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Porter 5 Forces

The document discusses Michael Porter's Five Forces model for analyzing industries and competitors. [1] The five competitive forces are threats of new entrants, power of customers, power of suppliers, threat of substitutes, and competitive rivalry. [2] Porter's model helps companies understand an industry's structure and profitability to develop strategies to improve their competitive position. [3] Analyzing the five forces provides information to determine how to influence industry characteristics.

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Swapnil Chonkar
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184 views12 pages

Porter 5 Forces

The document discusses Michael Porter's Five Forces model for analyzing industries and competitors. [1] The five competitive forces are threats of new entrants, power of customers, power of suppliers, threat of substitutes, and competitive rivalry. [2] Porter's model helps companies understand an industry's structure and profitability to develop strategies to improve their competitive position. [3] Analyzing the five forces provides information to determine how to influence industry characteristics.

Uploaded by

Swapnil Chonkar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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MICHAEL PORTER FIVE FORCES

MODEL
Introduction
 It has been used by Michael E Porter for “Analyzing Industries And
Competitors” in 1980.

 It is important tool for analyzing organization structure in strategic processes.

 Porter model is based on corporate strategy should meet the opportunities and
threats in the organizational external environment.

 Porter has identified five competitive forces that shape every industry and
every market.

 These forces determine the intensity of competition and the probability and
attractiveness of industry.
 The objective of corporate strategy should be to modify these forces to
improve the position of the organization.

 Porters model supports driving forces in a industry.

 Information derived from the five forces management decide how to


influence or exploit particular characteristic of their industry.
Threats Of New Entrants:-

 Economies of scale:-
 Benefits associated with bulk purchasing.

 The high or low cost of entry:-


 How much will it cost for new technology.

 Ease of access to distribution channels:-


 Do our competitor have the distribution channel sewn up.

 Cost advantage not related to the size of the company:-


 Personal contacts or knowledge that larger companies do not own or learning curve.

 Government actions:-
 Will new laws introduced that will weaken our competitive position.
The Power Of Customers:-

 This is high where their few, large players in a market.


 The large grocery chains.

 If there are a large number of undifferentiated, small suppliers.


 Small farming businesses supplying the large grocery chains.

 The cost of switching between suppliers is low.


 From one fleet suppliers of trucks to another.
The Power Of Supplier:-

 It is reverse of power of customer.

 Power is high where the brand is powerful.


 Pizza Hut, Microsoft etc.

 There is possibility of the supplier integrating forward.


 Brewers buying cars.

 Customers are fragmented so that they have little bargaining power.


 Gas/ Petrol stations in remote places.
Threat Of Substitute:-

 Where the product –for –product substitution.


 Email for fax where the substitution of need. Better
toothpaste reduces the need for dentist.

 Where there is competing for the currency in your pocket.


 Video suppliers compete with travel companies.
Competitive Rivalry:-

 This is most likely to be high where entry is likely.

 There is a threat of substitute product.

 Suppliers and buyers in the market attempt to control.


Four competitive strategies
1. Cost leadership across industry
2. Cost leadership focused on particular

industry segment
3. Differentiation across industry

4. Differentiation focused on particular

industry segment
Porter says "goals, objectives, culture,
and activities must be consistent with strategy"
THANK YOU

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