Porters 5 forces essay assignment

J.R. Meilich BUS 444

5 Forces 5 items Assignment

#4 New entry: Capital requirements are

The threat of potential entry is high when capital requirements are low. This means that

any new entrant who is interested in entering the market can do so easily because the start

up costs may be very low. An example of this type of industry would be at-home

businesses that can sell their products online and require very little to no money to sell

the products. For example, a person who knits sweaters at home and then sells them

through online sites does not have the same start up costs as a firm who rents a local retail

space to sell products and overhead costs such as electricity. It is for this reason, that

firms or people in this industry face a higher threat by new entrants as they bring new

options to the marketplace. As more new entrants enter the industry, rivalry also

increases and profitability decreases.

#9 New entry: Securing favorable location

The threat of potential entry is high when securing a favorable location is easy for new

firms in the industry. Most of the incumbents have selected their location strategically

and the locations that remain for new start-ups may be low. In this case, the threat of

potential entry is lower. An example of a firm that does very well in reducing the threat

of potential entry by making it difficult to find favorable locations is McDonald’s. They

often take the most favorable locations for themselves.

#12 New entry: Government policy: regulation is

The threat of potential entry is high when regulation is low. This means that when there is

little government regulations imposed on a certain industry, it makes it more attractive

and much easier for new entrants to enter the market. A good example of an industry that

has well-established policies that make it difficult for new entrants to enter the market is

the physician and health care industry. It is regulated with laws that require many licenses

and other approvals before a firm can enter the market. The existing firms in the industry

are benefitting from this as there are fewer rivals.

#19 Rivalry: Fixed costs are

The intensity of rivalry is higher when fixed costs are high because there is a need to sell

in higher volume to spread the costs or break even. An example of an industry that has

high fixed costs could be one in which a company produces cell phones. They must sell

higher volumes in order to cover the fixed costs but the problem is that the other firms in

the industry are in the same situation so rivalry heats up when all the firms in the industry

try their hardest to gain the most market share.

#34 Suppliers: Availability of substitute supplies is

The power of a supplier is high when the availability of a substitute is low. When there

are fewer substitutes, the supplier is in control because the buyer cannot easily change to

something different and thus must continue to make business with the supplier. An

example for this can be a company that supplies paint for cars that are manufactured. The

buyer, which is the manufacturer of cars in this example, has very little choice of other

materials that it can apply to a car instead of paint. So here, the availability of substitutes

is low and the car manufacturer most likely remains in business with the paint supplier.