National Basketball Association (NBA) is one of the leading sports organizations in the world. The league is available to viewers in the United States as well as other parts of the world. The pricing varies from one geographical location to another and has a good number of basketball teams (30) that offers abundance of entertainment to their customers. It is also prudent to note that NBA uses Akamai’s global streaming video service to reach customers and strategic partners in different parts of the world such as in Asia, Europe , Africa, middle east and north America just to mention a few. It is one of the most successful of the American professional sports leagues that also includes the major leagues baseball, the national football league and the national hockey league (Porter, 2011). Nevertheless, NBA has a better global presence where it is televised in 12 countries using over 42 languages all over the world. This paper intends to carry out the industry analysis of firm using the Porters five forces model.
Porter’s five forces model
This is one of the most commonly used analysis tools used to analyze the competitive position of a firm in a specific industry. The model was developed in 1979 my Michael Porter with intention of deriving a framework that would help evaluate the competitive strength and position of the firm within the industry. The framework is based on the concept that there are five forces that determines the competitiveness of a firm in an industry (Roy, 2011). He believed that an analysis of these forces would help determine where the power lies and make strategic decisions that would keep a firm in a competitive position. These five forces include; threat of new entrants, bargaining power of buyers, bargaining power of suppliers, rivalry among the existing firms and threat of substitute products or services. All these forces are very much applicable in the sports industry and we will have an in depth analysis of how the forces have influenced the competitiveness of the firm.
Bargaining power of the supplier
This is concerned with assessment of how easy it is for the suppliers to drive up prices or impose their terms in the relationship. However in the case of NBA, the bargaining power of the suppliers is quite low. This is because there are numerous of suppliers with similar CDN and thus making the organization to have an upper over the suppliers. Nevertheless, the organization has over the years maintained a good relationship with the suppliers thus enabling a constant and reliable supply (Porter, 2011). It is however imperative to note that even if these relationships break, the organization can freely and easily finds a replacement.
The bargaining power of the buyers
According to Michael porter, the bargaining power of the buyers is another important aspect that determines the competitiveness of a firm within an industry. This is an assessment of how easy the buyers can force a downward pricing strategy in an industry. It is mainly determined by having alternative sources or the number of buyers in a particular industry. In the case of NBA, the bargaining power of the buyers is quite high (Roy, 2011). The basketball fans have various alternatives through which they can watch their favorite basketball matches. The fans can watch live matches from other television channels thus putting the firm at a risk of losing a sizeable fan base. Nevertheless, NBA has been able to deal with this threat by the additional content and providing essential insights and commentaries on matches. The use of Akamai’s has also enhanced penetration of the firm to most parts of the world thus capturing more consumers.
On the other hand, there is a very low bargaining power on the side of the media and other corporations. This low power is as a result of the increased monopoly that allows NBA to demand huge fees for TV broadcast rights. On the same note, the basketball games are increasingly becoming popular every day thus making the demand for the game quite high. This forces the TVs and other corporations to agree to the huge fees to maintain their business interests.
Threats of potential entrants/new entry
Michael porter noted that profitable markets will always attract new entrants and the long term effect of such a move is reduced profits. He argues that unless there are strong barrier to entry, then the overall profitability of the industry is likely to go down with time. In the case of NBA, the threat of new entrants in the market is not a major threat to the organization. It is important to understand that there are other less prestigious basketball leagues that really discourage new entrants in the industry (Shilbury, Westerbeek, Quick, Funk, & Karg, 2014). On the same note, NBA is a prestigious organization with a strong foundation and a powerful sense of belonging amongst its faithful thus making it hard for potential entrants in the s ports industry. Nevertheless, there has been emergence of other professional sports leagues such as MLB, NLF and NHL which have also entered the sporting industry with a storm. It is however essential to point out that the use of Akamai has been instrumental in ensuring that the new entrants in the sporting industry do not affect the profitability of NBA (Porter, 2011). The organization has ensured a strong brand name throughout a factor which to a great extent has kept new entrants at bay and the ones entering have found it difficult to cut the firm’s market share. It is also worth note that the use of Akamai has also been a great barrier for new entrants in a number of ways. The NBA has secured copyrights with Akamai which makes it difficult for others to enter the market. It also provides high speed loading as limited phenomenon of piracy in instances where the content is available for free.
Threat of substitute
Presence of close substitutes in the market will always give customers an opportunity to switch from one product or service to another. The shifting is mainly driven by price increases and this ultimately makes the market less attractive as the profits will be reduced substantially. The presence of close substitutes leads to price wars thus enhancing the bargaining power of the buyer. In the case of NBA, the threat of substitutes is real and may have adverse effect on the sustainability of the organization (Shilbury, Westerbeek, Quick, Funk, & Karg, 2014). With the enhanced technology, there are high chances that traffic from nba.com will be drained significantly. It is also worth to note that other major professional sports leagues such as the hockey and football leagues in the United States and other parts of the world are increasingly becoming popular.
The existence of these leagues has given the customers a variety of sports and they can make choices on which sports leads to utmost satisfaction. Some of the sporting leagues have better online content which is also easily available thus putting the profitability of the business at stake. Also, amateur content uploaded on streaming websites or peer-to-peer platforms that are faster to download and have no forced ads have also significantly affected the performance of the organization. All these factors have offered the firms’ clients alternatives thus having adverse effects on the profitability of the firm.
This is another important force that porter felt had significant impact in determining the competitive of a firm in a given industry. It is a driver that is determined by the number of competitors and their capabilities. According to porter, many competitors offering similar and undifferentiated products and services will reduce the attractiveness of the market (Roy, 2011). In the case of NBA, there is competition although not a very stiff one. The major competitors include Major League Baseball Enterprises, National Football League and the National Hockey League that deals with baseball, football and hockey respectively. Although the different organizations are in the sports industry, each of them has interest indifferent sports and hence they are not direct rivals. On the same note, NBA has global presence and the use of Akamai has only accelerated its dominance over the competitors.
The use of Akamai has enabled basketball fans all over the world to access as fast as possible NBA’s virtual assets. It allows the NBA to focus on a specialized niche thus making it possible to be a market leader in the sports industry. The use of Akamai has only enhanced professionalism in the basketball industry hence enabling NBA to conquer a broad market and be way ahead of its competitors such as MLB and NFL(Shilbury, Westerbeek, Quick, Funk, & Karg, 2014). From the five forces analysis, it is clear that the organization has made tremendous steps and its competitiveness in the industry has to great extent been as a result of use of Akamai. Akamai has over 25000 servers all over the world which has enabled differentiation and improved NBA content worldwide. As a result, the firm has remained competitive in the industry and is far much ahead of other players in the industry.
Porter, M. (2011). Competitive strategy. New York: Free Press.
Roy, D. (2011). Strategic Foresight and Porter’s Five Forces. München: GRIN Verlag GmbH.
Shilbury, D., Westerbeek, H., Quick, S., Funk, D., & Karg, A. (2014) . Strategic sport marketing.
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