ITV plc is a media company operates in the UK and internationally whose segment contents of Broadcast & Online in the UK and global contents ITV studios. It is one of the UK’s leading and fastest growing commercial channel and integrated producer broadcaster creates, owns and distributes high-quality contents in multiple platforms. It consists of ITV2 and ITV3 the two largest digital channels in the UK from where most of the revenue is generated. During 2014 ITV has launched the high definition version of the digital channel known as ITV Encore the first pay only channel.
It is estimated that ITV has the largest share of UK television, advertising market. Porter’s five forces analysis was developed by Michael E. Porter of Harvard University. It is the framework that helps a company to analyse the level of competition within the industry and how the strongest competitive force will determine the profitability of the industry and so are of greatest importance in strategy formulation. It also helps to evaluate the company’s current competitive position.
1. 1 Bargaining Power of Buyers: The Bargaining power of the buyer is the ability of the buyer to force down the prices, demanding better quality or more service. The bargaining power of the customer will be relatively high due to ITV running in the high competitive media industry with strong competitors media companies like BBC, SKY and Channel 5 is operating. Although ITV is one of the largest commercial media company due to the competition in the industry there is the high chance the customer might switch to other companies if ITV doesn’t provide high-quality television programs and world class contents.
If the buyers believe they can always find the equivalent product they tend to play one against other. Profitability of the company depends upon the number of viewer ITV can attract. 1. 2 Bargaining Power of Suppliers: The supplier is major to any business organization. The supplier is the one who provides the raw material, machinery to the business so that the business can carry out is operations. In broadcasting & media industry the main supplier is the one who creates contents & programs.
The bargaining power of the supplier depends upon the reputation and experience of the supplier. High the reputation higher is the charge. Looking at the ITV who produces, creates its own programs for its channel the main supplier will be the directors, actors, story writer. High Experience & famous the supplier are the bargaining power is higher. Some programs like Champions league have a greatest bargaining power due to BBC outbidding ITV which cause ITV to lose the contract to show the programs in its television. Football Association being the supplier choose the highest bidder.
Bargaining power of supplier has the greatest impact in companies’ profitability losing the famous shows like Champions league resulted the large portion of audience moved to its competitor. Cilla Black was one the huge hit during autumn 2014 which attracting around 8. 3 million viewers. On the other hand, the bargaining power of the supplier is low if the company has the largest number of audiences. As ITV has the largest share of UK television more and more supplier would prefer their programs to be broadcasted through ITV channel.
1. 3 Threat of Substitutes: There are many substitutes exist in the market like internet download, online streaming, movie industry which is the biggest threat for the company like ITV. The internet provides the alternative platform for the viewer to watch the programs for free. Other substitutes will be the indoor and outdoor concert and event which instead viewer will choose to watch live instead watching the television which may drop the percentage of a viewer. Netflix and Amazon are the regards as the substitutes which provide the high definition quality movies and programs through the online stream.
1. 4 Threat of New Entrants: If the market has a high return then it attracts new entrants. Threats of the new entry in the industry depend on the height of entry barriers. As in the media industry required a large amount of capital investment and where the competitors are in the good position in the market the entry barriers is very high. ITV and BBC hold the strong position in media industry so the threat is minimized. Brand Identification also creates the barrier by forcing entrants to spend the huge amount marketing and getting the customer loyalty. At present ITV and BBC hold the strong customer loyalty.
Access to distribution channels the new entrants should have the secure distribution channel of its product or service the new media entrants programs and content may not like by the viewer which creates difficulties for the new company to existing in the market. The rapid growth of online streaming BT and Netflix might be the threat of new entrants in the market for the online pay television. 1. 5 Competitive rivalry within the industry: In any industries sector intensity of the rivalry is very high. Competition within the industry forces the companies to lower the price and loose the market share.
In UK television industry there is lots of competition. The main rival for the ITV is BBC which holds the strong position within the UK. Industry always required the powerful competitive strategy to survive within against the competitors. Both the broadcaster has the popular shows like coronation street, downtown abbey for ITV and East Enders for BBC which are the most-watched soap of the year, Although ITV has lost its contract broadcasting the Champion League, as a result, customer has switched to BBC, but it still has some famous entertainment shows like Britain’s Got Talent and X-Factor which attracts the audience.
TV’s another rival is Sky which provides the wide range of services like sports channel, movies channel, and weather for the cast. To be competitive within the market ITV need to spend the huge amount of capital in marketing, new programs hiring the best actors, directors which will increase the cost and lower the profitability.
However, it can generate the wide range of audience which will help to increase their profitability. 1. 6 Limitation of Porter’s Five Forces There are several limitation of Porters Five Forces. Porter’s Five Force underestimates the influence of a company’s core competencies on its ability to achieve profit. The model is applicable to small companies & firm but it is difficulty to apply to large multinational companies. The model mainly forces in the external factor rather than the company’s internal strength and ability. The model consider the market as static not dynamic based on idea of competition and ignores other factor strategic decision and environmental issues.
