PowerPoint Diagram Pack Porter’s Five Forces Developed by Michael Porter, Porter’s Five Forces is a classic business frame...
Porter’s Five Forces – Introduction <ul><li>Porter’s five forces constitutes a framework for analysing a company’s environ...
Porter’s Five Forces – Framework Diagram THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and  downl...
Porter’s Five Forces – Potential Insight & Output Pressure from Substitute Products Bargaining Power of Buyers Bargaining ...
The publishing industry has seen only modest increases in sales in recent years Total U.S. printed media revenues,  1989-1...
The stock market, unsure of publishing’s future role, is not rewarding print-focused players Value of $100 invested in Mar...
Leaders in the PC business have changed as quickly as the need for computing power New entrants and industry consolidation...
Gross margins have declined as the PC becomes a commodity product Average PC makers’ revenue spending Top PC makers’ gross...
Several factors determine the bargaining power of buyers <ul><li>A buyer group is powerful when: </li></ul><ul><ul><li>It ...
Bookstores are the only channel with the ability to exert pressure on publishers Limited bandwidth will slow book publishe...
Distinct distribution channels serve the two major different end-user segments Business Massive increase of home PC usage ...
Porter’s Five Forces – Framework Diagram Template Porter’s Five Forces – Template Suppliers Internal Rivalry New Entrants ...
END OF PARTIAL PREVIEW You can preview the full PowerPoint document and  download it at  http://learnppt.com/powerpoint/
Browse our catalog of PowerPoint Diagram Packs http://learnppt.com/powerpoint   Join our mailing list and receive the  Bas...
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Porter's Five Forces - PowerPoint Template

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Developed by Michael Porter, Porter’s Five Forces is a classic business framework for evaluating the attractiveness of a particular industry by analyzing 5 forces. It is useful to utilize Porter’s Five Forces in conjunction with a SWOT analysis of the industry.

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  • 93 09/15/98 11 25
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  • Porter's Five Forces - PowerPoint Template

    1. 1. PowerPoint Diagram Pack Porter’s Five Forces Developed by Michael Porter, Porter’s Five Forces is a classic business framework for evaluating the attractiveness of a particular industry by analyzing 5 forces. It is useful to utilize Porter’s Five Forces in conjunction with a SWOT analysis of the industry. <ul><li>Check out our site for all your PowerPoint needs! </li></ul><ul><li>http://learnppt.com – Find our ebook on creating effective and professional presentations. Covers basic to advanced concepts, including storyboarding, diagramming, and the Consulting Presentation Framework. </li></ul><ul><li>http://learnppt.com/powerpoint -- Shop our catalog of Diagram Packs. We try to add more Packs monthly. All of our diagrams are professionally designed by ex-management consultants from top firms. </li></ul>4. Suppliers Suppliers negotiation power 2. Competitors in the industry Rivalry among existing companies 1. Potential new competitors Threat by new competitors 3. Substitution products Threat by substitution products 5. Customers Buyers’ negotiation power
    2. 2. Porter’s Five Forces – Introduction <ul><li>Porter’s five forces constitutes a framework for analysing a company’s environment (or industry structure): </li></ul><ul><ul><li>Porter first structured the framework in his 1980 book Competitive Strategy. </li></ul></ul><ul><li>Porter assumes that competition in an industry depends on five basic forces: </li></ul><ul><li>The collective strength of these forces determines the ultimate profit potential and allocation in the industry. </li></ul>What It Is Why We Use It Strengths & Limitations Industry Competitors Substitutes Potential Entrants Buyers Suppliers Rivalry Among Existing Firms Bargaining power of buyers Bargaining power of suppliers Threat of substitute products or services Threat of new entrants Source: M.E. Porter, Competitive Strategy , 1980, p. 4 Free Press. <ul><li>Strengths: </li></ul><ul><ul><li>Quite comprehensive framework. </li></ul></ul><ul><ul><li>Good starting point to understand key drivers and trends. </li></ul></ul><ul><li>Limitations: </li></ul><ul><ul><li>Very often used strictly qualitatively. </li></ul></ul><ul><li>Assess attractiveness on the basis of competition in an industry. </li></ul><ul><li>Highlight areas in which industry trends may pose opportunities or threats. </li></ul><ul><li>Analyze where the company stands vis-a-vis the underlying causes of each competitive force. </li></ul><ul><li>To understand/diagnose levels of return. </li></ul>THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
    3. 3. Porter’s Five Forces – Framework Diagram THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ 4. Suppliers Suppliers negotiation power 2. Competitors in the industry Rivalry among existing companies 1. Potential new competitors Threat by new competitors 3. Substitution products Threat by substitution products 5. Customers Buyers’ negotiation power
    4. 4. Porter’s Five Forces – Potential Insight & Output Pressure from Substitute Products Bargaining Power of Buyers Bargaining Power of Suppliers Threat of New Entrants Intensity of Rivalry Low, stable returns Low, risky returns High, stable returns High, risky returns Exit Barriers Entry Barriers L H L H Cost Leadership Differentiation Cost Focus Differentiation Focus Competitive Advantage Competitive Scope Broad Narrow Lower Cost Differentiation <ul><li>Several important economic and technical characteristics of an industry are critical to the strengths of each competitive force: </li></ul><ul><li>A supplier group is powerful when: </li></ul><ul><li>It is dominated by a few companies and is more concentrated than the industry it sells to. </li></ul><ul><li>There are no substitute products. </li></ul><ul><li>The industry is not an important customer. </li></ul><ul><li>Its products are important to the industry. </li></ul><ul><li>Products are differentiated or suppliers have built up switching costs. </li></ul><ul><li>It poses a credible threat of forward integration. </li></ul><ul><li>Barriers to entry: </li></ul><ul><li>Economies of scale (including shared resources) </li></ul><ul><li>Product differentiation (proprietary) </li></ul><ul><li>Capital requirements </li></ul><ul><li>Switching costs </li></ul><ul><li>Access to distribution channels </li></ul><ul><li>Cost disadvantages independent of scale </li></ul><ul><li>Government policy </li></ul><ul><li>Expected reaction of incumbent </li></ul><ul><li>Intense rivalry results from: </li></ul><ul><li>Numerous or equally balanced competitors </li></ul><ul><li>Slow industry growth </li></ul><ul><li>High fixed or storage costs </li></ul><ul><li>Lack of differentiation or switching costs </li></ul><ul><li>Capacity augmented in large increments </li></ul><ul><li>Diverse competitors </li></ul><ul><li>High strategic stakes </li></ul><ul><li>High exit barriers </li></ul><ul><li>A buyer group is powerful when: </li></ul><ul><li>It is concentrated or purchases large volumes relative to seller sales. </li></ul><ul><li>The products represent a significant fraction of the buyers’ costs or purchases. </li></ul><ul><li>The products are standard or undifferentiated. </li></ul><ul><li>It faces few switching costs. </li></ul><ul><li>It earns low profits. </li></ul><ul><li>It poses a credible threat of backward integration. </li></ul><ul><li>The bought product is unimportant. </li></ul><ul><li>It has full information. </li></ul><ul><li>Search for products that can perform the same function. </li></ul><ul><li>Assess buyers’ propensity to substitute. </li></ul><ul><li>Focus on those that: </li></ul><ul><li>Are improving their price performance trade-off compared with the industries products. </li></ul><ul><li>Require low switching costs. </li></ul><ul><li>Are produced by industries earning high profits. </li></ul><ul><li>Take offensive or defensive actions to create a defensible position against the forces: </li></ul><ul><ul><li>Positioning the firm so its capabilities provide the best defense </li></ul></ul><ul><ul><li>Influencing the balance of forces through strategic moves </li></ul></ul><ul><ul><li>Anticipating shifts in the factors underlying the forces and responding to them </li></ul></ul>THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
    5. 5. The publishing industry has seen only modest increases in sales in recent years Total U.S. printed media revenues, 1989-1999 Includes both consumer and advertising spending Source: Veronis, Suhler & Associates; S&P Industry Survey Note: Magazine and newspaper spending includes both advertising and consumer spending The internet provides an innovative new distribution medium that magazines and newspapers can use to recover readers and lure advertisers. <ul><ul><li>99E </li></ul></ul><ul><ul><li>98E </li></ul></ul><ul><ul><li>97E </li></ul></ul><ul><ul><li>96E </li></ul></ul><ul><ul><li>$ Billions </li></ul></ul><ul><ul><li>95E </li></ul></ul><ul><ul><li>94 </li></ul></ul><ul><ul><li>93 </li></ul></ul><ul><ul><li>92 </li></ul></ul><ul><ul><li>91 </li></ul></ul><ul><ul><li>90 </li></ul></ul><ul><ul><li>89 </li></ul></ul>Total revenues CAGR Newspapers Books Magazines <ul><li>Newspaper and magazine revenue growth has been driven by price increases, as circulation has been flat to falling </li></ul><ul><li>Newspapers and magazines share of total advertisers’ spending has also fallen from 32% to 28% over the last five years </li></ul><ul><li>Book publishers have seen growth in book unit volumes, with stable prices: </li></ul><ul><ul><li>Books remain a popular source for access to fiction and non-fiction despite a growing number of substitutes </li></ul></ul><ul><ul><li>Recent growth of discount stores has helped increase sales </li></ul></ul>1989-1994 4.6% 1994-1999E 5.7% THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ EXAMPLE
    6. 6. The stock market, unsure of publishing’s future role, is not rewarding print-focused players Value of $100 invested in March 1985 Source: Compustat Note: All dividends reinvested. Indices track independent, “pure play” print media companies in each print segment Publishing companies must to transition to full media companies, expanding beyond print to distribute their products to be seen as long-term competitors. The Wall Street appeal of online involvement could help publishers who proactively use the new distribution medium maa-85 maa-86 maa-87 maa-88 maa-89 maa-90 maa-91 maa-92 maa-93 maa-94 maa-95 THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ EXAMPLE
    7. 7. Leaders in the PC business have changed as quickly as the need for computing power New entrants and industry consolidation are forcing competitors to continually redefine their business strategies. U.S. Unit Market Share of top 10 competitors (quarterly changes in market share) <ul><ul><li>40% </li></ul></ul><ul><ul><li>30% </li></ul></ul><ul><ul><li>20% </li></ul></ul><ul><ul><li>10% </li></ul></ul><ul><ul><li>0% </li></ul></ul>U.S. Unit Market Share <ul><ul><li>70% </li></ul></ul><ul><ul><li>60% </li></ul></ul><ul><ul><li>50% </li></ul></ul>2Q 1994 4Q 1994 4Q 1993 CompanyX 1Q 1994 3Q 1993 2Q 1993 1Q 1993 3Q 1994 CompanyX CompanyX CompanyX CompanyX CompanyX CompanyX CompanyX CompanyX CompanyX THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ EXAMPLE
    8. 8. Gross margins have declined as the PC becomes a commodity product Average PC makers’ revenue spending Top PC makers’ gross margin, 1989-1994 Taiwanese hardware manufacturers, such as Acer, have experienced 25% compound annual revenue growth since 1986 by being the lowest cost suppliers to the top PC makers worldwide. <ul><ul><li>$1.00 </li></ul></ul>Revenue <ul><ul><li>$0.76 </li></ul></ul>Cost of goods $0.04 R&D $0.13 Mktg. & distribution $0.02 SG&A <ul><ul><li>$0.05 </li></ul></ul>Operating profit <ul><ul><li>% Gross margin </li></ul></ul>THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ EXAMPLE
    9. 9. Several factors determine the bargaining power of buyers <ul><li>A buyer group is powerful when: </li></ul><ul><ul><li>It is concentrated or purchases large volumes relative to seller sales </li></ul></ul><ul><ul><li>Its purchases from the industry represent a significant fraction of the buyers’ costs or purchases </li></ul></ul><ul><ul><li>It purchases standard or undifferentiated products </li></ul></ul><ul><ul><li>Brand identification is low </li></ul></ul><ul><ul><li>Its switching costs are low </li></ul></ul><ul><ul><li>Its profits are low </li></ul></ul><ul><ul><li>It poses a credible threat of backward integration </li></ul></ul><ul><ul><li>Its purchases from the industry is unimportant for the quality of its products or services </li></ul></ul><ul><ul><li>It possesses full information </li></ul></ul>These factors may change over time and alter buyer power. THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
    10. 10. Bookstores are the only channel with the ability to exert pressure on publishers Limited bandwidth will slow book publishers’ ability to distribute products on-line, but could bypass bookstores through Internet-based mail-order services and other creative services. Publishers <ul><li>These large national stores played a central role in boosting book sales to record levels in 1994, but put pricing pressure on publishers </li></ul><ul><li>For newspapers and magazines the customer-base is more fragmented </li></ul>Convenience Stores & Newsstands Direct Distribution (subscription) Other retail outlets Schools & Universities <ul><li>Bookstores U.S. Retail Market Share, 1994 </li></ul><ul><li>Barnes & Nobles 17.3% </li></ul><ul><li>Borders-Walden 16.1% </li></ul><ul><li>Crown Books 3.2% </li></ul><ul><li>Books-a-Million 1.8% </li></ul><ul><li>Total retail market of $9.4 billion 38.4% </li></ul>Primarily newspapers and magazines Primarily books THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ EXAMPLE
    11. 11. Distinct distribution channels serve the two major different end-user segments Business Massive increase of home PC usage has increased the strength of the mainstream channel, especially retailers. Source: IDC and Merrin Information Services, Inc. Channels Direct Sales System Integrators (SI) Value-Added Resellers (VAR) Dealers Computer Superstores Mass Merchants Consumer Electronic Stores Office Stores Mail Order Direct Response Value-added channels Mainstream channels Definitions Those sales made by a manufacturers’ sales force, agent, or representative Provide customized value-added solutions for clients Offer unique, tangible solutions “off-the-shelf” to targeted customers The “traditional” computer dealer channel. Do not add unique value to the system but do offer some value in the form of support, training, or other services Large, well-merchandized store fronts , with most revenue generated by computer-related sales Typically offer a wide range of products, including computer-related equipment Offer a wide range of electronic merchandise, including computer-related items Retailers and resellers focusing on office supplies Third-party computer sales that use telephone to perform all levels of sale Direct telephone sales from manufacturers not using third parties Typical buyer Home users THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ EXAMPLE
    12. 12. Porter’s Five Forces – Framework Diagram Template Porter’s Five Forces – Template Suppliers Internal Rivalry New Entrants Substitutes Buyers <ul><li>Bullet point 1 </li></ul><ul><li>Bullet point 2 </li></ul><ul><li>Bullet point 3 </li></ul><ul><li>Bullet point 4 </li></ul><ul><li>Bullet point 1 </li></ul><ul><li>Bullet point 2 </li></ul><ul><li>Bullet point 3 </li></ul><ul><li>Bullet point 4 </li></ul><ul><li>Bullet point 1 </li></ul><ul><li>Bullet point 2 </li></ul><ul><li>Bullet point 3 </li></ul><ul><li>Bullet point 4 </li></ul><ul><li>Bullet point 1 </li></ul><ul><li>Bullet point 2 </li></ul><ul><li>Bullet point 3 </li></ul><ul><li>Bullet point 4 </li></ul><ul><li>Bullet point 1 </li></ul><ul><li>Bullet point 2 </li></ul><ul><li>Bullet point 3 </li></ul><ul><li>Bullet point 4 </li></ul>Competitive Advantage Lower Cost Differentiation Cost Leadership Differentiation Cost Focus Differentiation Focus Competitive Scope Broad Narrow INDUSTRY COMPETITIVE ASSESSMENT COMPETITIVE STRATEGY THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
    13. 13. END OF PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
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