Porters five forces of the Japanese Animation industry
INSTRUCTIONS:
Write your response to questions following these 2 case vignettes for your CEO – assuming that your consultancy firm has been assigned to these contexts and the questions are what you have been asked to provide a response to by your CEO.
- Japanese Animated Films
Japanese animated films, featuring cute girls with improbably big eyes and cuddly creatures with squeaky voices, used to be scoffed at as a cultural curiosity whose appeal in the west was limited to children and cartoon junkies. But in recent years the market for anime has found a wider audience, becoming one of the country’s most valuable exports.
There are about 430 plus anime production companies in Japan. They employ large numbers of people to create hundreds of detailed drawings that the films require. It takes 100 people about three to three-and-a-half months to complete a 21-minute programme for a typical TV slot. If the programme becomes a big hit, the profits are shared by the TV broadcaster, the advertising agency, and the financial backers who invest in the projects. The studio that created the anime is paid costs but is excluded from profit sharing. Programmes cost on the average about Y13m to make, and the production company on the average receives about Y9m to Y10m from TV broadcasters. Some anime production companies generate additional revenues through toys, T-shirts, and other merchandizing if they retain rights to drawings of popular programs, but most have to forgo the rights to the original drawings in order to pay overheads and finance the production of the projects.
- Analyze the above description of the Japanese animation industry using Porter’s Five Forces model.
Solution
Porters five forces of the Japanese Animation industry
The Porters five forces is an industry analysis model that identifies and analyses the competitive forces that shape a particular industry, hence determining its strengths and weaknesses (Porter, 2016). The five forces include competition, the potential of new entrants, the power of suppliers, the power of customers and the threat of substitute products. This section applies the model to the Japanese animated films industry.[G1] [G2] [G3] [G4]
Competition in the industry
There are about 430 players in the industry, employing many people that are involved in this industry. The many players in this industry, who deal with almost similar products ensures that stakeholders such as production houses, TV stations, financial partners, advertising agencies and workers in the industry have a large pool of players to choose from.
Potential of new entrants into the industry
The film and animation industry is always evolving, with technology enabling many options. This not only ensures that there is a quality film but also makes it easy for other players to join the industry. The fairly low cost of making a film (Y13M), means that many players could still join the industry as long as they can make films that are well received by the market. The rather liberal financial markets, a strong economy, and low-interest rates also [G5] [G6] allow borrowers to easily access capital required in the industry.[G7]
Power of suppliers
Suppliers in this industry are powerful, in that they are mostly involved in critical stages of the project such as advertising, production, and distribution.[G8] In this case, they can easily influence prices, especially if they worked in a cartel-like manner. While this is an unlikely scenario, their hold on the industry cannot be ignored as it may be costly to hop from one supplier to another.
Power of customers
Customers, in this case, include the TV stations that air the programs, as well as the general public that purchase or view these films.[G9] [G10] Due to a large number of customers, their power is reduced since they may not be in a position to influence prices. [G11] [G12]
Threat of substitute products
The Japanese anime industry, which was once frowned upon, is now a readily accepted industry, even to the general public. The general acceptance also means that the threat of substitutes is still high. The ease with which it is to get into the industry, and also to make a film, means that it is easy to come up with substitute products which would easily be accepted by the market.
References Porter, M.E (2016) The five competitive forces that shape strategy. Harvard Business Review. Available at: http://nacm.org/pdfs/gscfm/The%20Five%20Competitive%20Forces%20that%20Shape%20Strategy.pdf