Accounting 411 Business Valuation Spring 2008 Assignment B: Industry Analysis Objective: Practice applying Porter’s Five Forces to an industry Analyze this industry using Porter’s Five Forces. For each of the forces, indicate whether it is high, low, or medium, and the rationale for your choice. Threat of new entrants : The most significant issue to consider here is economies of scale. Since the industry is discount stores, the ability to purchase in volume to achieve discounts will be a key factor that would make it difficult for new entrants to jump into this business. First mover advantage, distribution access, and legal barriers really don’t apply. Overall this threat is LOW. Threat of substitutes : Substitute for a discount/variety store may be a traditional department store. It is easy for a customer to switch, but there will be a trade-off – should expect higher price and perhaps higher quality. Overall this threat is LOW-MEDIUM. Buyer power
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Porter five forces analysis, retail stores, LOW-MEDIUM Overall profitability