explain why MC Donalds are examples. While the domestic market for their product
ID: 2549272 • Letter: E
Question
explain why MC Donalds are examples. While the domestic market for their products is international demand how allowed them to maintain double digit growth. What are the five competitive forces that affect prices and profitability in an industry? As a follow-up to question 8, give two examples of powerfiul suppliers Who has the greater advantage for research and development in the pharmaceutica industry, large drug companies or smaller ones? What is meant by the concept of rotational investing? Explain why low interest rates make housing stocks and other related stocks attractiv If an investor fears higher inflation, what possible industries might he or she choose investment?Explanation / Answer
The five competitive forces that affect prices and profitability in an industry are:
1. Power of buyers – This force deals with the ability of customers to influence prices as well as profitability. This force is affected by number of buyers, ability of the buyers to substitute, and significance of each buyer in terms of the size of their orders.
2. Power of suppliers - This force deals with the ability of suppliers to influence prices as well as profitability. This force is affected by number of suppliers, size of each supplier, uniqueness of their products and services and switching costs for the company.
3. Threat of substitutes – Substitutes that have been developed by competitors can be used in place of the product/service being provided by the company. Where the substitution is easy or where substitution leads to lower costs then the pricing power of the company will get weakened.
4. Threat of new entry – This force affects prices and profitability significantly. The lower is the time and money that it takes competitors to enter the market the higher will be the threat to the company’s pricing power. Factors considered here are time and cost of entry, economies of scale, cost advantages and barriers to entry.
5. Competitive rivalry – This force is affected by the number of competitors in the industry and their ability to threaten the company. The higher is the number of competitors (providing similar products and services) the lesser will be the pricing power of a company in the industry.
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