Would someone give some insight to these questions? (Pertains to Five Force Anal

Question

Would someone give some insight to these questions? (Pertains to Five Force Analysis)

1) Industry "A" contains 231 businesses (i.e. members, rivals, incumbents). Each business in industry "A" has no more than 2% market share. Industry "B" has 7 businesses and the largest company has a 60% market, the second largest has a 35% market share, and the remaining 5 companies have a 1% market share. Assuming everything else between industry "A" and "B" is the same (i.e. ceteris paribus), which industry has more competition? Why? Which force captures the industry trait referenced in this example?

2) Suppliers of industry "M" possess all the assets and competencies necessary to provide the same product as industry "M" to the buyers of industry "M."Suppliers of industry "N" do not have access to the technology, distribution channels, or marketing expertise to produce or sell the products of industry "N."ceteris paribus, which industry has more competition? Why? Which force captures the industry trait referenced in this example?

3) Members of industry "X" are manufacturers and sell to hundreds of different retailing companies. As a buyer, any individual retailing company constitutes less than 2% of sales for a manufacturing business in industry "X."Members of industry "Y" are manufacturers and sell to three different retailing companies s. As a buyer, any individual retailing company constitutes more than 92% of sales for a manufacturing business in industry "Y." ceteris paribus, which industry has more competition? Why?Which force captures the industry trait referenced in this example?

Explanation / Answer

Ans1: Industry A has more competition, as industry concentration of B is high which indicates only a few firms holding a large market share making it less competitive i.e. closer to monopoly whereas for industry A the concentration ratio is low which shows that the industry is characterized by many rivals, none of which has a significant market share. The Rivalry force captures the industry trait in this example.

Ans 2: Industry N has more competition as Suppliers of this industry can exert bargaining power on it by raising prices or reducing the quality of purchased goods and services or vice versa depending upon the numbers of suppliers available in the market. Bargaining Power of Supplier force captures the industry trait referenced in this example.

Ans 3: Industry X has more competition as here the power of buyer is strong as X is having a share of 2% only, the relationship of the buyer to the producing industry is in economic terms a monopsony (a market in which there are many suppliers and one buyer) but the pure form of monopsony doesn’t exists. Bargaining power of buyer force captures the industry trait referenced in this example.

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