The ultimate Fighting Championship Is categorized, based on the North American Industry Classification System, as part of the “Promoters of Performing Arts, Sports, and Similar Events without Facilities,” Identifying with the code 711320. To analyze the strength of competitive forces within the industry and the attractiveness of the industry, we will use the Five Forces Model. The first part of the Five Forces Model is the threat of new entrants. Based on the function of barriers, it is highly unlikely that there will be new people entering into the market.
As an incumbent of the industry, JIFF would desire to keep the threat of new entrants to be low so they can shut the door behind them once they are in. The Ultimate Fighting Championship has entered into the industry and kept others from coming into their space. AFC has captured market share through their product differentiation. Compared to other sports entertainment on television, this particular company has differentiated themselves from the rest of the Industry through Incorporating mixed martial arts and positioning themselves to Internationalism.
A fighter with a boxing background can be In the octagon with another fighter that comes from a Jujitsu background. This sparks more interest amongst viewers as the company stands for their fighters and their branding association with different styles of fighting. The next part of the Five Forces Model is the bargaining power of suppliers and for AFC; the supplier group would be considered to be potential fighters.
A supplier group is powerful when satisfactory substitute products are not available to industry firms; suppliers’ goods are critical to errs’ marketplace success; it is dominated by a few large companies and is more concentrated than the industry to which it sells; industry firms are a significant customer for the supplier group. By this definition, the supplier group is powerful: there aren’t any substitute products to fighters In the Industry, fighters are needed for AFC to be a part of the marketplace, there are only a few companies In the Industry and the fighters are more concentrated than the Industry.
However, the demand for fighters to be a part of the AFC Company is high and fighters are plenty. Therefore, with that aspect the suppliers’ bargaining power may be low. In contrast, when we speak about the supplier group’s bargaining power, it is high based on the definition the book gives us. In addition to the bargaining power of suppliers, there’s the bargaining power of buyers. The customers of JIFF are the viewers and purchasers of the pay-per-view events that JIFF sells.
As firms want the highest return on their investments, customers want the lowest price possible for the product or in this case, to watch the pay-per-view shows. Therefore, customers are powerful when they purchase a large portion of an industry total output; the sales of the product being purchased account for a significant portion of the seller’s annual revenues; they could switch to another product at little, If any, cost. This Is the case In this Industry and for this particular company: viewers can simply switch the channel or purchase a different pay-per-view event.
The purchasing of these events is a power of buyers is also due to the fact that they have almost zero switching costs hen they decide to purchase from another company, their competitor, in their industry. Also, the threat of substitute products is a part of the Five Forces Model. According to the book, substitute products are goods or services from outside a given industry that perform similar or the same functions as a product that the industry produces. We would classify substitute products for JIFF to be any other activity the customers could be doing other than watching JIFF.
Due to the substitute product’s ewer price and equal or greater quality, product substitutes present a very strong threat to JIFF. Whether it would be riding a bike, cooking, eating, or painting, there are many substitute products towards AFC. Switching costs could also be low and few and for these reasons the threat of substitute products are high. This is a huge issue that JIFF would need to address. The final part of the Five Forces Model is the intensity of rivalry among competitors. For AFC, this can be anything from the NFG, NAB, or WE: anything else the customer can watch other than JIFF.
Based on this definition, there is an intense rivalry with so many companies and competitors in the industry. WE and boxing would be considered direct competitors for AFC. These two competitors not only somewhat share the same viewer demographic as JIFF, but both competitors release APP events where viewers can purchase. Any other sports accessible through the television would be considered Buff’s indirect competitors. Nestled in a slow-growth or no-growth market, the intensity of the rivals are high as they try to increase market shares.
