Porter’s 5 Forces Model
Threat of a New Entrant
Barriers to enter in the MMA market is moderate because 36 States of the country has legalized the MMA market and therefore many competitors are likely to enter the market. However, due to huge investment and huge amount of time required to establish a particular fighting brand, it is difficult for new companies to enter the market. In order to fully cater the market and to challenge UFC’s market revenues, then an established brand is required from another industry to compete UFC in the market. The customers of UFC, WWE, and boxing, are loyal to their specific fields which makes it difficult for new entrants to divert the attention of their customers. Huge amount of knowledge is also required to run the particular business because there are many slight variations that could occur which needs changing in the organization as well (Sim, 2007). Therefore, knowledge is a key element along with sustainability. Even though if a new entrant enters the market, then it would be difficult to survive as it needs funds and investment to manage the fights in many different states.
Threat of a New Substitute
The substitute for MMA is WWE and Boxing which is the major threat for the organization. Other substitute include karate and kick-boxing events. Therefore, the threat of a new substitute is very low for the industry. The buyer willingness to shift from a particular industry to another is high which can further increase the threat of companies as the switching cost is also low. The procedures of attending the events is also similar amongst industries which has the same concept of PPV and other related events. However, the presence of Boxing in many countries allows a greater fan base than WWE and MMA which makes the boxing industry unique.
Competitive Rivalry
Many small competitors are present in the same industry, but the size of the industry is smaller than its substitutes. UFC shares a larger chunk of the market revenues which constitutes over 90%. Some of the small competitors of the company includes DREAM, Strikeforce, EliteXC, and International Fight League (IFL). These competitors pose a huge threat for UFC as many fighters that left the UFC signs with the smaller organizations, therefore it switches the number of UFC customers towards the small competitors. There is strong and fast industry growth rate since the approval of US government for legalizing the MMA events. However, exit barriers are also low which can allow companies to easily leave the market using exit strategies (Fina, 2009).
Bargaining Power of a Supplier
The supplier’s bargaining power is very high which includes the major supplier as fighters and referees. At the end of the day, the fighters get in to the ring and fight for their honor and rewards. Therefore, the viewers’ pay cost for PPV and buy tickets to view the match because of their preferred fighters fighting in the match. However, in some cases cable companies and PPV providers can also be considered as the suppliers for UFC which makes the transmission available to all end consumers. The fighters have a higher ratings amongst suppliers as because of them, many customers arrive at the scene and watch the fight. However, at UFC the bargaining power of supplier is low as UFC dictates the term for their contracts even from the World’s top fighter. Dana White, the president of UFC believes that UFC does not want help from anyone as it could well position itself as a strong brand.
Bargaining Power of a Buyer
There are two ways from where customers could view the MMA show. Either the customers could view the show from their homes through TV, or either they could view through entering the arena or stadium. If the option for television is considered, then there are cable companies which are huge in number to offer services in different countries. Many companies could also sponsor fighter in their respective fights. However, due to the increase in sponsorship cost from UFC, the sponsors have remained limited in number but still the bargaining power of a buyer is low. The number of customers is beginning to increase for UFC, and is outnumbering the number of viewers for boxing and WWE. The new concept of MMA has been introduced by UFC which has been embraced by different viewers which also has increased its brand loyalty.......................................
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