The five forces model is used for assessing the attractiveness of Essay

The five forces model is used for assessing the attractiveness of industry sector. Evaluate the key factors that need to be considered when making a assessment of the current industrial environment - Essay Example When the number of players in a market increases, revenues will be shared among competitors and hence profitability of individual firms will decrease. According to this concept, an industrial sector in which â€Å"entry barriers are high and exit barriers are low† is considered to be potential for investment (Kotler, 2009, p.226). Availability of substitutes increases the tendency of customers to switch their demand to alterative products or services. To illustrate, coffee is a close substitute for tea. While analysing the threat of substitutes in an industry, the marketer must also consider a number of factors such as buyer’s inclination to substitute, prices of substitutes, switching costs, and availability of substitutes. An industry having few close substitutes is recommended to be the most attractive segment. Buyer power indicates the customer ability to influence marketers and it mainly depends on buyer volume, availability of substitutes, and degree of market competition. An industry with low buyer power is potential for business operations. Likewise, supplier power reflects the ability of suppliers to put the organisation under pressure. When there are few substitute products/services and supplying firms, supplier power over the marketer is relatively high. Such an industrial environment would not be beneficial for a business. This factor plays a pivotal role in determining the competitiveness of an industry in majority of the cases. An industrial sector where the intensity of competitive rivalry is low is the most potential for making an investment. This model is widely used for micro-environment analysis of industries since its development. For instance, it can be effectively applied to assess the potentiality of airlines industry in order for making a decision regarding whether or not to