Chapter 5, Problem 10MBD

Explanation of Solution

Implementing Porter’s five forces to measure attractiveness in entering movie rental business:

The Porter’s five forces model can be used by the given company to ensure the attractiveness in entering movie rental business:

• Bargaining power of buyers: Power is low for buyers when their choices are limited by a fewer sellers among producers of a particular product type.
• Bargaining power of supplier: When buyer has less power and choices then suppliers have high power, when buyer has more power and suppliers have low power and choices.
• Availability of substitute goods and services: When there are many substitutes available to good or service then the threat from substitutes is high. When fewer substitutes are present then threat is low.
• Threat of new entrants: The threat from entry of new firms is high when can easily enter a market and threat is low when they cannot easily enter a market.
• Rivalry among existing customers: When there is fierce competition in market then the rivalry is high and competition is low when competitors are complacent.

Strategy used by the Movie Rental Business:

The given company can use the generic strategy from porter’s five force model as:

• “ Product Differentiation”:
  • Significant research must be done to embrace IT...