An Industry Through The Lens Of Porter's Five Forces Model

1521 Words Apr 23rd, 2016 7 Pages
Industry Analysis
Examining an industry through the lens of Porter’s Five Forces model provides potential investors with key factors to consider for the overall industry (Porter, 2008):
• Threat of new entrants
• Power of Suppliers
• Power of Buyers
• Substitutes
• Rivalry
Threat of new entrants
Threat of new entrants is sparingly addressed. While there are references to capital-intensive businesses, the major focus regarding competition is the strategy of being the “first mover” and an “innovator” (Winters & Franson, 2001, p. 64). The important consideration is the amount of capital required to start and maintain business segments, relative to the time to earn a solid return on the capital invested (Hitchner, 2011, p. 154, 1091). While the high capital needs are considered a barrier to entry, the uncertainty of the length of time to before returns are realized is an investment concern.
Power of suppliers
Power of suppliers is not addressed in the report. Enron has energy producing business lines, thus, the vertical integration lowers the supplier risk for that portion. However, with the sale of Portland General, and the other business segments Enron is entering, the risk of purchasing from suppliers is changing. The key area of concern is the commodity trading business. Because there is little information, it is unknown how vulnerable Enron is on the purchase side of financial transactions. Certain financial instruments are structured so that the buyer agrees to purchase at…

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