Five-forces Industry Analysis Assignment A five-forces industry analysis provides an overview of...

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Five-forces Industry Analysis Assignment    A five-forces industry analysis provides an overview of the potential profitability of the average firm in an industry, at least in the short run. In the form of a brief (typed) report XXXXXXXXXXpages, not including appendices), perform a five-forces industry analysis of the industry in which you are currently working.  1. Identify the industry. Clearly define where the industry “starts” and “stops”, the products and services provided by the industry, as well as the geographic boundaries/scope of the industry (regional, national, international). Include a list of companies (or categories of companies) in the industry. Verify that these companies match the definition of your industry. If they do not, revise your industry definition.  2. Examine the extent of internal rivalry, entry, substitutes, buyer power, and supplier power within your industry, indicating whether each of these forces represents a high, medium, or low threat to profits. In particular, for each force:  • Designate which contributing factors most directly impact your industry  • Identify potential metrics to serve as an indicator or predictor of each contributing factor.  • Assign 100 points across all of the contributing factors chosen within each force to designate relative importance.  • Indicate whether the overall force currently represents a high, medium, or low threat to profit. Explain.  3. The result of your analysis should be your assessment of the potential profitability of the average firm in the industry. Clearly state what this profit potential is (i.e. high, medium, or low). Next, compare the profitability of your current employer to the perceived potential profitability of the average firm in your industry. In terms of the five forces, explain why your current employer is performing better or worse than the average firm in your industry.  4. Develop and document 3-5 strategies for your current employer to address issues/concerns highlighted in your five-forces analysis. For each strategy, include:  • Rationale for the strategy (in terms of one or more of the five forces)  • High-level capital expenditure discussion (How much? For what? Why?)  • High-level human capital needs (How much? For what? Why?)  If there is a specific force for which you do not think it is necessary to develop a strategy, indicate why not. Run each strategy by employees working in the affected area to determine if this is something that is currently being done within the organization. Why or why not? If not, what would have to change in order for the strategy to be adopted? Based on this discussion, determine whether or not your current employer is pursuing a long-run competitive strategy. Explain. Remember that a long-run competitive advantage must be based on actions or strategies that are not easily imitated by competitors.    All sources, including interviews, must be properly cited.

David · Accepted Answer

Five-Force Industry Analysis – Software Industry
Running Head: FIVE FORCES INDUSTRY ANALYSIS
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FIVE FORCES INDUSTRY ANALYSIS
Five-Force Industry Analysis – Software Industry
Name
Institution
Executive Summary
Understanding the various competitive forces that affect an industry with their underlying causes enables effective understanding of the root factors that determine how profitable a firm is in an industry. This further helps in strategic positioning of a company within the industry. This report completes a Five-force industry analysis for the US Software Industry examining how the forces affect profitability of the average firm. From the findings, it can be noted that the overall force in the industry currently represents a medium threat to profits, with the threat tending towards the low end. This implies that the potential profitability of the average firm in the US Software Industry therefore, tends to be high. To compare the perceived profitability of a firm with the profitability of Proans USA, a firm in the software industry, it can be noted that the average firm in the industry performs relatively well than Proans USA. Based on the five forces analysis, the report recommends that Proans USA adopt a number of strategies that will best place the company in the industry. These include offering customized designed software, which will increase customer-switching costs making the customers more loyal to the company. In addition, the company can adopt a faster reaction to changes in technology through collaboration wit learning institutions, and cal also adopt an incremental approach to software design, which makes software development more flexible to changes. Furthermore, the company can ensure its long strategy by investing in skills development for its programmers.
Table of Contents
2Executive Summary
4Five-Force Industry Analysis – Software Industry
4Industry Definition
6The Scope of the Industry Examined (National) - Us Software Industry
6Five Forces Analysis
7The Power of Bargaining for the Buyers
9The Suppliers Bargaining Power
11Threat from New Entrants into the Industry
13Threat of Substitutes in the Market
14Degree of Rivalry
15Overall Force and Threat to Profits
16Strategies to Address Concerns from the Five-Force Analysis
18References
20Appendices
20Appendix I: The Software Product Segments in the US Software Industry
20Appendix II: US Software Industry Growth in Revenue
20Appendix III: The Relative Importance of Buyer Power Contributing Factors
21Appendix IV: The Relative Importance of Supplier Power Contributing Factors
21Appendix V: The Relative Importance of Threat of New Entrants Contributing Factors
21Appendix VI: The Relative Importance of Threat of Substitutes Contributing Factors
21Appendix VII: The Relative Importance of Degree of Rivalry Contributing Factors
Five-Force Industry Analysis
Five-Force Industry Analysis – Software Industry
Industry Definition
The software industry is highly knowledge intensive with the core result and output of the industry being coded information and instructions that guide the performance and operations of computer systems. The outputs and the inputs in the industry very much consist of considerable intangible products, with the prices of the products having high levels of Schumpeterian rents – prices charged and earned before an innovative technology is completely diffused and imitated (Graham & Mowery, 2006, p. 71). In this industry, the return of investment due to innovative software is highly influenced by intellectual property ownership and rights.
This industry is primarily concerned with the development of software for both infrastructure and middleware operations. The products are mainly twofold: systems software and application software. System software includes software such as database management systems, network management systems, operating systems, enterprise management systems, management information systems among other systems software. Application software on the other hand mainly includes software that improves business productivity such as software for supply chain management or logistics management among others, applications to use at home, among other application software (“MarketLine Industry Profile,” 2012, p. 7).
There are four main product segments in this industry. These include the operating system software product segment, which are the backbone systems and drive the operations of computers and most electronic products. The second product segment is Database and Network Management Product segment, which comprise software that help in the management and synthesizing of data and information as well as provide connectivity among different computer clients and servers. The third is the home applications and general business productivity applications, which are software applications meant to improve business processes such as retail management, point of sale data support, design software, among others. Individuals in their homes to complete a wide array of tasks use the home applications. For instance, the antivirus software applications, which help, protect against cyber attacks.  Finally, there is the vertical application or cross industry software products, which help to interconnect, different companies which depend on different industries (“MarketLine Industry Profile,” 2012). These make each of the companies efficient and smooth in their operations and flow of products and information from one to the other. Such products include the Supply Chain Management applications, which interconnect various organizations and improve vertical integration.
Of these product segments, database and network management comprises the biggest software product segment, with a 24.5% market share within the US software industry. The values are as shown in Appendix 1 and in the chart below.
Figure 1: Software Product Segments in the US Software Industry
Source: (MarketLine Industry Profile, 2012, p. 9)
The Scope of the Industry Examined (National) - Us Software Industry
The five forces analysis will primarily focus on the US software industry as Proans USA company, the company in focus is located in the US. The US software industry is the most developed in the world and takes leadership position. This leadership position has mainly been attributed to early leadership and strong research and development within the software industry. Other competitive factors that have further fuelled the strength of the US software strategic positioning in the global market has been the interoperability and ease of use of the software products developed in the country (“MarketLine Industry Profile,” 2012).
Although the software market in the US declined in 2009 due recession impacts, in 2010 and 2011, the industry has, experienced growth with this predicted to continue over the next five years. The industry has experienced a compounded growth rate of 2.3% with total revenues of $108.7 billion in 2011 in the last five years (“MarketLine Industry Profile,” 2012, p. 7). The growth in revenue is as shown in Appendix II.
Some of the existing companies in the industries range from large well-established firms to medium and small enterprises. Examples of companies in this industry include Oracle, Microsoft Corporation, IBM Corporation, TIBCO, Progress Software, Pegasystems, SAP, BO, BPM, and SOA. These companies develop a wide range of software products (MarketLine Industry Profile, 2012). Large companies such as SAP, IBM, and Oracle, in addition to software development, offer also a wide range of system support services and maintenance. All these companies match the industry definition.
Five Forces Analysis
Understanding the various competitive forces that affect an industry with their underlying causes enables effective understanding of the root factors that determine how profitable a firm is in an industry. This further helps in strategic positioning of a company within the industry (Porter, 2008, p .80). In his work, The Five Forces that Shape Competition, Porter (2008, p. 80) define five competitive forces that define industry competitiveness and profitability. These include power of bargaining for the buyers, power of bargaining for the suppliers, rivalry that exists among firms in the market, threat of new firms, and threat of other products substituting the products and services provided in the industry. In analyzing these forces within the software industry in the US, the software development companies are taken as the players in the market, with the software makers and developers of hardware components as the suppliers while the business end users and the individual consumers who buy the software are the buyers.
The Power of Bargaining for the Buyers
Switching Costs
The buyers in this industry are mainly the individual consumers, government institutions, and end user businesses of all sizes, which use such software to enhance efficiency and productivity in their business. Therefore, numerous buyers in the industry span various industries such as retail, banking, healthcare, and telecommunications among others. Such buyers however, rely on specific software companies since software development tends to be industry specific, and the people who use it need to be trained to use it (Slaughter, et al., 2006). Hence, a firm can focus on developing healthcare software systems, while others focus on retail management systems.

Five-forces Industry Analysis Assignment A five-forces industry analysis provides an overview of the potential profitability of the average firm in an industry, at least in the short run. In the form...

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