Porters 5 forces essay assignment

A.N. Professor Ofer Meilich Bus 444 9/23/2016

5F5I

21. When perishability of items is high, so too is rivalry among firms. An obvious

example of this is with grocery stores. Nearly every item sold at a grocery store has a shelf life.

Companies must compete to sell these perishable items before they become useless and

unmarketable. Because of the small window of time to sell a tomato, for example, grocery stores

will use aggressive sales tactics to incentivize the buying of their products. When walking

through the produce section, one might see a buy one get one free offer on blueberries or an offer

to buy five packs of cherry tomatoes for five dollars when a single pack is sold for two dollars.

Items such as kitchen supplies, on the other hand, do not perish easily and thus we will likely

never see a deal for buying three ladles for the price of one.

32. Buyers have high power when an industry’s products have little cost saving

value. When an industry has low cost savings in regards to its product, they do not have much

leverage over the buyer, and thus the buyer has more power over the seller. A buyer will be

highly price-sensitive to products that do not save them much money. For example, printers have

a high up keep, and thus those products have a low cost saving value. Because of this, a buyer

will take a lot of time deciding on a printer, and will weigh their options before buying a

company’s printer that has the potential of having a higher upkeep then another printer.

36. If switching costs of the focal industry is high, supplier power is high. An

example of this is if two firms were engaged in just-in-time manufacturing, in which suppliers

must be highly reliable and consistent with their shipments. If a company were to switch from a

reliable supplier, they would potentially incur the costs of having to find a new, reliable supplier

that could handle their just-in-time supplying needs.

Another example could be with electricity. It is extremely costly to leave an electricity

company’s service in lieu of solar energy. Thus many people who want to have a smaller carbon

footprint can’t do so due to financial reasons.

8. If incumbents’ control over distribution is low, threat of entry is high. An example

of a new entrant struggling to come into an industry could be that of accessing a retail store. If a

new brewery opens up, it will be difficult for the brewery to get its beer to be sold at retail stores

across the US. An example of a distribution channel that is easy to access could be online

jewelry websites. It is quite easy to make jewelry and sell it on a website like Etsy, thus many

new entrants can be allowed entrance into the jewelry industry.

3. If economies of scale are high, it is very difficult for a new entrant to enter the

market. If a burger restaurant wanted to compete against McDonalds, they would have an

exceptionally, or nearly impossible, task of competing with McDonalds’ prices. This is due to

McDonalds having economies of scale. Because of their undeviating menu options, production

costs are kept low and predictable. They also mass produce their raw materials and a vertically

integrated on many levels, allowing for them to save costs and thus keep prices low. They

purchase massive amounts of raw materials as well, which allow for cost savings with bulk buys.

All of these factors would stifle the competitive ability of a start up fast food restaurant.