Porter’s five forces would be used to provide a broad analysis of the competition in the Television industry. This external environment and especially competitive forces indicate how pro active and change oriented a company must be to remain effective. The Five Forces analysis allows determining the attractiveness of an industry. It provides insights on profitability.
Thus, it supports decisions about entry to or exit from and industry or a market segment.Moreover, the model can be used to compare the impact of competitive forces on the own organization with their impact on competitors. Competitors may have different options to react to changes in competitive forces from their different resources and competences. This may influence the structure of the whole industry (see figure 4 in appendices for a diagram of the analysis) The television industry can be used to deliver information, education and entertainment from sports and game shows to films and soap operas.
Technically and commercially it can be analysed it terms of production, transmission, finance, reception, but any sophisticated understanding of how television could evolve relies on understanding its cultural dimension. Threat Of New Entrants Low Threat – because the British Television Industry includes many large companies, it is difficult for new television channels to succeed without merging and forming a partnership with other companies. If a new TV station becomes popular, or a larger channel of a similar format sees them as a threat, they will end up being bought out.It is almost impossible nowadays for a small company to grow itself to compete with the big companies, as the big companies, have all the power. It may be the case that new television companies may not even get off the ground, because it costs a lot to get a television company up and running and the finances may not be available.
Another reason a new TV company may not start, is that the availability of channel space may not be there, so they may have to wait a long while to get the channel space they need.The Internet is also a threat to the television industry, as people can watch television programmes from all over the world by downloading programmes, However this is a minimal threat as many people over estimate the internet. It is correct that it is powerful but the television industry has many more advantages over the Internet such as advertising on TV is far more profitable than advertising on a website. Threat Of Substitute Products And Services High Threat – there are a lot of alternative types of entertainment, which can be used as a substitute for TV:DVD’s are a big threat to the television industry, as they are something that people can choose to watch whenever they want to, they don’t have to sit down at a certain time to see what they want to see, they can watch them at their own leisure.
Low Threat – The British Television Industry includes an amount of multiple buyers. There are advertisers that purchase airtime from the television companies, excluding the BBC, as there are no advertisements on ant BBC television channels, because they use money from TV licensing. Other TV companies use advertisements as a good way to generate revenue to create their programming.The British Television Industry relies on viewing figures to keep track on the most popular channels and programmes, for example: the BBC1’s share of the total viewing figures for March 2004 was 19. 2%, whereas ITV’s share, was 18. 9% (see figure 2 for full chart in appendices).
It is up to the viewers what they watch, so the TV companies rely on the viewers to watch their programming. Power Of Suppliers Medium Threat – The British Television Industry, holds the power in the relationship between themselves and the suppliers.The suppliers are usually independent production companies who create programming for larger companies, for example Endemol UK makes Big Brother for Channel 4. The suppliers are able to increase their power when they produce a good product that has the potential to bring in lots of revenue.
Big Brother is also a good example of this, as it has become a brand, and generates a lot of money in phone votes. Competition High Threat – Because all the major channels in a way offer the same products, they are easily substitutable; the rivalry between these companies is very high.The market share is very important to them, as it shows what channel is the most popular, and what programmes bring in the most audiences. It helps the channels, especially the ones that have advertising, as they can charge more for a 30 second advertisement in between a popular programme, to less in a less popular one.
The competition is mainly between the big channels of the BBC and ITV. They are the channels that want to beat each other out in the audience shares, and try very hard to do it. All the channels are in competition with each other.