Strategic Management

NAME: MAGARE G JOANNE

ID NO: 635685

SEMESTER: SPRING 2014

COURSE: BUS4090 STRATEGIC MANAGEMENT

LECTURER: JANE N. WERE

ASSIGNMENT

TASK: Choose an industry in which you would like to compete. Use the five forces method of analysis to explain why you find that industry attractive.

ANSWER:

Five Forces Analysis helps a marketer to contrast a competitive environment. It has similarities with other tools for environmental audit, but tends to focus on the single, stand alone, business rather than a single product or range of products.

Five forces analysis looks at five key areas namely the threat of entry, the power of buyers, the power of suppliers, the threat of substitutes, and competitive rivalry.

The threat of entry.

Economies of scale e.g. the benefits associated with bulk purchasing.

The high or low costs of entry e.g. how much will it cost for the latest technology?

Ease of access to distribution channels e.g. Do our competitors have the distribution channels up?

Cost advantages not related to the size of the company e.g. personal contacts or knowledge that larger companies do not own curve effects.

Government action e.g. will new laws be introduced that will weaken our competitive position?

How important is differentiation? e.g. The Champagne brand cannot be copied.

If there are a large number of undifferentiated, small suppliers.

The cost of switching between suppliers is low.

The power of suppliers.

The power of suppliers tends to be a reversal of the power of buyers.

Where the switching costs are high e.g. switching from one software supplier to another.

Power is high where the brand is powerful e.g. Cadillac, Pizza Hut, Microsoft.

There is a possibility of the supplier integrating forward e.g. Brewers buying bars.

Customers are fragmented so that they have little bargaining power e.g. Gas/Petrol stations in remote places.

The threat of substitutes

Where there...