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Porter's Five Forces Analysis

In: Business and Management

Submitted By jjanjig
Words 616
Pages 3
Jake Janjigian
SI 422 C1
Kirks
9/16/13

Class #4 – Understanding the Five Forces

1) For each of the Five Forces, the Porter article cites several factors that influence its "strength" (i.e., the amount of downward pressure it exerts on industry profits). For each Force, pick one of these factors, and bring a NEW example from the business world to share in our class discussion.
Buyers: In the oil industry, a few large companies control the supply of gasoline in the United States and have generate low buyer power within the industry. Companies like Exxon, BP, Shell, and Lukoil can limit supply and control prices without any complications because demand for their product is so high, there are no widely available substitutes, and their products are undifferentiated.
Suppliers: The upstream suppliers in the oil industry, being OPEC, also have a large amount of supplier power because they exert a lot of control on the prices and quantity of oil that is bought by the major players within the industry.
Substitutes: There are really no feasible replacements to gasoline in today’s economy. Electrics cars and cars that run on ethanol do exist and are becoming more popular, but gasoline and oil remain as the widespread standard for consumers. As a result of this, oil companies can maintain and manipulate their prices because there is no threat of them being replaced.
New Entry: It is extremely costly to enter the oil industry as the major players have become so entrenched and stretched about the business environment. There are massive capital requirements and expenditures needed to enter into this industry making it nearly impossible for small companies to enter and achieve any sort of significant market share.
Competition: There is certainly a sense of competition in the industry as companies fight to achieve market share, and come out with new products; however…...

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