buyers likely to switch between players due to the absence of switching costs.
→ Buyers are prone to switch as they must buy films that are likely to be successful at the box office and so generate revenues.
Buyer size: These larger buyers experience strong financial muscle which translates into a higher negotiating power. Such buyers include retailers such as AEON and large cinema chains such as AMC.
Power of Suppliers: Moderate
Importance of quality/cost:
Suppliers can often negotiate higher prices due to their differentiated input, which increases their power. However, some suppliers may rely on the film production market for revenues. Supplier power is weakened for such suppliers.
Player independence:
Supplier power may increase in the future as skilled crews and creative artists are able to distribute their own productions more easily on the internet
Power of New Entrants: Moderate
Low-cost switching
Buyers are prone to switch between players.
Buyers, such as multiplex cinemas, may experience a certain degree of loyalty (limited) to certain producers of films, if they have a history of producing popular and successful films.
Suppliers accessible
Whilst access to suppliers may be relatively easy but unable to turn themselves into a major competitor with such ease.
Market growth
The declining level of the market in the mature economies decreases the likelihood of new entrants.
Countries such as China has shown market growth, which has overtaken Japan to become the second biggest market in terms of box office receipts.
Power of Rivals: Moderate
Low cost switching:
It is therefore easy to deliver more of the product if demand rises. Buyers are also able to switch between players easily, as switching costs are low,
Low fixed costs:
Such high fixed costs serve to intensify rivalry. On the other hand, such outlay is not always necessary to produce a successful movie.
Easy to expand:
Is relatively easy to expand sales due to the ‘weightless’ nature of the product; it can simply be sold as a digital download
Competitor size:
There are a number of large market players, including some of the largest global production and distribution companies. However, there are numerous smaller companies, including independents.