Self‐Study Questions

1. From Table 3.1, select a high‐profit industry and a low‐profit industry.

From what you know of the structure of your selected industries, use
the five forces framework to explain why profitability has been high in
one industry and low in the other.
- Bargaining power of suppliers
Clearly, there isn't a lot of provider power in the tobacco industry.
This is due to the fact that tobacco, the most important unprocessed
substance, is purchased directly from tobacco ranchers through
offering. However, when tobacco is in the hands of major names in
the tobacco sector, the organizations can have a significant impact
on cost. The tobacco industry has an unusually high level of item
separation.
The airline industry also has a large market force of suppliers. Even
with a segment into this industry, there are very few providers, so
each one can determine its own price. Regardless, there isn't
enough item distinction among the many carriers’ groups. Because
of the minimal level of item separation, different organizations
cannot charge completely different prices. They undercut each
other's costs and begin delivering at a cost that is extremely close
to their minimal expense, resulting in a reduction in overall benefit.
- Bargaining power of buyers
When it comes to the tobacco industry, buyers' bargaining power is
quite limited. Indeed, despite hefty tariffs and expenses, buyers
continue to acquire these things, owing to brand loyalty and, more
importantly, tendency. This component of reliance on tobacco
products is crucial in increasing the tobacco industry's profits.
Customers do not reduce their requests fundamentally due to
compulsion, regardless of how high the prices are. When compared
to the tobacco industry, the airline industry has a stronger haggling
force of buyers. They can surely shift to lower assessed aircrafts,
and with the help of innovation and the internet, which allows clear
correlations between many organizations' flying expenses, there
has been a tremendous downward pressure on the costs of air
travel from each firm. This has resulted in a significant decrease in
overall revenue.
- Threat of new entrants
Because of the high capital requirements, competition with
established brands, and competition against enterprises with
economies of scale, the tobacco sector faces little risk from new
entrants. Breaking into the tobacco sector and getting a piece of the
pie is prohibitively expensive. As a result, old firms' expenses aren't
cut anywhere near new entrants, and net revenues are high. Even
with complex administrative work, strict legislative rules, and hefty
costs, new enterprises do enter the airline market. This has been
 made possible by the widespread availability of credit and the ease
with which brand names can be laid out. As a result, the resistance
becomes more extraordinary, increasing expenses (and along
these lines benefits) are decreased.
- Threat of substitutes
Despite the fact that customers are well aware of the health risks
associated with tobacco use, they do not respond to alternatives
because of the unique advantages that they infer while smoking
tobacco. There are no immediate substitutes for tobacco, and while
customers may choose to stop using tobacco with the help of
indirect substitutes, better options such as electronic cigarettes are
also emerging as a result of similar tobacco selling companies,
resulting in increased profits without reducing the availability of their
products. Buyers in the airline industry do have alternatives to
consider. Homegrown travel should most likely be available using a
variety of modes of transportation, including trains, automobiles,
bicycles and so forth.
Nonetheless, this comes with a higher open-door cost in terms of
lost time. Another important factor that is frequently overlooked is
how the internet has brought the world closer together while also
reducing the frequency of migration. Assuming that guardians can
view and communicate with their children via Skype at any time,
they would not travel frequently unless absolutely necessary. As a
result, there are replacements for air travel, and as a result, there is
a downward pressure on costs to attract customers, resulting in
diminishing benefits.
- Rivalry among existing companies
In the tobacco industry, there aren't many big companies, and some
of them have consolidated to gain more market strength and focus.
As a result, there isn't much between-firm competition when it
comes to tobacco production. Due to the low amount of
competition, enterprises do not undercut one other's expenses,
resulting in a higher income and, as a result, a bigger benefit.
The carrier’s industry is extremely competitive, and the pressure on
businesses is increasing as a result of the growing presence of low-
cost transporters. It's possible that the transmission of low-cost
transporters isn't actually through new participants. Existing
businesses frequently expand in order to increase competition. In
this industry, fierce competition and cost-cutting have significantly
reduced income and net revenues.
2. With reference to Strategy Capsule 3.1, use the five forces framework
to explain why profitability has been so high in the US market for
smokeless tobacco.
When it comes to the tobacco industry, buyers have a strong bartering
force. Because tobacco can be harmful to a customer's health, demand
for smokeless tobacco grows, giving the Competitive item an
 advantage and benefit. The threat of new competitors is enormous,
especially as non-smoke tobacco is providing greater benefits to the
industry. Because the risk of a substitute item is exceedingly great, the
advantage of this item cannot be regarded sustained. Client awareness
of the harmful effects of cigarettes may reduce the item's benefit level.
3. The major forces shaping the business environment of the fixed‐line
telecom industry are technology and government policy. The industry
has been influenced by fiber optics (greatly increasing transmission
capacity), new modes of telecommunication (wireless and internet
telephony), the convergence of telecom and cable TV, and regulatory
change (including the opening of fixed‐line infrastructures to “virtual
operators”). Using the five forces of competition framework, predict
how each of these developments has influenced competition and
profitability in the fixed‐line telecom industry.
- Bargaining power of suppliers
As the volume of current innovation decreases, it will be difficult for
the provider to keep up with the stockpile. As a result, the providers
will try to raise the price of natural substances. It will have an impact
on the business benefit in this way.
- Bargaining power of buyers
The client will favor innovative innovation and may request that the
current telecom business reduce its costs for the current
governments. As a result, it will have an impact on the company's
productivity and enhance competition.
- Threat of new entrants
Every firm is constantly at risk from a competitor on the hunt for
another way in. Another competitor in the corporate market is fiber
optics innovation. This has a significant impact on the fixed-line
telecom business, as this is another innovative innovation that
buyers are interested in. It will create competition in the fixed-line
telecom market, lowering its profitability.
- Rivalry among existing firms
Because of the low volumes across old innovation enterprises,
there would be more contention issues, which will lower productivity
and increase rivalry among old innovation ventures.
- Threat of substitutes
Fiber optics may become a substitute invention in the not-too-
distant future, posing a serious threat to contemporary telecom
innovation. As a result, the current telecom business faces the risk
of being replaced, and its benefits will be reduced in the not-too-
distant future.
4. By 2018, the online travel agency industry had consolidated around
two leaders: Expedia (which had acquired Travelocity, Lastminute.com,
Hotels.com, Trivago, and Orbitz) and Priceline (which owned
booking.com, Kayak, Rentalcars.com, and OpenTable). These two
market leaders competed with numerous smaller online travel agents
(e.g., TripAdvisor, Travelzoo, Skyscanner, Ctrip), with traditional travel
agencies (e.g., Carlson Wagonlit, TUI, American Express—all of which
had adopted a “bricks ‘n’ clicks” business model), and with direct online
sales by airlines, hotel chains, and car rental companies. Amazon and
Google were both potential entrants to the market. The online travel
agents are dependent upon computerized airline reservation systems
such as Sabre, Amadeus, and Travelport. Use Porter's five forces
framework to predict the likely profitability of the online travel agency
industry over the next ten years.
- Bargaining power of suppliers
This field's supply exchange has been rather minimal, with a large
portion of the pay directly dependent on those companies, both
motels and ticket booking firms. When the overall cost divisions
were successful and profits from various travel and lodging areas
were utilized, the online travel planner business ruled the arranging
viewpoint with sellers, who had extremely restricted access to
expanded pay from unique stages that offer inn reservations and
other the travel industry and travel areas.
- Bargaining power of buyers
Because there are so many other options, the customer
arrangements are almost certainly equally strong. Because buyers
are still willing to switch to other service providers for better deals
and prices, keeping the buyer who is focused on that specific
service requires several ways to further develop customer
negotiating.
- Threat of new entrants
Because Amazon and Google are not participating in this industry,
no major brand will show that they are serious about competing with
Expedia and Priceline. It is a specific form of marketing environment
that eliminates the risk of new players and puts every large
company in support at a much lower risk.
- Threat of substitutes
Because huge corporations are now making market catch available,
the risks of replacement are still quite low. Expedia and Priceline
account for more than half of the internet-based travel service
sector. When a new substitute develops, it is well known that
certain corporations will buy a specific company and merge it with
them in order to preserve their deal-making in a similar industry at a
higher level.
- Rivalry among existing firms
Because the movement industry's regulatory environment is so
volatile, many companies in the specific promoting environment are
unquestionably growing their access to more advanced estimating
and inventive techniques to deal with customer fascination. Expedia
and Pricelina, for example, are directly impacted by the addition of
 new plants and the acquisition of smaller competitors. In this type of
strategy, the degree of repercussions of diesel-related
organizations in the area is filling in.
5. Walmart (like Carrefour, Ahold, and Tesco) competes in several
countries of the world, yet most shoppers choose between retailers
within a radius of a few miles. For the purposes of analyzing profitability
and competitive strategy, should Walmart consider the discount
retailing industry to be global, national, or local?
Walmart should consider the discount retail company to be open to the
public because its productivity and cutthroat structure are easier to
deconstruct. Clients require things depending on their preferences,
thus it is critical to group items according to their identity or location. If
Walmart is unable to provide this level of service, customers will likely
seek out other stores that can meet their expectations. One of the key
goals of corporations is to meet the demands and requirements of its
customers.
6. What do you think are key success factors in:
1. the pizza delivery industry?
There are a number of essential success aspects in the
pizza delivery process, including:
1. Advertisement
Being a well-known company has a lot of advantages for
businesses. As a result, entrepreneurs should consider a variety
of approaches to reach out to potential clients, particularly in
current age when everything is more convenient and
uncomplicated to obtain thanks to innovation. Entrepreneurs
should leave a lasting impression on their name so that
customers remember them when they think of pizza.
2. The pizza's flavor or its recipe
The one-of-a-kind tasting pizza should also leave a positive
impression on the customers. This will benefit them as well in
terms of expanding their organization, because in a business,
client feedback on the experience of your business or
administrations is really valuable. Similarly, entrepreneurs
should examine market demands and adjust their menus to
satisfy those demands. They need to figure out how to adapt to
the most recent trend that the clients are looking for every day.
3. Delivery on time
Actually, as a customer purchasing a pizza, I consider the time
of delivery because we all know that the flavor of the pizza
varies depending on the temperature, thus it is vital to deliver
the pizza swiftly to meet the needs of the customers.
 4. Employees
Employees are the primary point of contact with clients; whether
it's a positive or negative experience, representatives can
influence whether or not customers return or purchase your
product. Along these lines, it is vital to adequately prepare their
representatives and compensate them for the work they perform
in order to make a significant difference for the company.
2. the credit card industry (where the world's biggest issuers are:
Bank of America, JPMorgan Chase, Citibank, American
Express, Capital One, HSBC, and ICBC)?
The following are key success criteria in the Mastercard
business:
1. Optional payments
This will be really beneficial and attract more potential clients,
especially if the clients realize that it is more beneficial to this
specific Visa business than other competitors. These days,
when people evaluate how they may save a significant amount
of time owing to their hectic schedules, they will most likely
choose the option that benefits them the most. In this way,
payment options are one of the most important success aspects
that will undoubtedly benefit entrepreneurs.
2. Availability and accessibility
Clients prefer where it is more advantageous for them, and the
accessibility and availability of the Visa, which they can use
even outside the country, is very valuable for them, and this will
truly attract more potential clients.
3. Security and safety
We're talking about money, and obviously, clients or potential
clients are concerned about the safety and mystery of their
cash. Clients are incredibly defensive and sensitive when it
comes to money, therefore it's vital to keep them safe and
secure at all times so they can trust you.