- Do a SWOT analysis for Audible: A) What are some external opportunities and threats? (Here you need to discuss both general environmental trends as well as do a Porter’s 5 forces analysis). B) What are some internal strengths and weaknesses? What is Audible’s value proposition? In other words, what are its capabilities and core competencies? (You can use the Value Chain framework here). How does it create value for the customer?
- Outline Audible’s 5 elements of strategy.
- Based on your analysis (question 1) summarize the main issues Audible faces? What options are open to the company?
- Is this business worth saving?
- Who is likely to want to purchase Audible outright? Why?
- Who is likely to want to invest in this company? Why?
- How can Audible become a profitable company?
MGT 401- Strategic Management
Porter’s 5 Forces
Examples of Assessing Industry Attractiveness
- Always assess the attractiveness of an industry from the standpoint that you are already in the industry.
- Specific determinants (such as industry growth rates) have different impacts on different forces (such as rivalry among competing firms and the threat of new entrants).
|Rivalry Among Competing Firms||Industry Growth – Slow||Slow industry growth increases the rivalry among firms already in the industry as, for each to grow, they must cannibalize other firms’ sales. These other firms will resist. So slow industry sales increase rivalry making an industry less attractive.|
|Industry Growth – Rapid||Rapid industry growth decreases the rivalry among firms already in the industry as each firm can grow by attracting the new customers instead of cannibalizing other companies’ customers. So rapid industry growth rate decreases the rivalry among competing firms, thus making the industry attractive.|
|High Fixed Costs||High fixed costs increases the rivalry among competing firms. If a firm has a substantial investment in fixed assets (such as a steel mill), the company faces great pressures to keep the asset productive. So high fixed costs increase the rivalry among competing firms, thus making an industry less attractive.|
|Threat of New Entrants||Large Economies of Scale Required||If an industry requires high economies of scale for a firm to be efficient, such economies serve as a deterrent to potential entrants. Companies who are thinking about entering the industry would have to enter on a large scale which is more difficult (more $, more effort, etc.) than entering on a small scale. Thus, a requirement for large economies of scale reduces the likelihood of new firms entering the market, which makes an industry more attractive.|
|Capital Requirements – High||High capital requirements make an industry attractive from the standpoint of new entrants (assuming that you have the capital). For new firms to enter, they would have to invest in significant capital resources. As with economies of scale, this deters new entrants. As new entrants are deterred, high capital requirements decrease the likelihood of new entrants which makes the industry more attractive.|
|Access to Distribution Channels – Restricted||When access to distribution channels is restricted or difficult to obtain, it is unlikely that new firms will enter. So restricted access to distribution channels make an industry attractive as new firms are unlikely to enter.|
|Industry Growth – Slow||When industry growth is slow, few new entrants are likely. This makes an industry attractive from the standpoint of the threat of new entrants as few are likely to enter the market (notice the difference between the effect of slow industry growth between (1) the rivalry among existing competitors, and (2) the threat of new entrants.|
|Industry Growth – Rapid||Rapid industry growth is an invitation for new firms to enter the market. This means that the threat of new entrants is high, which in turn makes the industry unattractive.|
|Bargaining Power of Buyers||Buyer Volume – High||When buyers purchase a large portion of industry production, they are powerful. Powerful means that they can dictate prices, features, and service. So when individual or a group of buyers purchase a large volume, they are powerful. This makes an industry unattractive.|
|Buyer Volume – Low||When buyers purchase only a small portion of industry production, they have little influence over the manufacturers. Such buyers have low power which makes an industry attractive from the standpoint of those firms already in the industry.|
|Switching Costs – High||When switching costs for buyers are high, they will have difficulty changing from using your product to that of another firm. This makes an industry attractive.|
|Switching Costs – Low||When switching costs for buyers are low, they can easily change from using your product to using your competitor’s product in the event you raise prices. This makes an industry unattractive.|
|Threat of Substitutes||Differentiated Product||Differentiated products reduce the threat of substitutes as buyers who find value in the manner you differentiate your products may not find the same value in substitute products. This makes an industry attractive.|
|Undifferentiated Product||Undifferentiated products increase the threat of substitute products as buyers find value on a cost basis. This makes the threat of substitute products high, which in turn makes an industry unattractive.|
|Substitutes – Numerous||When there are numerous substitutes, the threat of substitutes is high which makes an industry unattractive.|
|Substitutes – Few||When there are few substitutes, the threat of substitutes is low which makes an industry attractive.|
|Bargaining Power of Suppliers||Threat of Forward Integration – High||When the threat of forward integration by suppliers is high it means that your suppliers could easily become your competitors. This makes an industry is unattractive.|
|Threat of Forward Integration – Low||When suppliers have no credible threat of forward integration, an industry is attractive.|
|Switching Costs – High||When a firm has a potentially high cost of switching from one supplier to another, that supplier has a high degree of leverage over the firm. This makes an industry unattractive.|
|Switching Costs – Low||When a firm has a low cost of switching from one supplier to another, that supplier has low leverage over the firm. This makes an industry attractive as the firm can easily change suppliers to reduce costs, seek more innovative suppliers, etc..|