Porters five forces

Question 1

What does porters highlight?

Answer 1

Main factors that determine competitveness and therefore profability of the market.

Question 2

What are barriers to entry in porters?

Answer 2

Main factors that prevent a firm from joining the market.
* If the market has high barriers to entry means that the market is less competitive and firms are able to charge higher prices and make monopoly profits.
* If firms enter markets more easily it means market is more competitive and prices tend to be low as consumers can switch to alternatives.

Question 3

What are strategies to barriers to entry?

Answer 3

Will be about retaining customers - loyalty schemes, discounts

Question 4

What is barganing power of suppliers?

Answer 4

Bargaining power of suppliers – When suppliers hold a significant levels of influence within a market, they are able to push prices up for raw materials and components and therefore lower profit margins for business that they supply to.
- Buyers tend to force prices down to maintain own profit margins and their ability to do so is determined by level of market power they have.

Question 5

Strategies of supplier power are..

Answer 5

• The main strategy for supplier power is to vertically integrate – by doing this you can buy up and secure a supplier and take away suppliers from competitors.

Question 6

Barganing power of buyers is…

Answer 6

Bargaining power of buyers – Customer power relates to their ability to influence price they pay for goods and services within an industry.
- Higher power they hold, the lower the prices tend to be.
- If customer power is low, businesses are able to set prices high and maximise profits.

Question 7

Strategies of barganing power of suppliers

Answer 7

• Strategies of buyer power: Customer loyalty through – Promotions, loyalty schemes, price competitive, create strong brand image, USP.

Question 8

Competitve rivarlary is…

Answer 8

Competitive rivalry – Competition levels can vary between a pure monopoly to perfect competition.
- Generally the lower level of competition within a market, the higher the profits for the business
- Much depends on the degree of rivalry between firms within the market.

Question 9

Strategies for competition are..

Answer 9

• Strategies for degree of competition; pricing strategies, placing your products, reward loyalty, product innovation, trends and fashion, USP, increase advertising.

Question 10

Threat of substitues is…

Answer 10

Threat of substitutes – If lots of substitutes within a market means customers can easily switch to an alternative if needed.
- The higher the number of substitutes the weaker the power of the individual business within the market.
- New technologies and government action can open up markets to competition can increase number of alternatives available to customers.

Question 11

Strategies of threat of substitues are…

Answer 11

• Strategies of threat of substitutes – Business may have to reduce selling price, improve the quality of their products to retain customers, Increase investment in marketing to attract customers away from alternatives.