Data Bases • Custom Term Papers • Free Term Papers • Free Research Papers • Free Essays • Free Book Reports • Plagiarism? Links • Top 100 Term Paper Sites • Top 25 Essay Sites • Top 50 Essay Sites • Search 97,000 Papers @ DirectEssays.com • Search 101,000 Papers @ ExampleEssays.com • Search 90,000 Papers @ MegaEssays.com Free Essays • Term Paper Sites • Chuck III's Free Essays • Free College Essays • TermPaperSites.com • My Term Papers • Get Free Essays • Essay World • Planet Papers	Search Lots of Essays Back to Subjects - Business five force analysis five force analysis The industry being analyzed is the tobacco industry. The tobacco industry manufacturer cigarettes, snuff, chewing tobacco, etc. a. The customers are the wholesalers and retailers of tobacco products. There are a large amount of customers in this industry, which makes the customers not very powerful. b. I believe the customers do make high-volume purchases, which would make them powerful. c. The purchases customers make from the industry are the same relative to the amount expended for items from other industries. This causes the customer to have moderate power. d. The products customers are buying are differentiated because the customers are selling to people who want a certain brand of cigarette, snuff, and tobacco, etc., making the customers buy from a specific company that sells those brands. This weakens the power of the customer. e. I believe there are a wide variety of customers and therefore the profitability of each customer varies. The customers who earn low profits are under pressure to keep the costs of their purchases down. This type of customer would be powerful. On the other hand, the customers who earn high profits are not as concerned with the costs of their purchases, making them not as powerful. Overall, when it comes to customers making profits from this industry, they would have a moderate amount of power. f. The customers can easily obtain accurate information on the selling industry. This gives the customer power when it is time to negotiate the cost of the products. g. The customers can not easily vertically integrate backward and become their own supplier, It would be too difficult for a wholesaler or retailer to start making tobacco products. This makes the customers not very powerful. h. Customers can easily switch from one seller to another making themselves powerful. i. Overall, I think the customers have a moderate amount of power. a. The suppliers are the growers of the tobacco. There are few suppliers making them very powerful. b. Few substitutes exist for the product that is supplied, making the suppliers very powerful. c. Suppliers are dependent on the buying industry for sales and to make a profit, weakening their power. d. The tobacco industry definitely needs the tobacco growers service to survive, making the suppliers powerful. e. The tobacco growers (suppliers) do not have differentiation in their product. This weakens their power because the tobacco industry does not have to pay more for the tobacco because it is basically all the same. f. It is not costly to switch suppliers. Some companies choose to switch to a less expensive supplier in order to lower the cost of their products. This weakens the power of the suppliers. g. The suppliers can not easily vertically integrate forward and become their own customer because of the many costs in manufacturing tobacco. h. Overall, I believe the suppliers are highly powerful in the tobacco industry. a. Overall, the growth rate of the industry is moderate. Tobacco consumption is rising rapidly in developing countries. However, in the U.S. cigarette consumption has been slipping by about two percent per year. This means that there is a moderate level of competition for the existing tobacco industry competitors. b. There is a mixture of fixed costs and variable costs associated with this industry. This keeps competition at a moderate level because the companies want to increase sales possibly by lowering costs and still earn a profit. c. There is a high level of product differentiation between tobacco industry competitors. For example: RJR Nabisco offers major tobacco brands such as Winston, Salem, Camel and more. Manufacturing many different tobacco products keep competition levels low. d. There are not many competitors, which means the total market does not have to be divided in many ways. There are eight well-known tobacco manufacturers in the world that each owns a good size of the market. e. There are high exit barriers in the tobacco industry. This means that the manufacturers of tobacco have a lot to lose if they should decide they want to withdraw from the industry. This makes the competition high because the tobacco manufacturers are more likely to stay in the industry even if the profits are low. f. There is a moderate level of rivalry in the existing tobacco industry competitors. The tobacco manufacturers continually are striving to market a more safe form of tobacco and lower prices, which will keep the competition in this industry alive. Potential Competitors (entry barriers keeping them out) a. Economies of scale, a barrier in the tobacco industry, make it more efficient to have a larger facility to produce higher volumes of cigarettes, chewing tobacco, etc. b. Large start-up costs in the tobacco industry keep the potential competitors out of the market. c. In order to survive in this industry, a tobacco manufacturer should offer a variety of tobacco products. This idea of product differentiation makes it harder for a new firm to gain customers. d. The barrier of high switching costs does not apply to the tobacco industry because the cost to switch from one tobacco grower to another is low. e. Access to distribution channels is not a significant barrier to keep potential competitors out of the tobacco industry. There are many different people to distribute new companies products. f. Restrictions make it harder for smaller rivals or new entrants to persuade consumers to switch tobacco brands. Also, many legal threats faced by tobacco manufacturers make it harder for new firms to start being profitable. g. The idea of favorable location and patents does not apply in the tobacco industry because it does not matter where they manufacturer the product it only matters what customers will buy them. Thus, not creating a barrier for a potential competitor. h. The same industry competitors have been around for sometime, this makes it difficult for a new entrant to survive against the manufacturers that have been competing for sometime. i. Overall, it is difficult to enter the tobacco industry. a. There are few substitutes for the tobacco industry. However, the substitutes that they do have are easily available. The two substitutes available are gum and the nicotine patch. Fortunately for the industry, customers do not promote these items as alternatives to tobacco and therefore do not pose a threat to this industry. a. The analysis above indicates the following: the customer and existing competition forces are moderate, the supplier force is strong and the threat of potential entrants and substitutes are weak. b. This is a moderately difficult industry in which to compete for existing competitors because of the pressure to keep costs low and keep up with technology. c. This would not be a good industry for a new firm to enter because of the extremely difficult barriers to entry. d. I do expect existing firm competitors to have high profits and sales growth, because tobacco sells itself. As long as the companies in this industry keep up with technology and marketing they will see an increase in their sales, especially abroad. Bibliography: Word Count: 1179
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