An Assignment on Industry Analysis: A Case of MBA Program Offered by

Ace Institute of Management

Industry Analysis and Porter’s Five Forces Model

In order to remain competitive and adjust the business strategies to best meet the objectives and
deal with changes in the environment, it is important for firms to identify the various factors that
have an influence in the entire industry. It is because, industry analysis provides an insight on the
current situation of the industry, ongoing trends, possible changes in the future and what kind of
strategies are being adopted by successful firms to deal with change. Likewise, industry analysis
also helps to take informed decisions about the strategic direction of the firm. Too often, strategic
decisions are made in absence of this information resulting in loss of valuable market share to the
primary competitors and loss of grip over the market due to substitute products. Because of these
reasons, industry analysis is an important market assessment tool that helps a firm discover the
forces operating in the external environment.
The guidance on evaluating the competition and understanding the market forces influencing
firm’s operations in an industry is provided by Michael Porter in his articles, “How Competitive
Forces Shape Strategy” and “Note on the Structural Analysis of Industries”. According to Porter,
the intensity of competition in any industry isn’t resulted due to coincidence or bad luck but is
resulted due to five forces in the external environment namely, the intensity of competition,
bargaining power of buyers, bargaining power of suppliers, threat of new entrants and threat of
substitutes as illustrated below;
Porter’s Five Forces Model
As this model is widely used in industry analysis, it seems appropriate to apply this model for the
industry analysis of MBA colleges in Nepal as well. To carry out this analysis, MBA program
being offered by Ace Institute of Management has been chosen.
Applying the Porter’s Five Forces Model to MBA of Ace Institute of Management

1. Intensity of Competition
Out of the five forces mentioned in the above section, intensity of competition is most influential
on the firm’s operations and its control over the market share. The intensity of the rivalry among
competitors is related to various factors like level of industry growth, number and relative size of
the competitors, degree of differentiation in product/service offerings, amount of fixed costs
incurred and the strategies employed by competitors.
Ace Institute of Management affiliated to Pokhara University, was founded in the year 1999 A.D.
This provides the college with a long history of 20 years. This is one of the reasons why Ace
Institute of Management has been able to gain public trust and capitalize on it well establishing
itself as one of the most renowned and reputed business schools for MBA education in Nepal. This
is a major factor that provides the college a competitive advantage over its competitors. According
to the survey done by New Business Age Pvt. Ltd. which runs monthly business magazine “New
Business Age” and daily business magazine “Abhiyan National Daily” in order to find out the
public rankings on “Top 10 best MBA colleges in Nepal”, Ace Institute of Management secured
the second position. The award criteria was based on several factors like years of program
commencement, job placement opportunities, exposure to real-life business, student initiated
learning and development activities, college brand image, infrastructure and quality of faculties.
All these factors have been successful in attracting business students and increasing the market
share of the college in the entire industry. Due to these kind of awards and recognition, Ace
Institute of Management has been charging premium price of 8-9 lakhs which is almost the double
of industry average. It is not a matter of surprise that the college has been able to get the customers
willingly pay the premium price. This is because the college is not only offering a two year MBA
course, but providing various facilities like job placement opportunities, exposure to the real-life
business, mentoring classes which has established it as a strong competitor in the industry.
Likewise, apart from the full-time MBA course, the college also offers Executive MBA and
Evening MBA. Through this, the college has been able to target a broader segment of business
students.
Therefore, even though there is an existence of a number of MBA offering colleges in Nepal, Ace
Institute of Management has been able to deal with the competition very effectively till date by its
competitive strategies.
2. Bargaining Power of Suppliers
The second force in the environment that has an impact on the industry and the firm is the
bargaining power of suppliers. By the term bargaining power, we mean the ability of suppliers to
increase the price they are currently charging or decrease the quality being offered. The power of
suppliers increases in situations when they are limited in number, there are no other substitutes
and are crucial to the firm’s functioning.
However, in the case of Ace Institute of Management, the suppliers are the university they are
affiliated to and the faculty members. As Ace Institute of Management is affiliated to Pokhara
University, it needs to operate its activities according to the guidelines of Pokhara University. In
this situation, the college may be affected if the University amends the rules regarding continuation
of MBA by colleges, maximum number of students that can be admitted, maximum amount that
is to be paid to the university as affiliation charge and so on. Likewise, it has been previously
mentioned that experienced and renowned faculties of the college also have a great role in
increasing the goodwill and attracting students. In relation to this, college may be obliged to fulfill
the demands of faculty members concerning increment in salary, incentives and other facilities. It
is because losing a source of goodwill will result in losing a competitive edge over the competitors.
If the college fails to acknowledge this, the faculty members may join the competing colleges.
3. Bargaining Power of Buyers
The third environmental factor that has an influence on the industry and firms operating under it
is the bargaining power of buyers. By the term bargaining power, we mean the power held by the
buyers over the firm through demanding reduction in product/service prices, improvement in
quality offered and other augmented services. Buyers become more powerful when they purchase
or consume a large portion of the firm’s output, when there are large number of firms providing
similar product/ service offerings and there are no switching costs.
In the context of Ace Institute of Management, the buyers are prospective and existing business
students. As there are large number of colleges offering MBA under various universities in the
Kathmandu valley itself, the college is faced with a lot of competition. The subjects offered under
the course are more of less similar to that of other colleges. Likewise, currently there are many
colleges that are offering new courses that students might find interesting. For instance, King’s
College which charges comparatively lower fee, has introduced courses like MBA
Entrepreneurship, MBA Agribusiness, MBA Pro and MBA Nonprofit. Whereas, Ace Institute of
Management has remained stagnant in its course offerings for a while. Therefore, to deal with the
bargaining power of buyers and retain them in the future, the college should focus on creating a
new experience for the students by offering new and interesting courses over the time.
4. Threat of Substitutes
Threat of Substitutes is the fourth factor that affects the industry and firms. Substitutes are the
firms that offer similar products/services at the same or cheaper price. The threat of substitutes
increases when the firm fails to provide differentiated value to the customers. This results in
customers shifting to other firms in hope of better products/services.
In relation to this, the possible substitutes of Ace Institute of Management are the existing or new
colleges who will most probably try to provide a MBA offering that is suitable for executives, full
time students and those unable to devote full time for MBA in the form of Executive MBA, Full-
time MBA and Evening MBA. This action from other colleges will present them as substitutes to
Ace Institute of Management and they may attract the attention of the above customer segments.
5. Threat of New Entrants
Threat of new entry is the fifth factor that has an impact on the firms and industry as a whole. New
entrants are the firms who may enter the industry in the near future. They create a pressure for
firms already operating in the industry as reduce the market share for existing firms and may exert
pressures on prices. It is because during the initial phase of operation, new firms generally try to
offer best services at cheaper prices to gain public attention.
In the context of Ace Institute of Management, the new entrants may be the firms that may be
affiliated under Pokhara University in order to offer MBA programs. New MBA colleges may be
established in the future with more interesting and relevant specializations on MBA and prices
cheaper than the industry average. However, strong proactive and retaliation strategies from the
college may be effective in reducing the impact of new entrants over the college’s functioning and
market share.
In this way, through this industry analysis of Ace Institute of Management following the Porter’s
Five Forces Model, the potential factors in the external environment have been identified. The
information obtained can be further utilized in order to take informed decisions and provide a
strategic direction to the college.

Submitted By:
Pragya Budhathoki
Quest International College
MBA, 6th Trimester.