Porter’sFive Forces Model

ThePorter’s five forces analysis deals with the external factorsaffecting a firm. They influence the nature of competition andflexibility of the market. A corporation must comprehend the dynamicsof the market to compete efficiently. According to Porter, thestrength of the five forces plays an immense role on how businessesconduct their daily undertakings. An adequate knowledge of the forcescontributes to the company’s profitability margins. CNN is one ofthe leading cable and satellite television network around the globe.It was founded in 1980, and the network has seen tremendous growthover the years. However, intense competition from other networks is amajor challenge that has changed how CNN operates. This paper willdiscuss Porter’s five forces concerning CNN. How the five forceshave affected CNN’s dominance will be a major point ofconsideration in this article.

Assessingthe external factors of CNN requires Porter’s five forces. Theyinclude:

  • Competitive rivalry

  • Bargaining power of the buyer

  • Bargaining power of the suppliers

  • Threat of new entrance

  • Threat of a substitute product/service

Competitiverivalry

Theforce typically examines the intensity of competition within theindustry. The number of competitors, costs, customer loyalty, andquality difference determines it. The level of competition in thecable network is very high. The main competitors include Fox Company,Netflix, Verizon, AT&ampT, and Hulu. CNN was ranked number one incable news in April. This was the fifth time CNN was beating Fox Newsin the last eight months. CNN continues to dominate due to itsflexibility. As a matter of fact, the last time the corporation beatFox in an eight-month period was back in 2001. However, the intensityof the market has made CNN improve its operations to retain its loyalcustomers.

Bargainingpower of the buyer

Consumerpower is a core factor that influences approximation of the createdvalue. It affects the quality and pricing of the service or product.In general, the force analyzes the size of orders, number ofcustomers, price sensitivity, and differences between competitors.Buying power is low when clients obtain goods/services in smallquantities, and the vender`s product/service is different from any ofits competitors. CNN has managed to meet consumer expectations toachieve majority market share in the different segments. Customersare more sensitive to price and quality, and they can switch to otherchannels if the services are not differentiated. According tosurveys, CNN’s growth margins were the best in April more than anyother cable networks. It is popular to viewers aged between 25 and54.

Bargainingpower of supplier

Theforce focuses on the relative size and concentration of sellersrelative to the industry’s members. It exists in situations whereswitching costs are high, customer fragmentation, and high power ofproducts/services. The fewer the suppliers, the greater thebargaining power. Businesses tend to operate better in situationswhere the suppliers are many. CNN enjoys a global network ofjournalists who are engaged in producing numerous stories on a dailybasis. The diverse supplier base in the cable network reduces thebargaining power.

Threatof new entrants

Asmore companies venture into the industry, they tend to decrease themarket share. CNN remains competitive by differentiating its servicesto cope with the threats posed by new entrants. The average customerviews 5 to 15 channels, instead of the hundreds they pay for. Withnew entrants such as Netflix and AT&ampT, consumers are reluctant topay the high prices. However, the broad range of loyal customers hasmade CNN a mainstay in the cable network.

Threatof substitutes

Anew service that can act as a substitute may lessen the market share.The threat comes in two forms, i.e. price and performance. If Fox hascheaper services that are even better regarding performance, thenmore consumers would be drawn to it. CNN intensive coverage of itsnews continues to attract more customers even if other corporationsare offering the same.

References

Arline, K. (2015, February 18). Porter`s Five Forces: Analyzing the Competition. Retrieved from Porter`s Five Forces: Analyzing the Competition: http://www.businessnewsdaily.com/5446-porters-five-forces.html

CNN. (2016, April 26). CNN #1 IN CABLE NEWS IN PRIME TIME BEATS FOX NEWS FOR 5 OF THE PAST 8 MONTHS. Retrieved from CNN #1 IN CABLE NEWS IN PRIME TIME BEATS FOX NEWS FOR 5 OF THE PAST 8 MONTHS: http://cnnpressroom.blogs.cnn.com/2016/04/26/cnn-1-in-cable-news-in-prime-time-beats-fox-news-for-5-of-the-past-8-months/

Dhar, S. (2014, November 10). CNN vs. DISH, Porter`s five forces of play. Retrieved from CNN vs. DISH, Porter`s five forces of play: https://www.linkedin.com/pulse/20141110031653-211038745-cnn-vs-dish-porter-s-five-forces-at-play

Mind Tools. (2012, November 16). Porter’s Five: Assessing the balance of power in a business situation. Retrieved from Porter’s Five: Assessing the balance of power in a business situation: http://www.mindtools.com/pages/article/newTMC_08.htm