Week 5 - Assessing Competition

Question 1

What is Porter’s five force?

Answer 1

• Porter’s Five Forces are Threat of new entrants, Bargaining power of buyers, Bargaining power of suppliers, Threat of new substitutes, and Competitive rivalry.
• This framework helps strategists understand what makes an industry profitable and provides insights needed to make strategic choices.

Question 2

What are threat of new entrants?

Answer 2

Threat of new entrants is low if there are barriers to entry such as:
• Economies of scale
• Capital requirement for entry
• Experience
• Legislation or government action
• Product differentiation
• R&D spending

Question 3

What are threat of substitutes?

Answer 3

• The threat of substitutes is high if:
• Consumer switching costs are low
• Substitute product is cheaper than industry product
• Substitute performance is equal or superior to industry product performance

Question 4

What is buyer power?

Answer 4

• Buyer power is high if:
• Buyers are more concentrated than sellers
• Buyer is price sensitive/elastic
• Buyer is well-educated regarding the product

Question 5

What is supplier power?

Answer 5

• Supplier power is high where this is:
• High switching costs
• Bargaining power low
• Powerful brand with a product ecosystem

Question 6

What are strengths in SWOT?

Answer 6

• Internal characteristics of a business that gives it a competitive advantage
• Positive tangible and intangible attributes internal to an organisation
• Ex. Established brand name, economies of scale, better marketing skills, intellectual property, high market share

Question 7

What are weakness in SWOT?

Answer 7

• Internal characteristics that place the firm at a disadvantage relative to others
• Prevent the organisation from experiencing organic or inorganic growth
• Ex. Low spending on R&D, narrow product portfolio, high levels of debt, no SMART aims, limited e-commerce investment

Question 8

What are opportunities of SWOT ?

Answer 8

• External chances to make greater profits in the environment through satisfying dynamic customer requirements
• May arise from market, competition, industry/government and technology factors
• Ex. Rapid market growth, economic boom, sales decline for a substitute product, investing in m-commerce

Question 9

What are threats in SWOT?

Answer 9

• External elements in the environment beyond an organisation’s control that can cause operational issues
• Ex. Entry of foreign competitors, product life cycle in decline, increased government regulation, recessionary period, high inflation and unemployment

Question 10

Advantages of Porter’s 5

Answer 10

• Helps to gauge the overall competition in the industry
• Helpful in shaping corporate strategy and vision

Question 11

DisAdvantages of Porter’s 5

Answer 11

• Unavailability of quantitative dimensions
• Not applicable for all industries universally

Question 12

Advantages of PESTLE

Answer 12

• Provides a simple and easy-to-use framework for analysis
• Assesses implications of entering new markets both nationally and globally

Question 13

Disadvantage of PESTLE?

Answer 13

• The process has to be conducted regularly to be effective
• Users’ access to quality external information is often restricted

Question 14

Advantages of SWOT?

Answer 14

• Provides a simple and easy-to-use framework for analysis
• Helps leaders and managers to form an overall judgement

Question 15

What are disadvantages of SWOT?

Answer 15

• Does not prioritise strengths, weaknesses, opportunities and threats in order of importance.
• A variety of stakeholders may have different opinions as the model is subjective