Question

What is the Environment analysis of the Time Warner Cable using Potters Five Forces model: Competitive rivalry, Threat of Substitute products, Threat of new entrants, Bargaining powers of customers, and Bargaining powers of suppliers? Please include Examples.

Answer 1

Threat of New Entrants- The economies of scale in the market in which Time Warner Cable works are relatively hard to achieve. It makes it easier for those who produce large capacitates to get a cost benefit. It also makes production more costly for new entrants. That makes new entrant challenges a weaker power.
Inside the industry, the product differentiation is strong, where companies in the industry sell differentiated products rather than a standardized product. Customers also look for products which are distinguished. Advertising and customer care are also strongly emphasized. All of these factors make this industry's challenge to new entrants a low power. Time Warner Cable should take advantage of the economies of scale it has within the market, fighting off new entrants by providing cost benefits.
Time Warner Cable should rely on creativity, in order to distinguish its offerings from new entrants. To build strong brand awareness it can spend on marketing. Instead of losing them to new entrants, this will help it keep its clients.

Bargaining Power of Suppliers- Relative to the consumers, the number of manufacturers in the sector where Time Warner Cable operates is significant. It means suppliers have less leverage over costs, which makes the suppliers ' bargaining power a poor force.
The commodity offered by those suppliers is more generic, less fragmented and has low switching costs. It allows the transfer of manufacturers to customers like Time Warner Cable. It makes the suppliers bargaining power a weaker force.
Within this sector, the manufacturers do not compete with other goods. That means there are no replacements for the commodity other than those offered by the suppliers.

Bargaining Power of Buyers- The number of vendors in the market where Time Warner Cable works is much greater than the number of companies producing the goods. This means consumers have a few companies to choose from, and thus have little leverage over costs. This makes buyers ' bargaining power a weaker business force.
Market competition within the industry is strong, meaning that consumers can not find alternative companies that produce a particular product. This switching difficulty makes buyers ' bargaining power a weaker force in the industry.

Threat of Substitute Products or Services- For the products produced in the sector in which Time Warner Cable works, there are very few alternatives available. Low benefit generating industries also manufacture the very few alternatives that are available. This means that the maximum profit that companies can earn in the industry in which Time Warner Cable operates is not subject to a ceiling. All of these factors make the threat of alternatives a weaker force within the industry.
High quality but much more expensive are the very few replacements available. Comparatively, businesses that are manufacturing within the market in which Time Warner Cable works sell at a lower price than competitors, with comparable efficiency.

Rivalry Among Existing Firms- There are very few rivals in the market that Time Warner Cable operates in. Most of these are big in size as well. This means that companies in the industry will not make moves unnoticed. That makes competition within the industry a weaker force among established firms.
The very few rivals have a large market share. It means that in order to achieve power and become market leaders, these will engage in aggressive behavior. That makes competition within the industry a stronger force among established firms.The market in which Time Warner Cable expands rapidly and is expected to continue to do so for a few years to come. A positive growth in the industry means that rivals are less likely to take aggressive action, as they do not need to steal market share from each other. That makes rivalry within the industry a weaker force among existing firms.
Within the industry in which Time Warner Cable operates the fixed costs are high. This makes companies work to full capacity within the industry. This also means these firms will lower their prices when demand slackens. That makes competition within the industry a stronger force among established firms.

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