The Porter Five Forces Model is used for industry analysis and business strategy formulation. It examines the various elements that contribute to the attractiveness and competitiveness of a given industry. The five forces model analyzes the dynamics within a certain market. To foresee and manage future competition, it is necessary to grasp the industry’s dynamics and profitability. The corporations in Group 2 are the primary focus of my Porter Five Forces analysis. Verizon, AT&T, and Sprint/T-Mobile are examples of companies operating inside an oligopoly market structure, as they control 95% of the U.S. cellular industry. Additionally, the group two firms can influence the prices of the products and services, helping to prevent price rigidity and war (Dzhabarova et al.,2020).
Based on Porter’s five forces, new entrants in the firm pose a threat to Verizon as there will be an increased production capacity. Unless the demand for the products increases, additional capacity holds consumer costs down, resulting in lower returns for Verizon. Additionally, if the buyers have more purchasing power in the industry, there are higher chances that they will force the prices of goods and services for Verizon to go down and thus have a low-profit margin. Verizon has a tougher time turning a profit when suppliers in a sector have more clout because they may more easily impose their will on contractual conditions (Isabelle et al.,2020). Suppliers can exert pressure on rival businesses by increasing pricing and decreasing quality. A company’s profitability will suffer if it cannot pass on price increases for supplies to customers. According to Madsen & Grønseth (2022), the presence of substitute items reduces the profit margins available to businesses operating in a given market. The difficulty for these businesses in turning a profit increase as the attractiveness of the price-performance alternative provided by replacements grows.
Reference
Dzhabarova, Y., Kabaivanov, S., Ruseva, M., & Zlatanov, B. (2020). Existence, uniqueness and stability of market equilibrium in oligopoly markets. Administrative Sciences, 10(3), 70.
Isabelle, D., Horak, K., McKinnon, S., & Palumbo, C. (2020). Is Porter’s Five Forces Framework Still Relevant? A study of the capital/labour intensity continuum via mining and IT industries. Technology Innovation Management Review, 10(6).
