Question Tag: Porter’s Five Forces

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  • 25 Marks

CSME – Nov 2018 – L2 – Q1a – Environmental Analysis

Perform a SWOT analysis using a Mini Resource Audit and Porter's Five Forces for Igbadun Nigeria Limited in the online streaming business.

Igbadun Nigeria Limited is a private limited liability company engaged in the business of online content streaming to registered subscribers through a dedicated website “igbadun.com”. The company’s content offerings include movies, TV episodes, cartoon series, educational series, documentaries, and reality shows.

The subscriber base growth rate of Igbadun has been phenomenal, jumping from about 3,000 in 2013 to 30,000 at the end of 2017. This is despite the fact that the industry is relatively new in Nigeria. The growth has led to an increase in revenue from N72 million in 2013 to N450 million by the year ended 31 December 2017. However, the only source of revenue to the company is customer subscriptions.

The impressive performance of Igbadun Nigeria Limited has been attributed to several factors, including:

  • Increasing internet usage;
  • Increased patronage of streamed online programs;
  • Improved access to the internet at a reduced cost;
  • Affordability of internet-enabled devices suitable for viewing online video content;
  • Cost reduction strategies and a very affordable subscription rate, which has been reduced from N2,000 in 2013 to N1,500 in 2017. This is the second-lowest rate in the industry;
  • Aggressive marketing strategy and investment in advertising;
  • Reduction in marketing costs as a percentage of revenue from 16% in 2013 to 12.8% in 2017;
  • Growth of gross subscribers by more than 100% per annum;
  • Investment of over 60% of its earnings for growth and development, especially in purchasing the best hardware and software available;
  • Aggressive R & D policy that has led to in-house development of most of its software, with all of them duly patented;
  • Effective Human Resource Management strategy that has helped to attract, motivate, train, and retain highly qualified and experienced manpower;
  • Management team of highly experienced personnel.

A report recently released by Arthur Baker and Company, a reputable consulting firm in Nigeria, predicted that the demand for online program streaming in Nigeria will grow significantly to 5 million by 2020. Consequently, existing rivals, such as Netcom and other smaller competitors, are jostling to gain competitive advantage. The relatively liberal legal requirements for entry have also facilitated an influx of new entrants into the industry. Netflox, the world’s biggest provider of online program streaming service, recently commenced operations in Nigeria.

Copyright activists recently proposed a bill to the National Assembly, allowing online program streaming providers to stream new releases only after two months of release. This bill will adversely affect the subscription revenue of igbadun.com if passed into law.

A major part of Igbadun’s subscription revenue is received through online payments using debit cards. However, a recent report by an independent consultant shows a decline in the use of online payment platforms due to increased security concerns. This has the potential to hurt Igbadun’s revenue stream.

Igbadun is also struggling to compete with other movie entertainment media such as cable TV, DVDs, and cinemas. The most worrisome for the company has been DVDs. The activities of pirates have made the price of DVDs for new releases as low as N500 each. If this continues unabated, the company risks losing its subscriber base.

Despite these challenges, Igbadun plans to grow its subscriber base to 200,000 by the end of 2020.

Required:

a. With the aid of a Mini Resource Audit and Porter’s Five Forces Model, prepare a SWOT analysis for the management of Igbadun Nigeria Limited.

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  • 1 Marks

BMF – Nov 2014 – L1 – SA – Q14 – The Business Environment

Identify the factor influencing the threat of entry in Porter’s Five Forces model.

The “threat of entry” part of the Porter’s Five Forces Model is influenced by:

A. Supplier competitiveness
B. Economies of scale
C. Inflation
D. Terrorism
E. Financial Reporting Council Regulation

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  • 30 Marks

CSME – May 2019 – L2 – Q1 – Environmental Analysis

Prepare a business environment and competitive analysis for UBC Plc's intended investment in GSM phone manufacturing using SWOT, PESTEL, Porter’s Five Forces, and Kant’s categorical imperative.

a. You have just been contracted by UBC Plc to prepare a business plan on the company’s intended investment in the manufacture of GSM phones in the country. The following is a summary of the brief given to you and your own research:

  • UBC Plc is a multinational conglomerate involved in the manufacture and distribution of computer hardware accessories, networking hardware and allied products. With experience spanning four decades in the industry, the company’s products enjoy a lion’s share of the market. As part of its diversification strategy aimed at sustaining its competitive advantage, the company intends to start the production of GSM phones, targeting the mass market in the country.
  • The company plans to control at least 40% of the low-end GSM phone market in the country in the next five years.
  • UBC Plc possesses the requisite human resources and physical facilities necessary for the successful takeoff and growth of the new venture. The company also intends to leverage its extensive distribution network for its IT products covering major cities within the West African sub-region to distribute its new GSM phones.
  • The company also has modern equipment which can easily be converted into the production of GSM phones at little cost without significantly affecting the current production levels of other products. When this is done, the equipment will be able to produce more than 5 million GSM phones per annum.
  • While the company intends to expand its production capacity radically within the first few years of manufacturing GSM phones, it is still struggling to cope with the country’s incessant electric power failure which has made the company rely almost exclusively on the use of generators to power its equipment. This constitutes the bulk of its overhead costs.
  • The firm has signed a Memorandum of Understanding with a group of reputable firms abroad, which guarantees a steady supply of all required components and inputs.
  • The current value of the annual GSM phone demand in the country is estimated at N520 billion. Estimated demand growth rate is put at 5%. There is currently no local producer, as all of the GSM phones in the market are imported. However, there is currently a large number of local firms that act as distributors to foreign producers.
  • Except for regulations aimed at ensuring that only high-quality products are manufactured, there are currently no legal restrictions on local production of GSM phones. Furthermore, to encourage manufacturing, the government offers tax holidays to all manufacturers in the first five years of operation.
  • The estimated cost per unit of GSM phones designed for the mass market in the country is put at N8,000 while the current average price stands at N10,000.

Required:
a.
(i) A business environment analysis using SWOT and PESTEL analyses. (10 Marks)
(ii) A competitive analysis using the Porter’s Five Forces Model. (15 Marks)

b. Advise on Kant’s categorical imperative. (5 Marks)

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  • 10 Marks

SCS – Nov 2021 – L3 – Q3 – Competitive Forces

Evaluate how the competitive environment of COM affects the realization of its BRIGHT strategy.

The company is facing increasing competition in its drive to remain the market leader and sustain the current competitive advantage. The market intelligence report commissioned by the board points to a highly competitive outlook. An industry analysis based on the current available information is required by the board, and the CEO has been requested to prepare a detailed presentation for the next board meeting.

Required:
Evaluate how the competitive environment of COM will affect the realization of the company’s BRIGHT strategy.

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  • 40 Marks

CSME – Mar/Jul 2020 – L2 – Q1 – CSME – Mar/July 2020 – L2 – Q1 – Air Spirit Strategic Analysis Using Bowman’s Strategic Clock and Porter’s Five Forces

Analyze Air Spirit Limited's competitive strategy using Bowman’s Strategic Clock and Porter’s Five Forces model.

Air Spirit Limited, a leading aviation company in Nigeria, is involved in passenger and cargo airline business. The company was established in 1980 and since inception, it has maintained leadership in the passenger airline business in Nigeria. The company has been able to leverage on experience, leading to efficiency in its operations which competitors have not been able to replicate. Hence, it has assumed cost leadership position in the industry. The firm currently pursues a low-price strategy and offers the lowest fare for all categories of flights (economy, business, and first class) in the market and its cargo services. Service quality of Air Spirit is adjudged by the flying public as second to none in terms of quality, efficiency, and safety with customer benefits rated above those of its rivals.

As a growth strategy, the company plans to expand its product offerings to include chartered flights. Target market includes politicians, businessmen, and high-net-worth individuals. It is estimated that the chartered flights market is growing at 10% annually. Also, the chartered flights market is currently serviced by only one company; Royal Airlines Limited, which covers only the Lagos-Abuja route. Setup cost is high, thereby providing a barrier for new entrants. The company hopes to leverage on existing competencies in the passenger and cargo market to build the best chartered flights company in the country within the next three years, offering excellent services and benefits that would be difficult to replicate by competitors. It has built a strong relationship with aircraft suppliers and maintenance contractors. This will facilitate easy access to needed inputs. It hopes to commence operations across several routes, most of which are not currently serviced by its competitor. The company believes that the capabilities obtained from the passenger and cargo airline business will enable it to offer the lowest fare in the chartered flights industry.

Required:
a. From the scenario above, use Bowman’s Strategic Clock to analyse the effectiveness of the current strategy of Air Spirit Limited in the passenger airline business. (22 Marks)
b. Using Porter’s Five Forces model, advise the management of Air Spirit Limited on the level of competition in the chartered flights market. (18 Marks)

(Total 40 Marks)

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  • 20 Marks

CSEG – May 2019 – L2 – Q3 – Strategic alternatives, analysis and selection

Analysis of competitive advantage bases and factors influencing industry rivalry, with application of Porter’s Five Forces model to the mobile money industry.

a) Asawasi Company, a relatively new company, is in the business of designing and building farm equipment and machinery. Whilst it has been successful in its first few years of operation, sales are now in decline as competition in the industry has intensified and there is greater rivalry between the competing organisations.

A review undertaken by consultants has recommended that in order to gain sustained competitive advantage, the company needs to establish the basis on which it can compete more effectively against its rivals in the future.

Required:

i) Describe the concept of competitive advantage and include references to the different bases Asawasi Company could use to achieve competitive advantage.
(5 marks)

ii) Describe the factors that can create competitive rivalry between organisations.
(5 marks)

b) An introduction of a new technology is an introduction of a new business. This is a statement of fact and evidence abounds in many African economies. The introduction of mobile phones came with space-to-space business and eventually gave rise to mobile money services.

Required:

Using Porter’s Five Forces model, identify the competitive forces that influence the state of competition in the mobile money industry and the profit potential of the industry as a whole.
(10 marks)

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  • 10 Marks

CSEG – May 2016 – L2 – Q6c – Analysing the external environment

Identify and explain five determinants of barriers to entry for new entrants into an industry, focusing on factors that protect existing firms from new competitors.

A new entrant into an industry will bring extra capacity and more competition and so could, in turn drive down profits. The strength of the threat posed by new entrants is likely to vary from one industry to another and depends on the strength of the barriers to entry and the likely response of existing competitors to the new entrant.

Required: Identify and explain FIVE determinants of barriers to entry to new entrants into an industry. (10 marks)

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  • 40 Marks

CSEG – May 2017 – L2 – Q1a – Strategic alternatives, analysis and selection

Analyze Gussie Perry Ltd's environmental policies, mission statement relevance, division performance, and market position using ROI, RI, and Porter's Five Forces.

CASE STUDY: GUSSIE PERRY LTD

Introduction:
Gussie Perry Ltd (GPL) is a long-established divisionalized company with its origins in shipping. The company has been in existence for nearly 120 years and has developed a reputation for reliability and quality service.

The shipping activities in which Gussie Perry Ltd (GPL) is engaged comprise four divisions – cruise, ferry, container, and bulk shipping. The cruise division is engaged entirely in the carriage of passengers, while the ferry division carries passengers and vehicles. The vehicles carried by the ferries range from motor cars to articulated trucks and buses. The container and bulk shipping divisions are engaged in the carriage of freight only.

Organizational Goals:
The company has stated over recent years that it aims to:

  1. Increase its international business to achieve long-term profitability.
  2. Provide the necessary capital investment to support its international operations.
  3. Train and develop the company’s employees.

Environmental and Safety Policy:
Environmental protection is now a key aspect of corporate social responsibility. Pressure on Gussie Perry Ltd (GPL) for better environmental performance is coming from many quarters. The company recently implemented an environmental and safety policy, which is monitored through an audit system, in an effort to ensure that its policies are being executed. It is the aim of the company to have operational standards that match the best industry standards. Training of management, staff, and specialist auditors is seen as a priority within the organization’s environmental and safety policy. This has become a major concern for the company because of customer anxiety about the safety of the ferries.

Financial Results:
In the last financial year, earnings per share were GH¢2.12, producing a dividend cover of 1.15 times. The dividend per share paid by Gussie Perry Ltd (GPL) has remained at the same level for five years. Comparative values for divisional revenue and operating profit are shown in Table 1.

Table 1: Divisional Financial Data

Division Cruise Ferry Container Bulk Shipping
Current year’s revenue (GH¢’000) 5,136 4,002 7,572 750
Previous year’s revenue (GH¢’000) 4,410 3,756 6,306 672
Current year’s operating profit (GH¢’000) 780 650 252 (30)
Previous year’s operating profit (GH¢’000) 528 480 240 (18)
Assets/Capital Employed (GH¢’000) 2,800 2,500 3,200 3,800

During the year, general inflationary levels in the shipping industry were 14% per annum. The company’s cost of capital is 25%.

Extract from the Chairman’s Statement for the Financial Year:
In his statement, Mr. Aaron Yeboah, the Chairman of Gussie Perry Ltd (GPL), commenting on revenue and profit before the inflation adjustment, said the company achieved encouraging results, particularly in the cruise division. The company had taken delivery of a new cruise liner, at a cost of GH¢1,200,000, and has two more on order. Aaron believed that this was an expanding market and considered the company to be in a good position to take advantage of the opportunity. With regard to the ferry division, Aaron expected continued growth, although there was an expectation of potential new entrants due to increased cargo volumes. This contrasted with his view of the declining performance of the container and bulk shipping divisions as shown in Table 1.

Market Information:
Gussie Perry Ltd (GPL) commissioned market research into its cruise and ferry operations. The results of this research indicated that, in recent years, within the cruise liner industry, there has been a change in customer appeal. Traditionally, the main customer base had comprised traders. In the last five years, the cruise division has experienced an increase in its clientele, especially holidaymakers. This stemmed from the promotion of domestic tourism.

Furthermore, the research showed a 15% increase in marine transport, but Gussie Perry Ltd’s market share actually reduced by 4%. The report indicates that the probability of the cruise market continuing to grow was bright. However, there were uncertainties about the future potential of the container and bulk shipping divisions.

Required:

a) Identify FOUR ways in which GPL’s concern for environmental and safety policy can impact on its performance. (4 marks)

b) The Chairman of the company has recently attended a short course on strategic planning. He was particularly interested in the relevance of mission statements to the strategic management process. Explain in FOUR ways how a mission statement is relevant in strategic management. (8 marks)

c) i) Calculate the current return on investment (ROI) and residual income (RI) for each division for the current year. (4 marks)
ii) Assess the performance of each division and advise the management of Gussie Perry Ltd (GPL). (8 marks)

d) With reference to Porter’s Five Competitive Forces model, assess the nature of the cruise and ferry shipping market in which Gussie Perry Ltd (GPL) is engaged. (16 marks)

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  • 10 Marks

BMIS – March 2024 – L1 – Q5b – Competitive forces and markets

Explain the components of Porter's Five Force Model used to analyze competitive environment and its impact on a company's profitability and strategy.

The Porter’s Five Force Model is regarded as a tool for driving industry competition. The model is used to analyse the competitive environment in terms of five key forces that impact a company’s profitability and influence its strategy.

Required: Explain the components of the Model. (10 marks)

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  • 15 Marks

BMIS – May 2017 – L1 – Q2a – Competitive forces and markets

Explain how Porter’s Five Forces can assess industry attractiveness.

a) Charis Shoes Ltd has been in existence for 5 years. The Board of Charis Shoes Ltd needs a report on examination of the industry’s attractiveness.

Attractiveness in this context according to the board refers to the overall industry profitability.

Required:
Explain how the Porters Five Forces model can be used to assess the attractiveness of the industry in which Charis Shoes Ltd operates. (15 marks)

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  • 25 Marks

CSME – Nov 2018 – L2 – Q1a – Environmental Analysis

Perform a SWOT analysis using a Mini Resource Audit and Porter's Five Forces for Igbadun Nigeria Limited in the online streaming business.

Igbadun Nigeria Limited is a private limited liability company engaged in the business of online content streaming to registered subscribers through a dedicated website “igbadun.com”. The company’s content offerings include movies, TV episodes, cartoon series, educational series, documentaries, and reality shows.

The subscriber base growth rate of Igbadun has been phenomenal, jumping from about 3,000 in 2013 to 30,000 at the end of 2017. This is despite the fact that the industry is relatively new in Nigeria. The growth has led to an increase in revenue from N72 million in 2013 to N450 million by the year ended 31 December 2017. However, the only source of revenue to the company is customer subscriptions.

The impressive performance of Igbadun Nigeria Limited has been attributed to several factors, including:

  • Increasing internet usage;
  • Increased patronage of streamed online programs;
  • Improved access to the internet at a reduced cost;
  • Affordability of internet-enabled devices suitable for viewing online video content;
  • Cost reduction strategies and a very affordable subscription rate, which has been reduced from N2,000 in 2013 to N1,500 in 2017. This is the second-lowest rate in the industry;
  • Aggressive marketing strategy and investment in advertising;
  • Reduction in marketing costs as a percentage of revenue from 16% in 2013 to 12.8% in 2017;
  • Growth of gross subscribers by more than 100% per annum;
  • Investment of over 60% of its earnings for growth and development, especially in purchasing the best hardware and software available;
  • Aggressive R & D policy that has led to in-house development of most of its software, with all of them duly patented;
  • Effective Human Resource Management strategy that has helped to attract, motivate, train, and retain highly qualified and experienced manpower;
  • Management team of highly experienced personnel.

A report recently released by Arthur Baker and Company, a reputable consulting firm in Nigeria, predicted that the demand for online program streaming in Nigeria will grow significantly to 5 million by 2020. Consequently, existing rivals, such as Netcom and other smaller competitors, are jostling to gain competitive advantage. The relatively liberal legal requirements for entry have also facilitated an influx of new entrants into the industry. Netflox, the world’s biggest provider of online program streaming service, recently commenced operations in Nigeria.

Copyright activists recently proposed a bill to the National Assembly, allowing online program streaming providers to stream new releases only after two months of release. This bill will adversely affect the subscription revenue of igbadun.com if passed into law.

A major part of Igbadun’s subscription revenue is received through online payments using debit cards. However, a recent report by an independent consultant shows a decline in the use of online payment platforms due to increased security concerns. This has the potential to hurt Igbadun’s revenue stream.

Igbadun is also struggling to compete with other movie entertainment media such as cable TV, DVDs, and cinemas. The most worrisome for the company has been DVDs. The activities of pirates have made the price of DVDs for new releases as low as N500 each. If this continues unabated, the company risks losing its subscriber base.

Despite these challenges, Igbadun plans to grow its subscriber base to 200,000 by the end of 2020.

Required:

a. With the aid of a Mini Resource Audit and Porter’s Five Forces Model, prepare a SWOT analysis for the management of Igbadun Nigeria Limited.

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  • 1 Marks

BMF – Nov 2014 – L1 – SA – Q14 – The Business Environment

Identify the factor influencing the threat of entry in Porter’s Five Forces model.

The “threat of entry” part of the Porter’s Five Forces Model is influenced by:

A. Supplier competitiveness
B. Economies of scale
C. Inflation
D. Terrorism
E. Financial Reporting Council Regulation

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  • 30 Marks

CSME – May 2019 – L2 – Q1 – Environmental Analysis

Prepare a business environment and competitive analysis for UBC Plc's intended investment in GSM phone manufacturing using SWOT, PESTEL, Porter’s Five Forces, and Kant’s categorical imperative.

a. You have just been contracted by UBC Plc to prepare a business plan on the company’s intended investment in the manufacture of GSM phones in the country. The following is a summary of the brief given to you and your own research:

  • UBC Plc is a multinational conglomerate involved in the manufacture and distribution of computer hardware accessories, networking hardware and allied products. With experience spanning four decades in the industry, the company’s products enjoy a lion’s share of the market. As part of its diversification strategy aimed at sustaining its competitive advantage, the company intends to start the production of GSM phones, targeting the mass market in the country.
  • The company plans to control at least 40% of the low-end GSM phone market in the country in the next five years.
  • UBC Plc possesses the requisite human resources and physical facilities necessary for the successful takeoff and growth of the new venture. The company also intends to leverage its extensive distribution network for its IT products covering major cities within the West African sub-region to distribute its new GSM phones.
  • The company also has modern equipment which can easily be converted into the production of GSM phones at little cost without significantly affecting the current production levels of other products. When this is done, the equipment will be able to produce more than 5 million GSM phones per annum.
  • While the company intends to expand its production capacity radically within the first few years of manufacturing GSM phones, it is still struggling to cope with the country’s incessant electric power failure which has made the company rely almost exclusively on the use of generators to power its equipment. This constitutes the bulk of its overhead costs.
  • The firm has signed a Memorandum of Understanding with a group of reputable firms abroad, which guarantees a steady supply of all required components and inputs.
  • The current value of the annual GSM phone demand in the country is estimated at N520 billion. Estimated demand growth rate is put at 5%. There is currently no local producer, as all of the GSM phones in the market are imported. However, there is currently a large number of local firms that act as distributors to foreign producers.
  • Except for regulations aimed at ensuring that only high-quality products are manufactured, there are currently no legal restrictions on local production of GSM phones. Furthermore, to encourage manufacturing, the government offers tax holidays to all manufacturers in the first five years of operation.
  • The estimated cost per unit of GSM phones designed for the mass market in the country is put at N8,000 while the current average price stands at N10,000.

Required:
a.
(i) A business environment analysis using SWOT and PESTEL analyses. (10 Marks)
(ii) A competitive analysis using the Porter’s Five Forces Model. (15 Marks)

b. Advise on Kant’s categorical imperative. (5 Marks)

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  • 10 Marks

SCS – Nov 2021 – L3 – Q3 – Competitive Forces

Evaluate how the competitive environment of COM affects the realization of its BRIGHT strategy.

The company is facing increasing competition in its drive to remain the market leader and sustain the current competitive advantage. The market intelligence report commissioned by the board points to a highly competitive outlook. An industry analysis based on the current available information is required by the board, and the CEO has been requested to prepare a detailed presentation for the next board meeting.

Required:
Evaluate how the competitive environment of COM will affect the realization of the company’s BRIGHT strategy.

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  • 40 Marks

CSME – Mar/Jul 2020 – L2 – Q1 – CSME – Mar/July 2020 – L2 – Q1 – Air Spirit Strategic Analysis Using Bowman’s Strategic Clock and Porter’s Five Forces

Analyze Air Spirit Limited's competitive strategy using Bowman’s Strategic Clock and Porter’s Five Forces model.

Air Spirit Limited, a leading aviation company in Nigeria, is involved in passenger and cargo airline business. The company was established in 1980 and since inception, it has maintained leadership in the passenger airline business in Nigeria. The company has been able to leverage on experience, leading to efficiency in its operations which competitors have not been able to replicate. Hence, it has assumed cost leadership position in the industry. The firm currently pursues a low-price strategy and offers the lowest fare for all categories of flights (economy, business, and first class) in the market and its cargo services. Service quality of Air Spirit is adjudged by the flying public as second to none in terms of quality, efficiency, and safety with customer benefits rated above those of its rivals.

As a growth strategy, the company plans to expand its product offerings to include chartered flights. Target market includes politicians, businessmen, and high-net-worth individuals. It is estimated that the chartered flights market is growing at 10% annually. Also, the chartered flights market is currently serviced by only one company; Royal Airlines Limited, which covers only the Lagos-Abuja route. Setup cost is high, thereby providing a barrier for new entrants. The company hopes to leverage on existing competencies in the passenger and cargo market to build the best chartered flights company in the country within the next three years, offering excellent services and benefits that would be difficult to replicate by competitors. It has built a strong relationship with aircraft suppliers and maintenance contractors. This will facilitate easy access to needed inputs. It hopes to commence operations across several routes, most of which are not currently serviced by its competitor. The company believes that the capabilities obtained from the passenger and cargo airline business will enable it to offer the lowest fare in the chartered flights industry.

Required:
a. From the scenario above, use Bowman’s Strategic Clock to analyse the effectiveness of the current strategy of Air Spirit Limited in the passenger airline business. (22 Marks)
b. Using Porter’s Five Forces model, advise the management of Air Spirit Limited on the level of competition in the chartered flights market. (18 Marks)

(Total 40 Marks)

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  • 20 Marks

CSEG – May 2019 – L2 – Q3 – Strategic alternatives, analysis and selection

Analysis of competitive advantage bases and factors influencing industry rivalry, with application of Porter’s Five Forces model to the mobile money industry.

a) Asawasi Company, a relatively new company, is in the business of designing and building farm equipment and machinery. Whilst it has been successful in its first few years of operation, sales are now in decline as competition in the industry has intensified and there is greater rivalry between the competing organisations.

A review undertaken by consultants has recommended that in order to gain sustained competitive advantage, the company needs to establish the basis on which it can compete more effectively against its rivals in the future.

Required:

i) Describe the concept of competitive advantage and include references to the different bases Asawasi Company could use to achieve competitive advantage.
(5 marks)

ii) Describe the factors that can create competitive rivalry between organisations.
(5 marks)

b) An introduction of a new technology is an introduction of a new business. This is a statement of fact and evidence abounds in many African economies. The introduction of mobile phones came with space-to-space business and eventually gave rise to mobile money services.

Required:

Using Porter’s Five Forces model, identify the competitive forces that influence the state of competition in the mobile money industry and the profit potential of the industry as a whole.
(10 marks)

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  • 10 Marks

CSEG – May 2016 – L2 – Q6c – Analysing the external environment

Identify and explain five determinants of barriers to entry for new entrants into an industry, focusing on factors that protect existing firms from new competitors.

A new entrant into an industry will bring extra capacity and more competition and so could, in turn drive down profits. The strength of the threat posed by new entrants is likely to vary from one industry to another and depends on the strength of the barriers to entry and the likely response of existing competitors to the new entrant.

Required: Identify and explain FIVE determinants of barriers to entry to new entrants into an industry. (10 marks)

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  • 40 Marks

CSEG – May 2017 – L2 – Q1a – Strategic alternatives, analysis and selection

Analyze Gussie Perry Ltd's environmental policies, mission statement relevance, division performance, and market position using ROI, RI, and Porter's Five Forces.

CASE STUDY: GUSSIE PERRY LTD

Introduction:
Gussie Perry Ltd (GPL) is a long-established divisionalized company with its origins in shipping. The company has been in existence for nearly 120 years and has developed a reputation for reliability and quality service.

The shipping activities in which Gussie Perry Ltd (GPL) is engaged comprise four divisions – cruise, ferry, container, and bulk shipping. The cruise division is engaged entirely in the carriage of passengers, while the ferry division carries passengers and vehicles. The vehicles carried by the ferries range from motor cars to articulated trucks and buses. The container and bulk shipping divisions are engaged in the carriage of freight only.

Organizational Goals:
The company has stated over recent years that it aims to:

  1. Increase its international business to achieve long-term profitability.
  2. Provide the necessary capital investment to support its international operations.
  3. Train and develop the company’s employees.

Environmental and Safety Policy:
Environmental protection is now a key aspect of corporate social responsibility. Pressure on Gussie Perry Ltd (GPL) for better environmental performance is coming from many quarters. The company recently implemented an environmental and safety policy, which is monitored through an audit system, in an effort to ensure that its policies are being executed. It is the aim of the company to have operational standards that match the best industry standards. Training of management, staff, and specialist auditors is seen as a priority within the organization’s environmental and safety policy. This has become a major concern for the company because of customer anxiety about the safety of the ferries.

Financial Results:
In the last financial year, earnings per share were GH¢2.12, producing a dividend cover of 1.15 times. The dividend per share paid by Gussie Perry Ltd (GPL) has remained at the same level for five years. Comparative values for divisional revenue and operating profit are shown in Table 1.

Table 1: Divisional Financial Data

Division Cruise Ferry Container Bulk Shipping
Current year’s revenue (GH¢’000) 5,136 4,002 7,572 750
Previous year’s revenue (GH¢’000) 4,410 3,756 6,306 672
Current year’s operating profit (GH¢’000) 780 650 252 (30)
Previous year’s operating profit (GH¢’000) 528 480 240 (18)
Assets/Capital Employed (GH¢’000) 2,800 2,500 3,200 3,800

During the year, general inflationary levels in the shipping industry were 14% per annum. The company’s cost of capital is 25%.

Extract from the Chairman’s Statement for the Financial Year:
In his statement, Mr. Aaron Yeboah, the Chairman of Gussie Perry Ltd (GPL), commenting on revenue and profit before the inflation adjustment, said the company achieved encouraging results, particularly in the cruise division. The company had taken delivery of a new cruise liner, at a cost of GH¢1,200,000, and has two more on order. Aaron believed that this was an expanding market and considered the company to be in a good position to take advantage of the opportunity. With regard to the ferry division, Aaron expected continued growth, although there was an expectation of potential new entrants due to increased cargo volumes. This contrasted with his view of the declining performance of the container and bulk shipping divisions as shown in Table 1.

Market Information:
Gussie Perry Ltd (GPL) commissioned market research into its cruise and ferry operations. The results of this research indicated that, in recent years, within the cruise liner industry, there has been a change in customer appeal. Traditionally, the main customer base had comprised traders. In the last five years, the cruise division has experienced an increase in its clientele, especially holidaymakers. This stemmed from the promotion of domestic tourism.

Furthermore, the research showed a 15% increase in marine transport, but Gussie Perry Ltd’s market share actually reduced by 4%. The report indicates that the probability of the cruise market continuing to grow was bright. However, there were uncertainties about the future potential of the container and bulk shipping divisions.

Required:

a) Identify FOUR ways in which GPL’s concern for environmental and safety policy can impact on its performance. (4 marks)

b) The Chairman of the company has recently attended a short course on strategic planning. He was particularly interested in the relevance of mission statements to the strategic management process. Explain in FOUR ways how a mission statement is relevant in strategic management. (8 marks)

c) i) Calculate the current return on investment (ROI) and residual income (RI) for each division for the current year. (4 marks)
ii) Assess the performance of each division and advise the management of Gussie Perry Ltd (GPL). (8 marks)

d) With reference to Porter’s Five Competitive Forces model, assess the nature of the cruise and ferry shipping market in which Gussie Perry Ltd (GPL) is engaged. (16 marks)

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  • 10 Marks

BMIS – March 2024 – L1 – Q5b – Competitive forces and markets

Explain the components of Porter's Five Force Model used to analyze competitive environment and its impact on a company's profitability and strategy.

The Porter’s Five Force Model is regarded as a tool for driving industry competition. The model is used to analyse the competitive environment in terms of five key forces that impact a company’s profitability and influence its strategy.

Required: Explain the components of the Model. (10 marks)

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  • 15 Marks

BMIS – May 2017 – L1 – Q2a – Competitive forces and markets

Explain how Porter’s Five Forces can assess industry attractiveness.

a) Charis Shoes Ltd has been in existence for 5 years. The Board of Charis Shoes Ltd needs a report on examination of the industry’s attractiveness.

Attractiveness in this context according to the board refers to the overall industry profitability.

Required:
Explain how the Porters Five Forces model can be used to assess the attractiveness of the industry in which Charis Shoes Ltd operates. (15 marks)

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