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WorksheetsFive Forces of Competition
Total questions: 19
Worksheet time: 11mins
The Five Forces Model of Competitions helps to do what?
analyse potential attractiveness and profitability of specific company
analyse potential attractiveness and profitability of any start-up at any time
analyse potential attractiveness and profitability of specific industry
analyse potential attractiveness and profitability of IT start-ups
Analysing threat of new entry helps understand...
what it takes to start a business in an international market
all internal risks about launching a new business in any country
all external risks about launching a new business in any country
what it takes to start a business in a specific sector
Powerful buyers may lead to an situation where...
a large number clients have control over buying conditions
a small number of clients have control over buying conditions
a large number of potential clients have control over buying conditions
a large number of loyal customers have control over buying conditions
What does it mean if there are many potential suppliers?
you should regularly change suppliers
the suppliers are likely not powerful
the suppliers are likely more powerful
you should remain loyal to the original supplier
List the five forces
(a)
In Porter's Five Forces, the threat of new entrants relates to
barriers to entry
substitutes
switching costs
buyer power
Barriers to entry into an industry are likely to be high if
switching costs are low
differentiation is low
requirement for economies of scale is high
access to distribution channels is high
Competitive rivalry will be high if
the industry is fragmented
there are a few strong players in the industry
there is a high degree of differentiation
the industry is in its infancy
A substitute product or service is
a competitor's product or service
an alternative way of meeting the same need
a new entrant into the industry
a less attractive way of meeting the same need
Mike, an entrepreneur, is thinking about launching a new bottled water company. He uses Porter’s Five Forces model to structure some analysis. State whether the power is weak or strong.
Mike identifies the buyer - not the ultimate drinker, but the retailer. In his country, 80% of sales by value are through one of four supermarket chains. The remaining 20% of sales are through hundreds of independent outlets. Buyer power is therefore...
strong
weak
Mike’s suppliers include his workers, plastic bottle manufacturers and transport companies. As a small operator, Mike realises that his suppliers will be parts of multinational companies.
Supplier power is (weak or strong)
strong
weak
The bottled water market is very competitive, with over 30 suppliers in Australia alone. Mike finds 60% of the market is held by the three largest companies. He also finds that big retailers stock smaller suppliers. The nature of the product means consumers will switch very easily.
Competitive rivalry is
strong
weak
The level of competition suggests entry is relatively easy. However, launch costs of water are relatively high. Suppliers need to find a spring source for the product.
The threat of new entrants is currently
strong
weak
Mike does a study of supermarket shelves and finds the average store selling 500ml water sells 25 other drinks (of a similar size) that could substitute for water.
The threat of substitutes is
strong
weak
One of the considerations for rivalry among existing competitors is
number of competitors
diversity of competitors
industry concentration and growth
government policies
number of customers
One of the considerations for threat of new entrants is
brand loyalty
differences between competitors
cumulative experience
switching costs
buyer likelihood to substitute
One of the considerations for bargaining power of buyers is
brand loyalty
size of customer orders
buyers' information availability
capital requirements
buyer's ability to substitute
One of the considerations for threat to substitute products or services is
buyer's ability to substitute
buyer's likelihood to substitute
switching costs
perceived level of product differentiation
relative price performance of substitute
One of the considerations for bargaining power of suppliers is
switching costs
number and size of suppliers
uniqueness of each supplier's product
focus company's ability to substitute
access to distribution channels
