British Broadcasting Corporation (BBC) is the leading news broadcasting company in the world. It was established in the UK under a Royal Charter. There are overall eight television channels, 40 local radio stations, 10 radio stations, and widespread many websites. BBC mainly covers BBC covers worldwide current affairs and news and telecasts them to the world through its radios, television channels, and websites. It also offers news, entertainment, and information in 32 languages and operates in a number of countries through its different portals. Until 1955, BBC had no competition in the UK when the UK government issued licenses to Independent Televisions.
Following is a detailed Porter Five Forces Model Analysis of BBC:
Competitive Rivalry – High
The news industry has very few players. However, each has a significant market share of the overall industry. The main competitors of BBC are American news channels such as ABC, FOX News, and Sky News while nationally it competes against ITV, CNN, and BSKYB. BBC is still the leader in the news industry where it holds 40% of the market share in the UK news industry. Without charging any fees to its customers for the reception, it is able to lead the industry and leave the competitors behind. All competitors are continuously working on new competitive strategies, diversification, and expansion of distribution capabilities (Abita, 2011). All the players in the industry are strong and they are few in numbers with the industry growing at a slow pace makes the intensity of competition amongst the rivals high.
Threat of New Entrants – Low
For the news industry, new entrants refer to new news channels of TV or Radio, either locally or internationally. The biggest entry barrier for this industry is the extraordinary setup cost. Existing channels have a strong customer loyalty. Establishment cost and brand awareness are the highest. There are strict rules and regulations in place by the different governments for this industry. The license fee is also very high. This added with the huge capital investment lead to a long payback period. This is another entry barrier. Therefore, there are only very few companies that are able to enter and then maintain their position and capture market share. Many new entrants simply merge with the existing players. Another factor is the time it takes to earn trust and establish a customer loyalty, which is very important in the news industry (Lin, 2014). BBC has been around for a very long time raising the entry barriers high. Thus, overall threat of new entrants is low.
Bargaining Power of Suppliers – Medium
The bargaining power of the suppliers depends on their numbers and the volume of the purchases made by the company. Suppliers in the news industry are both domestic and international, with each holding a certain level of power. As different nations have different regulations regarding the publication of news, international suppliers are in a better position to bargain. The second aspect is the popularity, experience, and demand of the listeners or viewers. If the suppliers are big names like Brad Pitt, Jay-z then they would hold sufficient bargaining power and if the supplier is a local channel, students, residents etc then their power is low. Thus, overall bargaining power of suppliers against BCC is medium.
Bargaining Power of Buyers – High
Due to the intense rivalry and availability of different sources, the buyers or the customers have a wide array of choices. Even for paid channels, there is competition to offer the cheapest packages. The switching cost for buyers is also low. Although BBC is free, there are many other channels national and international which are also free. BBC, therefore, cannot force its customers to keep on watching it. The bargaining power of the customers or buyers is thus high.
Threat of Substitutes – High
The substitutes of the news industry are magazines, newspapers, the internet, social websites etc. The same news that BBC offers is also available easily from the substitutes at even more convenience and low cost. Also, the cost to switch to substitutes is low. The biggest threat are social media websites, blogs, and other websites available on the net where users can post pictures, videos, blogs, news i.e. literally anything free of cost and making it available to the whole world. Therefore, the threat of substitute products is high for BBC.
References
Abita, B., 2011. Report on BBC (British Broadcasting Corporation). [Online] Available at: http://dineshperspective.blogspot.com/2011/08/assignment-topic-report-on-bbc-british.html [Accessed 20 June 2017].
Lin, Z., 2014. Competitive Strategy of BBC News Product. [Online] Available at: http://zhenyul.in/research/Zhenyu%20Lin%20-%20Competitive%20Strategy%20of%20BBC%20News%20Product.pdf [Accessed 20 June 2017].