Question

Systematically apply five force analysis to analyze the legal cannabis industry. Based on your analysis is the profit potential of this industry worth entering for a particular business or an entrepreneur? Why or why not?

5 force analysis focuses on 5 factors to assess profit potential.

1. Competitors in an industry

2. Potential new entrants to the industry

3. Substitutes for the industries offerings

4. Suppliers to the industry

5. Industries buyers

Answer 1

5 force analysis focuses on 5 factors to assess profit potential.

1. Competitors in an industry - Currently there are not many rival firms in this industry. Reasons for this being, marijuana consumption for recreational or medical purposes has been legalized recently and in very few states. Also, there are several norms to be adhered to as a result of which not many firms have got the legal status required to do the cannabis' business legally.

2. Potential new entrants to the industry - With the growth of acceptance of use of cannibis by giving the industry legal approval status. there is a possibility for new companies to enter this industry.

3. Substitutes for the industries offerings - There are substitutes available in the market such as alcohol and tobacco and other drugs.

4. Suppliers to the industry- Number of suppliers are less as the legal approval for cultivation and further processing are given after thorough documentation and completion of formalities.

5. Industries buyers - Increasing. The customer base for the product is growing continuously as stress levels increase, loneliness increase and distances from family and work-life imbalance increases.