SHRI RAMSWAROOP MEMORIAL

UNIVERSITY

BACHALORS OF BUSINESS ADMINISTRATION (DIGITAL BANKING AND FINTECH)

SESSION – 2023-2024

BUSINESS STRATEGY
ASSIGNMENT – 2

NAME OF THE STUDENT - Vaishnavi Pandey

TOPIC – Michael E. Porter’s Contribution

SUBMITTED TO – Ms. Harshita

Sachan
 TOPICS SLIDE NO.
Michael E. Porter 03
Five Forces Framework – 04
Threat of New Entrants 05
Bargaining Power of Suppliers 06
Bargaining Power of Buyers 07
Threat of Substitutes 08
Rivalry Among Existing Competitors 09

Real-life example of Michael E Porter's 5 Force Model 10

Value Chain Analysis- 11

Primary Activities 12
Support Activities 13

Real-life example of Michael E Porter's Value Chain Analysis 14

Generic Competitive Strategies- 15

Cost Leadership 16
Differentiation 17
Focus 18

Real-life example of Michael E Porter's Cost Leadership 19

Strategy
Case Studies 20
 Michael E. Porter
• Michael E. Porter is a leading authority on competitive strategy and the competitiveness of nations and
regions. He is a Harvard Business School professor and has authored numerous books and articles on the
subject.
• Porter's Five Forces Framework, Value Chain Analysis, and Generic Competitive Strategies are some of his
most well-known contributions to the field of competitive strategy. His theories have been widely adopted
by businesses and governments around the world and are still highly relevant today.

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 Five Forces Framework

Threat of new entrants Bargaining power of suppliers Bargaining power of buyers

Threat of substitutes Rivalry among existing

competitors

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 Threat of New Entrants
• This force refers to the possibility of new competitors entering the market and disrupting the existing
players. The higher the threat of new entrants, the more difficult it is for companies to maintain their market
share and profitability.
• For example, the airline industry has a relatively low barrier to entry, which has led to the emergence of low-
cost carriers like Southwest Airlines and JetBlue. These new entrants have disrupted the traditional players in
the industry by offering lower prices and innovative business models.

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 Bargaining Power of Suppliers
• The bargaining power of suppliers is a crucial factor to consider when analyzing the competitive environment
of an industry. Suppliers can exert power over companies by controlling prices, quality, and availability of
inputs.
• For example, if there are only a few suppliers of a critical input, they can charge higher prices and limit
supply, which can have a significant impact on a company's profitability.

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 Bargaining Power of Buyers
• The bargaining power of buyers is a crucial factor to consider when analyzing an industry's competitive
environment.
• Buyers have the power to negotiate prices and demand higher quality products or services, which can
significantly affect a company's profitability.
• For example, if a company relies heavily on a single large customer, that customer may be able to negotiate
lower prices or better terms, reducing the company's profit margins.

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 Threat of Substitutes
• Substitutes are products or services that can be used as alternatives to the industry's offerings, and they can
pose a significant threat if they are readily available and offer comparable benefits at a lower cost.
• For example, the rise of e-books has posed a threat to traditional book publishers, as consumers can now
access books digitally at a lower cost. This has led to a decline in demand for physical books and a shift in the
publishing industry's business model.

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 Rivalry Among Existing Competitors
• This force refers to the intensity of competition between companies in the same market.
• High rivalry can lead to price wars, decreased profit margins, and decreased innovation as companies focus
on staying ahead of their competitors rather than investing in new ideas.
• On the other hand, low rivalry can lead to complacency and a lack of innovation. It's important to strike a
balance between healthy competition and excessive rivalry.

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 Real-life example of Michael E Porter's 5
Force Model
• One of the most successful examples of a company using Michael E Porter's 5 Force Model to gain a
competitive advantage is Apple Inc. The company has been able to maintain its position as a market leader in
the technology industry by effectively analyzing and addressing each of the five forces.
• For example, Apple's strong brand image and loyal customer base have helped it mitigate the threat of new
entrants, while its focus on innovation and product differentiation has allowed it to stay ahead of
competitors.
• Another key factor in Apple's success with the 5 Force Model has been its ability to leverage its supply chain
and distribution channels to reduce costs and increase efficiency. By working closely with suppliers and
controlling its own retail outlets, Apple has been able to maintain high profit margins and offer competitive
pricing to customers.

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 Value Chain Analysis
• Value Chain Analysis is a tool used to identify opportunities for competitive advantage.
• By analyzing each activities, a company can identify areas where it can reduce costs or differentiate itself
from competitors.

Primary
activities

Value chain
analysis

Support
activities

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 Primary Activities
• The primary activities in the Value Chain Analysis are inbound logistics, operations, outbound logistics,
marketing and sales, and service. Inbound logistics involves receiving, storing, and distributing inputs for
production.
• Operations involve transforming inputs into finished products or services.
• Outbound logistics involves storing and distributing finished products to customers. Marketing and sales
involve promoting and selling products or services. Service involves providing after-sales support to
customers.

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 Support Activities
• Procurement is an essential support activity in the value chain analysis as it involves sourcing and acquiring
raw materials, goods, and services from external suppliers.
• Effective procurement can lead to cost savings, better quality products, and improved supplier relationships.
This support activity can create value for a company by improving product quality, reducing costs, and
increasing innovation.
• For instance, a company that invests in advanced manufacturing technologies can reduce production time
and costs, resulting in more competitive pricing.

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 Real-life example of Michael E Porter's
Value Chain Analysis
• One real-life example of a company that has successfully used Michael E Porter's Value Chain Analysis to
improve its operations and gain a competitive advantage is Toyota.
• By analyzing its value chain, Toyota was able to identify areas where it could reduce costs and increase
efficiency. For example, the company implemented just-in-time manufacturing and lean production
techniques to minimize waste and improve productivity.
• This allowed Toyota to offer high-quality cars at lower prices than its competitors, giving it a significant
competitive advantage.

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 Generic Competitive Strategies
• Michael E. Porter's Generic Competitive Strategies are a set of strategies that businesses can use to create a
sustainable competitive advantage in their industry.
• These strategies include Cost Leadership, Differentiation, and Focus.

Cost leadership Differentiation Focus

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 Cost Leadership
• Cost leadership is a strategy that involves producing goods or services at the lowest cost possible in order to
achieve a competitive advantage.
• One example of a company that has successfully implemented cost leadership is Walmart. By keeping their
costs low and offering everyday low prices, they have been able to dominate the retail industry and maintain
a competitive edge over their rivals.

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 Differentiation
• Differentiation is the second of Michael E. Porter's Generic Competitive Strategies, and it involves creating a
unique product or service that sets a company apart from its competitors.
• By offering something that no one else has, companies can charge higher prices and build customer loyalty.
• One example is Tesla, which has differentiated itself in the crowded automotive industry by focusing on
electric cars and innovative technology.

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 Focus
• The focus strategy involves concentrating on a narrow segment of the market and tailoring your products or
services to meet the needs of that specific group of customers.
• One example of a company that has successfully implemented the focus strategy is Rolex. By targeting high-
end consumers who value luxury, precision, and exclusivity, Rolex has been able to maintain a dominant
position in the luxury watch market for decades.

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 Real-life example of Michael E Porter's
Cost Leadership Strategy
• Cost leadership - One of the most well-known examples of Michael E Porter's Cost Leadership Strategy is
Walmart. The retail giant has been able to maintain its position as the world's largest retailer by offering low
prices to customers.
• Differentiation - One of the most successful examples of Michael E Porter's Differentiation Strategy is Apple
Inc. The company has been able to differentiate itself from its competitors by creating unique and innovative
products that have become synonymous with the Apple brand.
• Focus - One real-life example of a company that has successfully used Michael E Porter's Focus Strategy to
gain a competitive advantage is IKEA. The company focuses on providing affordable, stylish furniture to
customers who are willing to assemble it themselves.

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 Case Studies
• One example of a company that successfully implemented Michael E. Porter's theories is Southwest Airlines.
By focusing on cost leadership, Southwest was able to offer lower fares than its competitors and still
maintain profitability. They achieved this by implementing efficient operations and using a point-to-point
system instead of the traditional hub-and-spoke model.
• Another example is Apple, which used differentiation to create a sustainable competitive advantage. By
focusing on design and innovation, Apple was able to differentiate itself from competitors and create a loyal
customer base. This allowed them to charge premium prices for their products and maintain high profit
margins.

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THANK YOU

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