Porter's Five Forces

Question 1

What is the Five Forces Model?

Answer 1

A model that identifies and analyses five competitive forces that shape every industry and helps determine an industry’s weaknesses and strengths.

Question 2

What are the five forces?

Answer 2

• Competitive Rivalry
• Potential of new entrants in the industry
• Power of Suppliers
• Power of Customers
• Threat of substitute products

Question 3

What are the alternatives in a competitive rivalry?

Answer 3

1. Price Wars
2. Advertising Battles
3. Launch of a new product/product line
4. Increased customer services and warranties

Question 4

What are the entry barriers to new entrants?

Answer 4

1. Product differentiation
2. High Capital Cost
3. Cost disadvantages
4. Access to distribution channel
5. Government Policy
6. Patents etc.

Question 5

What is the benefit of Porter’s Five Forces Model?

Answer 5

1. Porter’s Five Forces model can help you to analyze the attractiveness of a particular industry, evaluate investment options, and assess the competitive environment in your market.
2. Porter’s Five Forces allows you to gain valuable insights into your current market, or one that you’re considering moving into. This can help you to develop a strategy to succeed.

Question 6

Which of the following is not a factor considered in Porter’s Five Forces model?
a) Regulatory Environment
b) Threat of Substitutes
c) Bargaining Power of Suppliers
d) Bargaining Power of Employees

Answer 6

(a)

Question 7

In Porter’s Five Forces model, the intensity of competitive rivalry is influenced by all of the following except:
a) Number of competitors
b) Industry growth rate
c) Customer loyalty
d) Supplier power

Answer 7

(d)

Question 8

Which of the following is an example of a barrier to entry in the Five Forces framework?
a) Low customer switching costs
b) High supplier power
c) Economies of scale
d) Limited product differentiation

Answer 8

(c)

Question 9

The bargaining power of buyers is likely to be highest when:
a) Buyers are fragmented and have limited information
b) There are few substitute products available
c) The product is critical to the buyer’s business
d) The industry has high fixed costs

Answer 9

(c)

Question 10

A company that successfully differentiates its products and services is more likely to:
a) Face strong supplier power
b) Have a lower threat of new entrants
c) Experience weaker competitive rivalry
d) Suffer from high buyer power

Answer 10

(c)

Question 11

Which force in Porter’s model is concerned with the influence of labor unions, government regulations, and industry standards on a business?
a) Supplier Power
b) Threat of Substitutes
c) Regulatory Environment
d) Competitive Rivalry

Answer 11

(c)

Question 12

In the context of Porter’s Five Forces, a “niche market” strategy is most effective in dealing with:
a) Strong supplier power
b) High competitive rivalry
c) A high threat of new entrants
d) Weak buyer power

Answer 12

(c)

Question 13

When assessing the threat of substitutes, which factor should a business consider most closely?
a) The bargaining power of suppliers
b) The ease with which buyers can switch to substitutes
c) Competitive rivalry within the industry
d) The availability of complementary products

Answer 13

(b)

Question 14

Which industry would likely have the lowest threat of new entrants according to Porter’s Five Forces?
a) Restaurant
b) Software development
c) Airline
d) Retail clothing

Answer 14

(b)

Question 15

What action can a company take to reduce the bargaining power of its suppliers in Porter’s Five Forces model?
a) Increase supplier dependence
b) Diversify its product offerings
c) Form strategic alliances with suppliers
d) Reduce the number of suppliers

Answer 15

(c)

Question 16

Imagine you are the CEO of a global smartphone manufacturer. Your company relies on a single supplier for a critical component. How does the supplier’s power affect your business, and what strategies can you employ to mitigate this risk?

Answer 16

Supplier Power: Supplier power can affect the business by creating dependency and potentially raising costs. To mitigate this risk, strategies may include diversifying suppliers, vertical integration, or negotiating long-term contracts.

Question 17

In the airline industry, discuss the barriers to entry that new players would face. How can established airlines strengthen their position against potential new entrants?

Answer 17

Threat of New Entrants: Barriers to entry in the airline industry can include high capital requirements, economies of scale, government regulations, and brand loyalty. Established airlines can strengthen their position by focusing on customer loyalty programs and cost-efficiency.

Question 18

You run a high-end fashion boutique. Your customers demand the latest fashion trends. Analyze the buyer’s power in this context and propose strategies to maintain profitability.

Answer 18

Buyer Power: In the high-end fashion boutique scenario, buyer power is high due to customer demands for the latest trends. Strategies to maintain profitability might involve creating unique in-store experiences, offering personalized services, and building a strong brand image.

Question 19

In the fast-food industry, explain the factors contributing to intense competitive rivalry. How can a fast-food chain differentiate itself and gain a competitive advantage?

Answer 19

Competitive Rivalry: Intense competitive rivalry in the fast-food industry can be driven by factors like low switching costs for consumers, similar product offerings, and high market saturation. Differentiation through menu innovation, branding, and efficient operations can help gain a competitive advantage.

Question 20

As a manager of a luxury car brand, how do you assess the threat posed by electric vehicles and public transportation as substitutes for traditional luxury cars? What actions can you take to address this threat?

Answer 20

Threat of Substitutes: The luxury car brand should assess electric vehicles and public transportation as substitutes. Strategies may include investing in electric vehicle technology, offering eco-friendly luxury options, and promoting the exclusivity and status associated with traditional luxury cars.