THE ECONOMIST

The Economist

The Economist

Q1. Analyse the magazine industry applying Porter's 5 Forces. Considering the most appropriate internal and external conditions, to what extent was the magazine industry in a strong competitive position to meet future challenges?

The publishing market will be analyzed taking publishing companies as players. The key buyers will be taken as individual consumers, and paper merchants, renters of office space and equipment as the key suppliers. The success of the publishing market, wholly dependent on consumer spending, is strongly related to measurable factors such as economic growth and employment levels and these factors will also affect competition in this market (Eric and Robert 2001, 156-63).



Porter's Five Force Analysis

The publishing market is facing higher levels of competition due to the increased popularity of online resources and e-books. The publishing market produces products which are highly influential in the educational system, socio-political and cultural environment. Buyers within this market are numerous, small and with little financial muscle. Paper merchants, suppliers of printing equipment, renters of office space, and computer manufacturers are all deemed as suppliers to the market players (Aaker & George, 1974, Pp. 281-6). These various suppliers vary in size and number depending on the specific supply. The publishing market is not only driven by the physical book, newspaper, or magazine, but various other forms of mass-media, such as online versions and e-books which continue to gain popularity. Independent publishers can cater for niche markets, as well as provide reduced costs, and consequently are finding themselves more in demand. There are other forms of entertainment considered here as substitutes to the publishing market, they include television, CD-ROM learning software and computer games, to name a few. Generally, large publishers that are diversified through various subsidiaries spanning a broad range of media dominate the market. Following are given each force with respect to the magazine industry (Schwerin & Newell, 1981, Pp. 23 -50).

Buyer power:

Publishing products are hugely influential in the education system as well as the socio-political and cultural environment. Publishing companies, who produce, serve and/or market media in the disciplines of books, magazines and newspapers, are the players in this market; while individual consumers are considered as buyers. Buyers within the market are numerous, small and with little financial muscle. This weakens their power. Whilst loyalty to a publisher will be negligible in this market, customers are likely to show loyalty towards certain authors, magazines, newspapers etc. An exception may be some publishing houses that publish literary classics. Much published media can be classed as a luxury rather than essential items. As such buyer power is strengthened by this low importance. However, in the case of professional or academic texts, which may be considered essential to consumers, buyer power is minimized. Price sensitivity in this market tends to be directed towards the retailer as opposed to the publisher. There are no switching costs for buyers in this market; however the loyalty shown by consumers to particular authors/genres etc. may prevent them from ...