Page 17 - MCS August Day 1 Suggested Solutions

SUGGESTED SOLUTIONS

 Power of buyers – (high threat) a large number of small individual buyers that buy cameras.
However, there are some organisations that may buy several cameras at once e.g.
universities. Such buyers are in a position to bargain for lower prices but having said that,
whether small or large buyers, they can easily switch to a new brand. There are no major
costs involved in switching to another brand or to an alternative product with the exception
of professional DSLR customers. The buyers (again with exception of professional DSLR
customers) are generally price sensitive and would switch to another brand that offers
lower prices. Based on the overall picture their bargaining power is moderately
strong. Brands such as MONTEL have generated customer loyalty by customer service,
quality, and reputation and by offering value for money based on these aspects to combat
the threat.

 Power of suppliers – (relatively weak) the bargaining power of suppliers in the industry
is relatively weak as, with the exception of the high quality glass for lenses, Montel
manufactures its own components. These glass suppliers (despite the reliance on their
product) will have to play per the rules set by the major players, regulation and
governments (e.g. stringent controls over quality). In the case of the suppliers of glass they
will hold immense influence and switching from one supplier to another will be difficult.

These frameworks can be used in several ways:

 To help management decide whether to enter a particular industry segment or market.
 To influence whether to invest more in an industry e.g. it is important to know whether the
investment costs will be recouped.
 To identify what competitive strategy is needed, establishing the factors driving profitability
in the industry. MONTEL will need to maintain its current profitability to maintain investor
confidence.

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