Vertical and Horizontal Mergers

Running head: FIVE FORCES ANALYSIS OF WARNER BROTHERS
Five Forces Analysis of Warner Brothers
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FIVE FORCES ANALYSIS OF WARNER BROTHERS
EXECUTIVE SUMMARY
This paper intends to analyse the industry competition of the Warner Brothers depending on
porter’s five forces. Thus, the level of probability of the company can also be determined with
the help of it. This paper taken into consideration the key stakeholders of the company and
ethical issues practiced in the entertainment and ass media industry.

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FIVE FORCES ANALYSIS OF WARNER BROTHERS
Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
Conclusion.......................................................................................................................................6
References........................................................................................................................................7

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FIVE FORCES ANALYSIS OF WARNER BROTHERS
Introduction
The competition of a business can be analyzed with the help of Porter’s five forces
framework. The competitive intensity determined by the by the five forces analysis, helps to
understand the profitability of the industry. Here, the competitive intensity of the industry from
which Warner Brothers belongs will be examined on the basis of five forces analysis
(WarnerBros.com, 2020). One of the largest diversified multinational entertainment and mass
media conglomerate is Warner Brothers. It was founded in 4th April 1923 and headquarter is in
Burbank, California. The organization specializes in film industry along with television,
animation, film studio, video games.
Discussion
The strategy formulation through the five forces analysis helps to cope up with the
competition in an industry. Though, the competition may hamper the performance of the
company, it also sometimes act in favor of the industry. The five forces illustrates the state of
competition in an industry. Thus, the ultimate profit potential of the Warner Brothers depends on
these forces. Some industries face intense competition while others have opportunity to gain high
returns (Hbr.org, 1979). The five forces that governs the competition of the entertainment and
mass media industry include threat of new entrants, threat of substitute products or services,
bargaining power of customers, bargaining power of suppliers and industry rivalry.
Threat of new entrants
One of the major barriers to entry of the entertainment and mass media is high levels of
initial cost. Thus, the threat due to the cost disadvantage under the economies of scale acts a key
barriers for the new entrants in this industry (Seastrom, 2017). However, recent technological

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FIVE FORCES ANALYSIS OF WARNER BROTHERS
development provides huge opportunities and enables new firms to enter into industry, which
higher level of competition. Other than barriers like economies of scale brand identification,
government policies, huge investment in research and development also prevent the new
entrants. To overcome the customer loyalty, new entrants need to spend heavily. Thus, it creates
one of the major barriers to entry for them. Apart from the initial cost, financial resources are
important in customer credit and inventions. The high capital requirements prevents the new
entrants to enter the market.
Threat of substitutes
The presence of substitutes is a big challenge for the Warner Brothers. There exists
various companies that offers video games and other entertainment services similar to Warner
Brothers (Rooney & Belli, 2016). Presently the companies in the field of social networking also
poses threat for the company due to the substitute products. Therefore, presence of substitutes
limits the level of profit by sharing the market. The products which improves their price
performance trade off compared to others product of the industry are considered as the most
influential substitutes. In addition, the products of the entertainment and mass media industry
generates enormous profits. Thus, it required attention as it is a major threat.
Bargaining power of customers
Another important factor of the five forces that determines the level of competition in the
entertainment and mass media industry is bargaining power of customers. As there involve no
switching cost for the customers to buy any other substitute products, it creates problem for the
Warner Brothers (Mollet, 2017). The abundance of availability of the entertainment and mass
media industry also acts against the Warner Brothers. The customers who purchases in large

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FIVE FORCES ANALYSIS OF WARNER BROTHERS
volume may impact the organization drastically. The undifferentiated or standard product of any
firm also increases the influence of the customers.
Bargaining power of suppliers
The influence of the suppliers may scale up the competition of the market. As the firms
will face the switching cost to change the suppliers, it may aggravate the problems of the
company (Yogerst, 2016). In such industry, the bargaining power of the actors also play a
significant role. Hence, the performance of the Warner Brothers highly dependent on these
suppliers. The domination of the suppliers are high in industry where few firms operates and the
market is highly concentrated. The influence of the supplier will be high on the industry, if the
supplier is not the customer of the industry.
Industry rivalry
There is fierce competition in global entertainment and mass media industry due to
existence of various big market players (Stöhr et al., 2020). These companies include the Walt
Disney Studio, Fox Filmed Industries, Paramount Pictures Corporation and others. These rivals
may adopt tactics such as unique advertising, new product introduction and price competition to
create obstacles for the other competitors of the market. As the rivalry induces, it degrade the
profitability of the Warner Brothers. Moreover, the presence of the expansion-minded members
in a slow growth industry intensify the fights for the market share.
The entertainment and mass media industry comes under the ethical and moral scrutiny.
In order to grab major market share through more sales, the firms under this industry sometimes
adopt unethical means, which should be avoided. Here, the rating system and Entertainment
Software Review Board (ESRB) works to prevent the unethical practices. Warner Brothers

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FIVE FORCES ANALYSIS OF WARNER BROTHERS
adopted these means to promote its business through ethical means. Another ethical issue of the
mass media industry is gender and race stereotypes. The key stakeholders of the company
include customers, shareholders, suppliers and competitors. The profitability of the Warner
Brothers influences by these stakeholders. The role of the customers, suppliers and competitors
analyzed with the help of five forces model. However, the shareholders are essential part of any
business, as they provide the financial backing. Thus, the potential dividends of the Warner
Brothers enable it to get financial backing from the shareholders, which impacts the performance
of the organization.
Conclusion
The role of the five forces analysis is considerable in determining the competition of any
industry. Here, one of the largest companies of the entertainment and mass media industry
Warner Brothers is taken to consideration to examine the competition of its industry base on five
forces (Thomson, 2017). In addition, the ethical perspective adopted by the company worked in
favour of it and the key stake holders also have a profound effect on the profitability of the
company.

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FIVE FORCES ANALYSIS OF WARNER BROTHERS
References
Hbr.org (1979). How Competitive Forces Shape Strategy. Harvard Business Review.
https://hbr.org/1979/03/how-competitive-forces-shape-strategy
Mollet, T. (2017). Cartoons in Hard Times: The Animated Shorts of Disney and Warner
Brothers in Depression and War 1932-1945. Bloomsbury Publishing USA.
Rooney, B., & Belli, M. L. (2016). Directors Tell the Story: Master the Craft of Television and
Film Directing. CRC Press.
Seastrom, L. O. (2017). A carnival at termite terrace: laughter and expression in Warner Bros.
animation.
Stöhr, A., Noskova, V., Kunz-Kaltenhäuser, P., Gaenssle, S., & Budzinski, O. (2020). Happily
Ever After?: Vertical and Horizontal Mergers in the US Media Industry. World
Competition, 43(1), 135-162.
Thomson, D. (2017). Warner Bros: The Making of an American Movie Studio. Yale University
Press.
WarnerBros.com (2020). | Home of WB Movies, TV, Games, and more!. Warnerbros.com.
https://www.warnerbros.com/
Yogerst, C. (2016). From the Headlines to Hollywood: The Birth and Boom of Warner Bros.
Rowman & Littlefield.