Given this information, which industry appears to be the most attractive? Which industry is the second-most attractive? Which industry is the least attractive? Industry Information Investment in production processes required Product Access to distribution channels Industry A Small Industry B Large Industry C Large Commodity Commodity Differentiated Unrestricted Restricted Restricted Number of suppliers of raw materials Few Few Numerous Switching costs incurred when changing suppliers Large Large None Likelihood of suppliers integrating forward Small Small Large Number of buyers of industry products Few Few Numerous Likelihood of buyers integrating forward Large Small Small Likelihood of buyers integrating backward Large Large Small Size of buyers of industry products Large Large Small Switching costs incurred by industry's consumers None None Large Rate of industry growth Performance of alternatives to industry's product Cost of alternatives to industry's product Low Low High High Low Low Low High High Number of competitors Relative size of competitors Many Many Few Relatively Equal Relatively Equal Large Imbalance Fixed cost of exit High High Low
Given this information, which industry appears to be the most attractive? Which industry is the second-most attractive? Which industry is the least attractive? Industry Information Investment in production processes required Product Access to distribution channels Industry A Small Industry B Large Industry C Large Commodity Commodity Differentiated Unrestricted Restricted Restricted Number of suppliers of raw materials Few Few Numerous Switching costs incurred when changing suppliers Large Large None Likelihood of suppliers integrating forward Small Small Large Number of buyers of industry products Few Few Numerous Likelihood of buyers integrating forward Large Small Small Likelihood of buyers integrating backward Large Large Small Size of buyers of industry products Large Large Small Switching costs incurred by industry's consumers None None Large Rate of industry growth Performance of alternatives to industry's product Cost of alternatives to industry's product Low Low High High Low Low Low High High Number of competitors Relative size of competitors Many Many Few Relatively Equal Relatively Equal Large Imbalance Fixed cost of exit High High Low
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
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Industry Structure: Five Forces Analysis
You have been hired by an investment bank as an analyst. Your first assignment is to rank the attractiveness (profit potential) of three industries, so that the firm can focus its search efforts for potentially lucrative acquisitions for a client. Using the data below, conduct three industry analyses employing the Five Forces model. First, indicate what each of the 5 forces is. Second, evaluate whether the power of each force is low or high within each industry (A, B, and C). Finally, rank the industries in terms of attractiveness.
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Name of Force |
Power of Force in Industry A (low or high) |
Power of Force in Industry B (low or high) |
Power of Force in Industry C (low or high) |
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Transcribed Image Text:Given this information, which industry appears to be the most attractive?
Which industry is the second-most attractive?
Which industry is the least attractive?
Industry Information
Investment in production processes required
Product
Access to distribution channels
Industry A
Small
Industry B
Large
Industry C
Large
Commodity
Commodity
Differentiated
Unrestricted
Restricted
Restricted
Number of suppliers of raw materials
Few
Few
Numerous
Switching costs incurred when changing suppliers
Large
Large
None
Likelihood of suppliers integrating forward
Small
Small
Large
Number of buyers of industry products
Few
Few
Numerous
Likelihood of buyers integrating forward
Large
Small
Small
Likelihood of buyers integrating backward
Large
Large
Small
Size of buyers of industry products
Large
Large
Small
Switching costs incurred by industry's consumers
None
None
Large
Rate of industry growth
Performance of alternatives to industry's product
Cost of alternatives to industry's product
Low
Low
High
High
Low
Low
Low
High
High
Number of competitors
Relative size of competitors
Many
Many
Few
Relatively Equal
Relatively Equal
Large Imbalance
Fixed cost of exit
High
High
Low
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