Porters 5 forces essay assignment

E.W.

14. Rivalry: Their size and power is

When the companies’ size and power is equal, intensity of rivalry is high. For example,

when two sandwich shops opened in the same town, they do not compete with franchise

restaurants such as Benihana or Olive Garden. The companies’ size is different and the power is

different, besides, their target competitors are different. Since both sandwich shops are family

owned businesses, they compete with each other and they think they will make a profit against

each other. If there are many similar restaurants there, you will have many competitors;

therefore, the intensity of rivalry is high. Benihana or Olive Garden are not their rivals or

competitors. They need to compete with the same size and power and they will think they will

make more profits.

23. Rivalry: Exit barriers are

Exit barriers are opposite side of barriers to entry. There are five categories of exit

barriers such as specialized assets, high cost of exit, strategic interrelationship, emotional

barriers, and government/ social restrictions. I would like to explain exit barriers applying into

the car industry. A company makes only a car roof for a specific car, but the company has to

close their business. Since the company is not making sufficiently high profits, which is zero

asset, most likely they cannot sell the machine to any companies. The shape and the size of the

roof were created for a specific car model; therefore, the intensity of rivalry is high. There is a

huge risk if they cannot resell to another companies or anybody their compressors and machines

after they closed their business. On the other hand, if other companies are able to repurchase the

compressors and machines, then exit barriers are low as well as the intensity of rivalry is low.

Another example is that when a family own business, you have no choice to leave the company

then emotional barriers are high which means the intensity of rivalry is high. Government/ social

restrictions are when the government wants you to stay in the business even though you do not

want to stay there, exit barriers are high. When the exit barriers are high then the intensity of

rivalry is high. It is not common these problems in the US, but it happened in different countries.

When a company has one of these categories is high, then exit barriers are high.

30. Buyers: Buyers’ knowledge about the industry’s cost structure is

When a buyer knows the price of products, the industry’s cost structure is high, the power

of a buyers group is high. If a buyer knows the cost of coffee beans, for example, the buyer

knows about the 10% of profit margin is reasonable, then the power of a buyers group is high.

37. Suppliers: Threat of forward integration by the supplier is

Suppliers can make an industry more competitive and decrease profit potential for the buyers if

they are strong. One the other hand, weak suppliers are less competitive and increase profit

potential for the buyers. For instance, retail clothing outlets who owned by the manufacture is

one of the forward integration. When retail clothing companies start producing their own clothes

and sell them directly to their buyers instead of purchasing from their suppliers and then sell to

their customers, the supplier’s power is high. In addition, their buyers are not price sensitive and

uneducated regarding the product, then supplier power is high.

38. Suppliers: Available substitutes/ if there are good/ suppliers?

If there are no substitutes for the products, there is no option for new entrants to doing the

business. For example, the cigarette industry. Substitutes of cigarettes are the patch, the nicotine,

the cigarette gum, the e-cigarette, the hookah, the cigarette mint, etc. If many substitutes in the

cigarette industry are good, then the power of substitutes is high. The cigarette, the nicotine, and

the patch are not the same product, but those are meeting the same need with work in a different

way. Again, substitute is any product that satisfies the same need, but in a different way.