Question

A friend of yours from college, who you haven’t talked to in 3 years, sends you an email asking you to meet him for lunch. He says he’s got a great idea for a business and wants to run it by you. At first you’re hesitant because your friend, while obviously intelligent, doesn’t always think things though. You agree to meet for lunch and talk about the idea. At lunch he explains that he’s been developing new flexible screens for his employer that are incredibly tough, waterproof, and use very little energy. His idea is to use these new flexible screens to create wearable computing clothing that can connect directly to smartphones and push ads, promotions, and video. His only problem is that he knows nothing about business. He’s not sure where to start.

a. Explain how you could use the five forces model to help your friend understand the potential success of his wearable flex screens.

b. How might understanding the unique forces affecting this industry determine the competitive advantage for your friend’s new company?

Answer 1

a) The five forces model consists of five forces which any business should understand to get success.

1) Bargaining power of supplier

2) Bargaining power of power

3) Threat from substitute products

4) Threat from new entrants

5) Industry rivalry with existing firms in the market.

I will explain my friend the five forces and how they can be analysed on the business he want to start.

1) Bargaining power of supplier: As this type of screens are not available in the market he can keep prices some what higher as his bargaining capacity will be more in the market as there is no rivalry.

2) Bargaining power of consumer: The consumer is the main important factor in which any industry runs. So I will tell him to keep price affordable to consumer which makes him earn profits as the consumer will be willing to pay that cost as his bargaining power is less as there are very less number of substitute or no substitute for wearable flex screens

3) Threats from substitute products: As he is saying that it is unique and is being developed, so mostly there will be no substitute products which is an advantage for him.

4) Threats from new entrants: Unless the model design comes out there will be no new entrants and by the time he can caotuca the market and set of deals with companies for supplying the products.

5) Industry rivalry: There will be competition from existing firms but he can survive as they are not having these new developed screens which gives him an upper hand on them.

B) Competitive advantage that my friends company will have in the market is that this a developed product which is still not entered the market. So when it enters the market he will have an advantage of suplyisup this product as people will be more interested with wearable flex screens due to its unique features which will help him to capture the market.