Exercises: Competition: competitive forces

List Porter's five competitive forces and explain in one sentence what each analyses.

Indicate which of Porter's forces corresponds to each event: a new franchise opens opposite, the main supplier increases its prices by 20%, customers can switch brands at no cost, and a product appears that fulfills the same need in a different way.

The figure shows the diagram of the five competitive forces, with rivalry at the centre. Identify the missing force, marked with '?', and explain under what conditions that force is strong.

State which Porter's force each fact in a city's gym sector corresponds to: a gym chain opens opposite yours, the only fitness machinery supplier raises its prices, customers compare fees with one click and switch without penalty, and setting up a new gym requires a huge investment.

Explain when customers have a lot of bargaining power (there are many suppliers, switching supplier is free, they buy large volumes) with the example of a printing house that bills 70% to a single large customer.

Explain what a substitute product is (it covers the same need in another way) and identify the substitutes for the medium-distance train and for a night at the cinema.

Barriers to entry make it difficult for new competitors to arrive. Give an example of a barrier of each type (capital required, licences or regulation, an established brand, access to distribution channels) and name a sector where barriers barely exist.

Explain which factors intensify rivalry between competitors (many and of the same size, price wars, high fixed costs, undifferentiated product) with the example of the mobile telephony sector.

A local coffee shop has three others on the same street. Analyse two of Porter's forces in its case: rivalry among existing competitors and the threat of new entrants (is it easy to open another coffee shop?), and suggest a way to differentiate itself.

A speciality coffee shop relies on a single coffee roaster that raises its prices every year. Explain which force it is suffering from, why the supplier has so much power in this case, and two strategies to reduce that dependency.

Barriers to entry (economies of scale, established brands, regulation, capital requirements) protect incumbent firms. Give an example of each type of barrier and explain what happens to rivalry and pricing when barriers are low.

Analyse the food truck sector in a medium-sized city with the five forces: rivalry, ease of entry, substitutes (restaurants, tapas bars), the power of customers and of suppliers (council licences, ingredient purchasing). Conclude whether you think it is an attractive sector.

A pizzeria suffers 30% rises in flour and mozzarella. Explain which force is at work, why it hurts it so much if its customers do not accept price rises, and propose two responses (looking for alternative suppliers, adjusting the menu, negotiating forward contracts).

A metalworking workshop manufactures parts almost exclusively for a large household appliance plant. Analyse the bargaining power of that customer, the risks of the dependence (price pressure, losing the contract) and two strategies to reduce it.

A cinema chain does not only compete with other cinemas. Identify its substitute products (streaming platforms, video games, other leisure options) and propose two strategies to make the cinema experience hard to substitute.

An artisan bakery wants to raise barriers to entry around it. Comment on what each measure can contribute: registering its brand, signing supply contracts with neighbourhood cafés, creating exclusive recipes and building customer loyalty with a club.

Analyse the low-cost gym sector in a large city using the five forces (rivalry, new entrants, substitutes, bargaining power of customers and suppliers) and conclude, with a reasoned sentence, whether it is currently an attractive sector to enter.

A local food delivery platform competes with two international giants. Analyse its situation focusing on customer bargaining power (restaurants and end users) and substitutes (collecting food in person, cooking), and propose two realistic defences for the small platform.

"An industry with many competitors is always a terrible industry to enter." Refute this statement by applying Porter's five forces model:

1. a) Justify how the weakness of other competitive forces (customers, suppliers, or substitute products) can offset high rivalry and allow for attractive margins.
2. b) Illustrate your answer by proposing a specific example of a real company or subsector where strong rivalry among competitors exists but entering remains profitable, justifying which competitive advantage it would rely on.

An educational start-up plans to launch a 100% online language academy for individuals.

1. a) Analyze the barriers to entry and the threat of substitute products it faces in this digital market, justifying how both forces shape the overall attractiveness of the industry.
2. b) Recommend and justify a competitive strategy (cost leadership, differentiation, or focus) that allows the company to survive against large free apps and global private tutoring platforms, designing a specific measure aimed at increasing switching costs for its students.

Compare, using the five forces, the attractiveness of selling sportswear with an online shop versus a neighbourhood physical shop: in which do new entrants weigh more?, where do customers have more power?, what role do costs play? Conclude which option seems more defensible for an SME.

Two gas stations located opposite each other on a local road have entered a continuous price war, reducing their margin from 0,14 € to just 0,02 € per liter without managing to increase their joint sales.

1. a) Justify, based on the product characteristics and the fixed cost structure, why price rivalry is so destructive to the profitability of both businesses.
2. b) Design two viable strategic ways out for one of them that allow it to escape this dynamic without resorting to illegal price-fixing, arguing how each path will affect drivers' bargaining power or service differentiation.

A small company manufactures plastic packaging for the agri-food sector. In the last financial year, the only two multinationals supplying it with virgin polymer increased their price by 20%, while the large supermarket chains buying its packaging refuse to accept price increases, threatening to terminate contracts.

1. a) Interpret this scenario by applying Porter's five forces model and explain the foreseeable impact on the company's profit margin and survival risk.
2. b) Design two realistic strategic decisions to reduce the company's vulnerability: one aimed at counteracting customers' bargaining power and another aimed at mitigating pressure from suppliers or the threat of substitute materials (such as cardboard or bioplastics).

A manager claims: "Porter's five forces model is an obsolete snapshot that cannot be used to anticipate the future in dynamic industries."

1. a) Partially refute this statement by explaining how the model can be applied prospectively and dynamically, rather than merely as a static description of the present.
2. b) Apply your reasoning to a real industry that has undergone a recent disruption (for example, the taxi sector versus ridesharing/PHV platforms or movie theaters versus streaming): identify which specific competitive force triggered the change and predict how the structural attractiveness of that industry has been altered.

Unit challenge. Imagine that you are going to open a specialty coffee shop serving organic products in your neighborhood or town. Design an executive feasibility report to evaluate the real business environment following these steps:

1. Macroeconomic variables: Visit the website of the INE or the Banco de España and collect the latest two figures for the headline CPI and the current official interest rate (reporting figures with a decimal comma, for example $2,8\,\%$ or $3,25\,\%$). Briefly explain how they impact your customers' disposable income and the cost of financing your investment.

2. Competitive forces: Create a table applying Porter's forces to your local environment. Analyze the existing rivalry (identifying two real competitors), the threat of substitute products, and the bargaining power of your local suppliers.

3. Strategic proposal: Write a reasoned proposal (maximum one page) with two specific decisions to position your business model against the pressures of the analyzed environment.

Assessment criteria:

• Rigorous extraction and interpretation of the consulted official macroeconomic data.

• Accurate and justified application of Porter's model to the local environment.

• Coherence and viability of the strategic measures proposed to tackle the identified threats.