Industry environment analysis
Threat of new entrants. Analysis.
Bargaining power of suppliers. Analysis
Bargaining power of buyers. Analysis
Power of substitutes. Analysis
Intensity of industry rivalry. Analysis
Summary of Industry environment analysis
The concept of industry environment analysis has been used for several decades now to analyze various factors that are external to the business, but remain critical in the quest for crafting a comprehensive competitive strategy.
In 1980, Michael Porter came up with a five force model that has remained instrumental in the analysis of the business environment. In this five force model, Porter established that there are various factors that need to be well catered for by any company that intends to craft a competitive strategy.
In his quest to come up with a competitive force model, Porter managed to group the external environment into five major categories that he named as the bargaining power of suppliers, the bargaining power of buyers, threats posed by new entrants, the level of rivalry that exists among the existing firms and finally the threats posed by the substitute products (Porter, 2008).
Conducting an environment analysis in the movie industry allows one to establish the extent of the existing opportunities as well as threats posed by external factors (Hill and Jones 2009). In the environmental analysis of the movie industry, it is evident that the threats that are posed by the new entrants are relatively high though they have been rated as High-Medium.
This indicates that the huge capital outlay that is required to venture into this business can discourage potential entrants form joining the business. However, this does not mean that it is impossible for new entrants to join the industry provided they can comfortably raise the required costs.
It is also evident that the lack of switching costs on the part of the buyers acts to the disadvantage of sellers such that the sellers can easily lose their clientele if it decides to switch to a competitor. The buyers can do so with ease as they have nothing to lose form an engagement where they choose the services of a competitor.
It is also evident that the general lack of clear substitutes in the movie industry makes the sellers to have an advantage especially due to the fact that they can easily retain the market share. However, the weakening power of buyers due to change in lifestyles as well as a changing economic factors have colluded to deny the movie industry valuable revenues that were initially associated with it.
As far as substitute products are concerned, the lack of clear substitutes in the movie industry has ensured that the power of substitutes has an insignificant influence as far as the extent of strategy crafting is concerned. Movies do not have a direct substitute hence the overall rating of this category of external environment is low.
When the intensity of industry rivalry is examined, it is evident that the movie industry is characterized by stiff competition among the main industry players. A shrinking market due to a change in the overall societal culture has led to intense competition especially to ensure that firms survive.
Lastly, the bargaining power of suppliers in the movie industry is low, despite their limited numbers. This has been occasioned by the nature of rivalry among the players as well as lack of a clear differentiation of the products offered.
Each supplier gets an opportunity to bask in glory when a specific product is fresh thus attracting thousands of viewers. However, due to the short product lifecycle associated with the industry, the suppliers have little bargaining power.
Reference List
Chaffey, D. 2009. Internet marketing: strategy, implementation and practice. New York: Prentice Hall.
Hill, C. and Jones, G. 2009. Strategic Management Theory: An Integrated Approach. Upper Saddle River: Cengage Learning.
O’Regan, T. 2010. Local Hollywood: Global Film Production and the Gold Coast Ben. New York: UQP.
Porter, M. 2008. On competition. New York: Harvard Business Press.