Chapter 3, Problem 2ARQ

Explanation of Solution

Original purpose of the five forces model:

The original purpose of the five forces model is to determine the profitability of an industry...

Explanation of Solution

Types of forces:

• There are competitive forces, which involves in strength factors of switching costs and customer loyalty...

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Competitive forces:

• One of the competitive forces is substitutes, whose strength factors include lower price and perceived benefits the same.
• Another competitive force is the new entrants, ...

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Bargaining power forces:

The two ...

Explanation of Solution

Five Forces operating on Falcon security:

• Bargaining power of customers
• Threat of substitutions
• Bargaining power of suppliers
• Threat of new entrants
• Rivalry

Bargaining power of customers:

It is described as market of output. The customer can buy the products from many suppliers, so the buyer has alternative option.

The factors, which affect the bargaining power of customers, are:

• Switching cost of the buyer
• Availability of buyer information
• Availability of substitute product existing in the market.

Threat of substitutions:

The first force is threat of substitution. It affects the customers to found different way of what you do. It uses different technology to achieve the same economic need.

The factors, which affect the threat of substitution, are:

• Switching cost of the buyer
• Substitute product existing in the market
• Price performance of substitute.

Bargaining power of suppliers:

It is described as market of input. The person who makes the product will sell on the flour. There is no option to buy from others...