Question

use the internet to select a well-known company (examples: Ford, Nike or General Mills). Using the Five Forces model write at least five sentences describing what this company needs to take into consideration under each of the five forces.

Rivalry among existing competitors

Threat of new entrants

Threat of substitute products and services

The bargaining power of buyers

The bargaining power of suppliers

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Answer 1

In Nike's case certain external factors create strong force of competition rivalry.The facors are low market growth rate which is a strong force, high aggressiveness of firms which is again a strong force ,moderate number of firms which is a moderate force. So Nike should focus on product development and market development so that it gets competitive advantage. as well as growing share in the world market.

Threat of new entrants is a weak force . Porters five forces analysis tries to find the influence of the new entrants in Nike's market.Cetain external factors like more cost involved in brand development,large economies of scale,moderate cost of engaging in business contribute to the weak threat of new entrants.Nike has large economies of scale due to worldwide production and distribution.Brand development needs huge cost and so new entrants find difficult to enter.

Certain external factors pose moderate threat of substitution against Nike.These external factors are moderate availability of substitutes,moderate performance per price of substutues ,cost of switching is low. Since customers have substitutes to Nike products , substitutes offer a moderate threat to Nike.Customers can switch over to substitues and the substitution cost is low.

Customers have moderate bargaining power according to the five forces analysis.Switching costs being low Nike customers can switch over to other products.Availability of substitutes being moderate , customers can also purchase other products.Small size of buyers also exert minimum influence on the company.

Bargaining power of suppliers is weak.Overall supply being large , the effect of the action of individual supplier is less in Nike 's business.Again supplier population is large and so individual supplier's impact on demand for  Nike products gets reduced .So a moderate size of individual suppliers  exerts moderate extent  of suppliers influence .