Porter’s Five Forces Industry Analysis
Michael Porter’s assume that a corporation is most concerned with the intensity of competition within its industry; Porter’s approach to industry analysis can be used to determine profit potential measured in terms of long-run return on invested capital. The five key elements that Porter analyzes in an industry’s environment to understand why the particular industry is lucrative as a whole are Threat of New Entrants, Bargaining Power of Suppliers, Bargaining Power of Buyers, Threat of Substitute Products or Services, Intensity of Rivalry among Competitors (Dress, 2016).
I. Threat of New Entrants: Medium
In the motion picture industry, the barriers to enter are moderate because the high level of capital …show more content…
Major film studios have long-term agreements with producers and distributors while independent moviemakers and small film studios do not have these opportunities to fund and distribute their movies. For instance, big film studios during their planning and pre-production phases have more channels to obtain funds from distributors and big theater chains due to the existing agreements among the parties. Independent producers and small film studios experience serious complications distributing their movies/films to a mainstream audience due to lack of popularity and agreement with powerful distributors (McGinley, …show more content…
However, movie theaters are the one who have the final word to assign auditoriums and schedule to play the movies, the give them power to bargain. A couple of decades before if one did not see the movie on the theater the only options were to wait the television channel play it or wait for the movie VCR to be release. Today, one cans do stream or download pirated content. This activity is illegal in the USA; however, there still some individuals who download piracy content to watch a movie. The Institute for Policy Innovation, a Lewisville, Texas-based claimed in its 2006 report, The True Cost of Motion Picture Piracy to the U.S. Economy” that motion picture piracy now results in total lost output among all U.S. industries of $20.5 billion annually”.
Furthermore, the word –of-mouth influence on the buyer’s behavior has increased due to the social media. Now, social media channels like Facebook, Twitter, Instagram, online blogs and review post in YouTube channels are the main sources when people wants get feedback about a movie playing in theaters. Negative critics on social media may discourage some consumers from going to see the movie. The fear of paying for a bad movie and waste time as well as their money make more people search on the social media to know if they should watch a movie or not
Michael Porter’s assume that a corporation is most concerned with the intensity of competition within its industry; Porter’s approach to industry analysis can be used to determine profit potential measured in terms of long-run return on invested capital. The five key elements that Porter analyzes in an industry’s environment to understand why the particular industry is lucrative as a whole are Threat of New Entrants, Bargaining Power of Suppliers, Bargaining Power of Buyers, Threat of Substitute Products or Services, Intensity of Rivalry among Competitors (Dress, 2016).
I. Threat of New Entrants: Medium
In the motion picture industry, the barriers to enter are moderate because the high level of capital …show more content…
Major film studios have long-term agreements with producers and distributors while independent moviemakers and small film studios do not have these opportunities to fund and distribute their movies. For instance, big film studios during their planning and pre-production phases have more channels to obtain funds from distributors and big theater chains due to the existing agreements among the parties. Independent producers and small film studios experience serious complications distributing their movies/films to a mainstream audience due to lack of popularity and agreement with powerful distributors (McGinley, …show more content…
However, movie theaters are the one who have the final word to assign auditoriums and schedule to play the movies, the give them power to bargain. A couple of decades before if one did not see the movie on the theater the only options were to wait the television channel play it or wait for the movie VCR to be release. Today, one cans do stream or download pirated content. This activity is illegal in the USA; however, there still some individuals who download piracy content to watch a movie. The Institute for Policy Innovation, a Lewisville, Texas-based claimed in its 2006 report, The True Cost of Motion Picture Piracy to the U.S. Economy” that motion picture piracy now results in total lost output among all U.S. industries of $20.5 billion annually”.
Furthermore, the word –of-mouth influence on the buyer’s behavior has increased due to the social media. Now, social media channels like Facebook, Twitter, Instagram, online blogs and review post in YouTube channels are the main sources when people wants get feedback about a movie playing in theaters. Negative critics on social media may discourage some consumers from going to see the movie. The fear of paying for a bad movie and waste time as well as their money make more people search on the social media to know if they should watch a movie or not