Question

One of the most popular frameworks for examining a firm's competitive environment is Porter's Five Forces, also known as the Industry and Competitive Analysis. As Porter puts it, "analyzing [these] forces illuminate an industry's fundamental attractiveness, exposes the underlying drivers of average industry profitability, and provides insight into how profitability will evolve in the future."

Use the five forces model to illustrate competition in the newspaper industry.

Are some competitors better positioned to withstand this environment than others? Why or why not?

What role do technology and resources for competitive advantage play in shaping industry competition?

*300 Words

  

Answer 1

Porter's five forces framework consists of:

a) The threat of fresh competitors

b) Rivalry among the current performers

c) Bargaining capability of suppliers

d) Threat from replacement goods

e) Bargaining capability of buyers

Five forces and newspaper industry:

a) The threat of fresh competitors

Newcomers in the newspaper industry present new ways of doing things. It puts so much pressure on the old newspapers that follow the traditional way of doing things.

• The strategy could be lowering the price, reducing the cost, new offers for customers, etc.
• Newspapers need to manage all these issues to stay ahead in the competition and build some strategies to safeguard the edge.

b) Rivalry among the current performers

If the rivalry among the players of the industry is very intense, it can decrease the prices and overall benefit for the industry. If the publishing company is competitive, it can take a toll on the long term profits the organization can earn.

c) Bargaining capability of suppliers

The raw material for the newspapers is bought from different suppliers. If the suppliers are in dominant positions, it can lead to a decrease in margins the newspaper can earn in the market.

• Powerful suppliers always use their negotiating power to draw higher prices.
• It lowers the overall profit for the newspaper industry.

d) Threat from replacement goods

Industry also suffers when the same need is met by another product. Substitute electronic products cause a bigger threat. Especially if the value proposition is also high and unique from what is offered by current industries.

e) Bargaining capability of buyers

Nobody can question the bargaining power of the buyer. They are demanding as well. They always want to purchase by paying less. This puts pressure on the newspaper industry.

• If the customer base is smaller and powerful, the bargaining power would be more.
• It also adds to their ability to seek discounts and other offers.

Competitors and their withstanding:

Some competitors definitely position better in such an environment. This is because of the strategy they use to cope with the competition. Competition is not only in one section of the industry but also in the economy and various roles.

• Customers, substitute products, suppliers, entrants, etc. all pose the competition.
• Whatever the reason might be, the strategist's goal is the best defense against the present influences.
• The competitor that can delve below the surface and evaluate the sources can better cope in such an environment.

Role of technology and resources in shaping industry competition:

Technology has played a significant role in creating assets for the competition going on in the industry.

• It has enabled a value chain supply and ways to strengthen the brand.
• It has allowed the collection of useful data by various means.
• Industries are able to switch costs and generate new network effect with the technology.
• It has helped in scaling the firm and enabling the product to reach wide markets.