Porter’s five forces analysis of the entertainment and leisure industry comprises of a broad scope of issues. The acknowledgment of Porter’s (1980) five forces systematic structure is famous in the whole world since it provides the general knowledge on how to handle business. This is based on all the aspects of business like the suppliers, threats, consumers among other business related issues. Porter’s five forces analysis also centers on competitive forces, which collectively determine the profitability as well as the attractiveness of any industry. The case study for this assignment will be based on the Warner Bros entertainment firm in New York. An example of a company in the entertainment and leisure company is Warner Bros, a fully developed company in the world ranking. This is because it has been named among the top hundred successful companies in the world. Warner Bros has increased the national growth of many companies through participating in community development schemes like educational programs as well as healthcare. They also donate to the developing countries as well as recruit people from all over the world. Warner Bros Company has augmented the national growth of many countries, which are still in the stages of development.
Strategy is also an important tool in the field of business and is has a huge linkage to the Porter analysis. Strategy refers to the process of combining the goals and objectives of the entertainment industry particularly in New York into one comprehensive plan. The strategy is usually drawn from the market research of the prospective company and is geared toward attaining the maximum profit potential. Strategy is also based on the general activities the firm puts into practice in order to ensure the entertainment industry flourishes. The basics of strategy as a process requires the executive personnel as well as the workers to be responsible and committed to their tasks in order to realize positive growth in the entertainment industry.
Porter’s analysis is also used by the entertainment industry like Warner Bros in line with the business and not as a starting point for the Company’s progress. This is because the company is viewed as the market with the closely related products; therefore, it should not have a huge gap with the products in their selling of goods and services. Warner Bros Company also operates as a sole industry; therefore, it has developed at least one of Porter’s analyses to deal with their business ventures. The global income and organization is depicted by the formulation and adoption of Porter’s analyses. This analysis draws the guidelines as well as expectations in Warner Bros.
Porter claims that an effectual aggressive approach takes the offensive or cynical actions in order to generate a defensible position except the five spirited forces. The entertainment and leisure industry expands and brings with it several issues, i.e. licensing, intellectual property, contract and investment as well as distribution. For instance, movies have become very popular in the contemporary society giving the rise to augmented selling and production. The United States of America is well known for the best movie studios. This makes other countries hire their services for the purpose of marketing their products. This is linked to Porter’s analysis of comprehending the dynamics of the competitor industry. It helps the entertainment and leisure industry to assess the potential opportunities for their prospect business ventures. It also helps the industry to draw some differences for other entertainment industries that offer the same services.
Competition analysis usually indicates a possible tool to evaluate the entertainment industry. The perfect competition along with Porter’s five forces analysis looks at the levels of opportunity risk and the profits made in the industry. The analysis helps the Warner Bros Company in determining the long-run profits they intend to make over a certain period of time. Porter’s analysis also focuses on the entry behavior into the market, the buyers, as well as the suppliers’ responsibilities in the market. The supplier power comprises of the supplier concentration ratio of approximately forty percent of the other factors influencing Warner Bros Company. The supplier is also capable of putting a difference into the inputs as per the market. For instance, if consumers have some higher demand movies, a supplier (the entertainment and leisure industry) increases its input. This goes along with an increase or decrease in the cost of movies. The supplier also has the power over a total purchase of the industry. The entertainment and leisure industry has many fields to digress. For instance, it includes the movie production, broadcasting, and recreation services among others. Porter’s analysis also gives an analysis of the buyer power. This is based on the ability of consumers to bargain the products sold to them. The consumers are also liable to the information about the product as well as the volume of products sold to them. The buyers usually depict their impact on the industry. This means that when the buyer’s power is sturdy, the link with the entertainment industry is closer. This is described by economists as monopsony. There are many suppliers, whereas the buyer is one. Therefore, the buyer determines the market price as well as the quality of products.
Porter’s five forces analysis includes three forces that describe the competition from external sources of the entertainment industry as well as two internal threats. This is the macro and micro environment forces of any business. A change in the micro and macroeconomic forces necessitate the entertainment industry to reconsider its market place as long as the industrial information is available. The entertainment and leisure industry is capable of applying their important competencies and business models in order to achieve such a profit, which is usually above the average profit that the industry gets. The higher profits are among the best compared to other media companies like Disney, Colombia Pictures, Paramount, and Universal Media among others. For instance, the profits made in the entertainment and leisure industry are low even after applying some special business tactics. The analysis also consists of substitute products in the Warner Bros Company in New York. This includes market threats from new entrants in the entertainment industry in New York like paramount Media along with Columbia pictures. The threat of the new competition indicates that profitable markets that have high returns generally make an impression on new firms in the entertainment and leisure industry. The profitability decreases with such kind of a competitive industry. The resolution to such market is only through the blocking of the new market’s entry by using the incumbents, which are the abnormal profit rates that go towards zero. Incumbents block the market through creating prices that distract the normal prices. The prices may lead to a loss in the Warner Bros Company. The type of competition that is deduced from this situation is an imperfect competition, which gives every supplier the opportunity to sell the specific products in the Warner Bros Company. This implies that the Warner Bros Company has barriers to the market, which are due to the sudden situation of high and low exit barriers. This means that only a limited number of firms can access the market, while the non-performing firms exit easily.
There is also a threat of substitute products and services in other entertainment industries in New York. This is caused by the consumers that go for alternative services offered by other entertainment companies like Walter Disney. It is also caused by the existence of a product that exceeds the normal boundaries. For instance, the Warner Bros Company may come up with a new channel that is extremely expensive for consumers to afford its services like advertising. This makes the consumers search for the options from other entertainment industries that offer the same services at a lower price.
Industry rivalry
Industry rivalry refers to the situation that the business enterprise engage in regarding prices as well as services. The businesses experience price wars, which leads to competitive price reduction. More so, the businesses engage in investment innovation and new products. The intensive promotion in sales and marketing is also experienced. The stagnating markets usually face intensive competition due to their size as well as growth prospects of below fifty percent. This is accompanied by the capacity and the high competition that ranges at above sixty percent.
Which are the most important forces that affect the entertainment and leisure industry?
The most crucial forces for the entertainment and leisure industry are the competitive force. This is because competition is a top consideration in the business world. The force is dependent on the firm’s strategic actions to uphold the top position in the market. For instance, the entertainment industries in the United States of America face a lot of competitions from Britain as well as from the Asian world. Africans also are being as an emerging entertainment world. A good example is Nigeria and South Africa. Their movie production level and competent has reached to greater heights. However, the top media Companies still remain in the US.
On the other hand, leisure is an activity that aids in the one’s relaxation and personal growth. This quality of life enhances the individual’s lifestyle since his or her childhood. The fascination of scenes and places draws one’s mind to a special environment, while helping the one to reduce stress for a while. Such leisure activities include tourism, culture expo, sports, as well as fitness. The level of competition largely gives the company an oversight of the probable environment. The competition strategy is easy to use by economists as well as the Bureau of Census. The competitive strategy also helps to show the market share of Warner Bros Company to be higher as shown in the table below. Assessing the competitive model, one deduces that the approximated eighty percent ratio shows an augmented market share. This is held by the largest firms where the industry is being the most concentrated.
The competitive market also helps Warner Bros Company to be aware of new products in the market; for example, when a competitor company begins to offer distinct services. The competitor company does this so as to discourage the existing entertainment firm. The firm could adopt the new technology and business ideas on how to improve and update their services. The Warner Bros has a wide scope of rivalry as well as tarnishing the company’s name, which is done by other companies. Therefore, the competitive market steers the production and investment of Warner Bros Company.