Conchada Jea Millar, A.

2BSA-4
Assignment #3
July 24, 2020

Self‐Study Question

1. From Table 3.1, select a high‐profit industry and a low‐profit industry.

From what you know of the structure of your selected industries, use
the five forces framework to explain why profitability has been high in
one industry and low in the other.
Altria Group Inc., delivered impressive long-term results for
shareholders by always focusing on its bottom line.
Threats of new entrants New entrants in Cigarettes brings
innovation, new ways of doing things and put pressure on Altria
Group, Inc. through lower pricing strategy, reducing costs, and
providing new value propositions to the customers. Altria Group, Inc.
has to manage all these challenges and build effective barriers to
safeguard its competitive edge. By innovating new products and
services. New products not only brings new customers to the fold but
also give old customer a reason to buy Altria Group, Inc. ‘s products.

Bargaining Power of Suppliers

By experimenting with product designs using different materials so
that if the prices go up of one raw material then company can shift to
another.
Altria doesn't just rely on its customers to generate greater profits. It
has also turned inward, seeking to simplify its business operations
and engage in cost management efforts in order to improve its core
businesses and invest in future growth initiatives.

Bargaining Power of Buyers

By building a large base of customers. This will be helpful in two
ways. It will reduce the bargaining power of the buyers plus it will
provide an opportunity to the firm to streamline its sales and
production process.
By rapidly innovating new products. Customers often seek discounts
and offerings on established products so if Altria Group, Inc. keep on
coming up with new products then it can limit the bargaining power
of buyers.
Threats of Substitute Products or Services
By being service oriented rather than just product oriented.
By understanding the core need of the customer rather than what the
customer is buying.
By increasing the switching cost for the customers.
Rivalry among the Existing Competitors
By building a sustainable differentiation
By building scale so that it can compete better
Collaborating with competitors to increase the market size rather
than just competing for small market.

Delta Airlines
Industry Competition
The level of competition in the airline industry is high. The big airlines
essentially fly to the same places out of the same airports for about the
same prices. The amenities, or lack of amenities, they offer are
similar, and the seats in coach are just as cramped no matter which
airline you choose. Delta's traditional rivals include United and
American, but the company also faces major competition from the
growing popularity of value carriers, most notably Southwest, but
also JetBlue and Spirit.
Bargaining Power of Buyers
Delta can respond to this market force by conducting market
research and offering more direct flights at low prices to the
destinations fliers search for most frequently on third-party
platforms. Additionally, the company should strengthen relationships
with credit card companies and strive to offer the best reward
programs; customers are loath to switch carriers when they have
accumulated what they view as "free" miles with a particular airline.
The Threat of New Entrants
Potential new entrants to the marketplace represent a minimal threat
to Delta. The barriers to entry in the airline industry are remarkably
high. The operating costs are massive, and the government
regulations a company must navigate are numerous and exceedingly
complex. There is not a single airline founded during the 21st century
that has even a 2% market share. JetBlue, founded in 1998, represents
the newest airline to make a dent in the industry, and the company's
market share is still less than one-third of Delta's
Bargaining Power of Suppliers
Delta's suppliers have a strong incentive to keep the relationship on
good terms. Delta can likely find a replacement supplier without a
problem if the relationship goes bad. The supplier, by contrast, is
 unlikely to find another buyer capable of replacing the sales volume
represented by Delta.
Threat of Substitutes
A substitute, as defined by the Five Forces model, is not a product or
service that competes directly with the company's offerings but acts as
a substitute for it. Thus, a United flight from New York to Los Angeles
is not considered a substitute for a Delta flight with the same start
and endpoints.

2. With reference to Strategy Capsule 3.1, use the five forces framework to
explain why profitability has been so high in the US market for
smokeless tobacco.
Although U.S. tobacco production has decreased significantly since
the 1980s (from nearly 180,000 tobacco-growing farms to about
10,000 in 2012), the United States continues to be a leading producer
of tobacco leaves. The United States is the fourth largest tobacco-
producing country in the world, following China, India, and Brazil.
Farms in the United States harvested more than 533 million pounds
of tobacco in 2018. In 2018, two states–North Carolina and
Kentucky–accounted for more than 70% of total tobacco cultivation.
3. The major forces shaping the business environment of the fixed‐line
telecom industry are technology and government policy. The industry
has been influenced by fiber optics (greatly increasing transmission
capacity), new modes of telecommunication (wireless and internet
telephony), the convergence of telecom and cable TV, and regulatory
change (including the opening of fixed‐line infrastructures to “virtual
operators”). Using the five forces of competition framework, predict
how each of these developments has influenced competition and
profitability in the fixed‐line telecom industry.

Threat of New Entrants

It comes as no surprise that in the capital-intensive telecom industry the

biggest barrier to entry is access to finance. To cover high fixed costs, serious
contenders typically require a lot of cash. When capital markets are
generous, the threat of competitive entrants escalates. In the U.S., for
instance, fledgling telecom operators must still apply to the Federal
Communications Commission (FCC) to receive regulatory approval and
licensing. There is also a finite amount of "good" radio spectrum that lends
itself to mobile voice and data applications. In addition, it is important to
remember that solid operating skills and management experience is fairly
scarce, making entry even more difficult.
Power of Suppliers
At first glance, it might look like telecom equipment suppliers have
considerable bargaining power over telecom operators. Indeed, without
high-tech broadband switching equipment, fibre-optic cables, mobile
handsets and billing software, telecom operators would not be able to do
the job of transmitting voice and data from place to place. But there are
actually a number of large equipment makers around. There are enough
vendors, arguably, to dilute bargaining power. The limited pool of talented
managers and engineers, especially those well versed in the latest
technologies, places companies in a weak position in terms of hiring and
salaries.
Power of Buyers
Telephone and data services do not vary much, regardless of which
companies are selling them. For the most part, basic services are
treated as a commodity. This translates into customers seeking low
prices from companies that offer reliable service. At the same time,
buyer power can vary somewhat between market segments. While
switching costs are relatively low for residential telecom customers,
they can get higher for larger business customers, especially those that
rely more on customized products and services
Availability of Substitutes
Products and services from non-traditional telecom industries pose
serious substitution threats. Cable TV and satellite operators now
compete for buyers. The cable guys, with their own direct lines into
homes, offer broadband internet services, and satellite links can
substitute for high-speed business networking needs. Railways and
energy utility companies are laying miles of high-capacity telecom
network alongside their own track and pipeline assets.
Competitive Rivalry
Competition is "cut throat". The wave of industry deregulation together
with the receptive capital markets of the late 1990s paved the way for a
rush of new entrants. New technology is prompting a raft of substitute
services. Nearly everybody already pays for phone services, so all
competitors now must lure customers with lower prices and more
exciting services. This tends to drive industry profitability down. In
addition to low profits, the telecom industry suffers from high exit
barriers, mainly due to its specialized equipment.
 4. By 2018, the online travel agency industry had consolidated around two
leaders: Expedia (which had acquired Travelocity, Lastminute.com,
Hotels.com, Trivago, and Orbitz) and Priceline (which owned
booking.com, Kayak, Rentalcars.com, and OpenTable). These two
market leaders competed with numerous smaller online travel agents
(e.g., TripAdvisor, Travelzoo, Skyscanner, Ctrip), with traditional travel
agencies (e.g., Carlson Wagonlit, TUI, American Express—all of which
had adopted a “bricks ‘n’ clicks” business model), and with direct online
sales by airlines, hotel chains, and car rental companies. Amazon and
Google were both potential entrants to the market. The online travel
agents are dependent upon computerized airline reservation systems
such as Sabre, Amadeus, and Travelport. Use Porter's five forces
framework to predict the likely profitability of the online travel agency
industry over the next ten years.

Threat of New Entrants

The competition between travel agencies is not very high, since they
do not possess the same services agencies ecotourism, which is
characterized by specific activities and more personalized
experiences. In the ecotourism industry, the success of each agency is
to provide different packages with competitive prices, have coverage
throughout the country, and be reliable. Of these qualities it depends
on the customer's decision to choose one or another company.

Bargaining Power of Suppliers

In the industry of travel agency’s there’s many few suppliers, a travel
agency only need suppliers for publicity things like calendars, pens,
notebooks, mugs, all that kind of little presents that the agency give to their
customers, and some clothes and tools suppliers, for the workers of the
agency and if they want, decided to sell special clothes to their costumers
depend upon of the plan that the costumer choose. These is because, almost
all of the services that de agency offers is by outsource with other companies.
Power of Buyers
Consumers are given the opportunity to design their trips as they want, with
few or none limitations. Technology also decreases the switching
costs costumers can now be informed of the competition advantages and
disadvantages in a couple of minutes. Many sites such as booking.com and
despegar.com just require the user to create an account to use their
platforms without additional costs. As there are empowered consumers
linked by technology into clusters, that are well informed of the services that
offer the tourim industry, and considering los switching costs, the extend to
which this costumers can affect the tourism industry is high. To effectively
bargain power from the consumers, travel agencies must offer very
differentiated experiences.
Availability of Substitutes
Substitutes are products that customer can purchase Instead of the
industry's product, from another industry. Offers benefits to the consumer as
the product produced by the firms within the industry.
In the tourism industry nowadays factors such as the prices of airline tickets
are very important for the development of a travel plan. Facing competitors
such as the case of other online agencies, face travel agencies or even the
airlines directly. In Colombia a substitute for our website are airlines that
make to the costumer being easy to plan their own individual journey, is
therefore that it is super important for us planning customer a trip that
meets all their requirements and also does not involve customer have to stop
their activities to mobilize to buy a ticket.
Competitive Rivalry
As seen, in recent years there has an increase in the tourist visitors around
the world. In the year 2014, the region that achieves the greatest number of
visits was Americas, this aspect will be crucial for our industry. Taking into
account that the number of visitors is increasing, the number of travel
agencies will grow too. In our case, the eco-tourism agencies are a small
part of the total, and also, our principal customers wont be all the
international tourists that arrive here. Our key strategy, is that in
comparison with other eco agencies, we offer more than a walk through the
jungle, we offer the experience of living with the different cultures that
Colombia has, it wont be easy as a new firm of eco-tourism, but we will have
different plans that will bring us the most loyalty customers.

5. Walmart (like Carrefour, Ahold, and Tesco) competes in several

countries of the world, yet most shoppers choose between retailers
within a radius of a few miles. For the purposes of analyzing
profitability and competitive strategy, should Walmart consider the
discount retailing industry to be global, national, or local?

Walmart Inc.’s strategic planning must prioritize competition and new entry
in the retail industry to be global. Based on this Five Forces analysis, the
business needs to continually improve its capabilities to sustain its
competitive advantages. Walmart’s generic strategy and intensive growth
strategies establish the basic approaches to grow the business and keep it
competitive.
6. What do you think are key success factors in:
1. the pizza delivery industry?
2. the credit card industry (where the world's biggest issuers are:
Bank of America, JPMorgan Chase, Citibank, American Express,
Capital One, HSBC, and ICBC)?

1.) As explained in the 2018 Pizza Power Report, a state-of-the-industry

analysis, one emerging consumer demand is that of customization.
People are looking for high quality, made-to-order pizzas that suit
their specific tastes. For this reason, many pizzerias are expanding
their options for toppings, ingredients and dipping sauces – especially
amongst the millennial market.
2.) Technology is made up of discoveries in sciences, product
development and improvement in machinery, process, and
automation and information technology. It also includes a
combination of knowledge, information and ideas (Murungi 2003).
Recent advances in technology have created a surge in “technology-
based self-service” (Dabholkar, et al.2003). Such developments are
changing the way that service firms and consumers interact, and are
raising a host of research and practice issues relating to the delivery
of e-service. E-service is becoming increasingly important not only in
determining the success or failure of electronic commerce (Yang
2001), but also in providing consumers with a superior experience
with respect to the interactive flow of information. Dabholkar (1994)
claims that when the customer is in direct contact with the technology
there is grea