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Five Forces Analysis Essay

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Five Forces Analysis

The industry being analyzed is the tobacco industry. The tobacco industry manufacturer cigarettes, snuff, chewing tobacco, etc.

Customers

a. The customers are the wholesalers and retailers of tobacco products. There are a large amount of customers in this industry, which makes the customers not very powerful.

b. I believe the customers do make high-volume purchases, which would make them powerful.

c. The purchases customers make from the industry are the same relative to the amount expended for items from other industries. This causes the customer to have moderate power.

d. The products customers are buying are differentiated because the …show more content…

d. The tobacco industry definitely needs the tobacco growers service to survive, making the suppliers powerful.

e. The tobacco growers (suppliers) do not have differentiation in their product. This weakens their power because the tobacco industry does not have to pay more for the tobacco because it is basically all the same.

f. It is not costly to switch suppliers. Some companies choose to switch to a less expensive supplier in order to lower the cost of their products. This weakens the power of the suppliers.

g. The suppliers can not easily vertically integrate forward and become their own customer because of the many costs in manufacturing tobacco.

h. Overall, I believe the suppliers are highly powerful in the tobacco industry.

Existing Industry Competitors

a. Overall, the growth rate of the industry is moderate. Tobacco consumption is rising rapidly in developing countries. However, in the U.S. cigarette consumption has been slipping by about two percent per year. This means that there is a moderate level of competition for the existing tobacco industry competitors.

b. There is a mixture of fixed costs and variable costs associated with this industry. This keeps competition at a moderate level because the companies want to increase sales possibly by lowering costs and still earn a profit.

c. There is a high

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