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Porter model

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  • 1. PREPARED BY: Bibhav Pal
  • 2.  The Five Forces model of Porter is an outside-in business unit strategy tool that is used to make an analysis of the attractiveness (value...) of an industry structure.  It captures the key elements of industry competition.
  • 3. BuyersSuppliers Substitute products Potential entrants Industry competitors Rivalry among existing firms Threat of new entrants Bargaining power of suppliers Bargaining power of buyers Threat of substitutes PORTER’s FIVE FORCEs MODEL
  • 4. Threat of New Entrants Threat of New Entrants PORTER’s FIVE FORCEs MODEL
  • 5. Bargaining Power of Suppliers Threat of New Entrants Threat of New Entrants PORTER’s FIVE FORCEs MODEL
  • 6. Bargaining Power of Suppliers Suppliers exert power in the industry by: * Threatening to raise prices or to reduce quality Powerful suppliers can squeeze industry profitability if firms are unable to recover cost increases
  • 7. Bargaining Power of Buyers Threat of New Entrants Threat of New Entrants Bargaining Power of Suppliers PORTER’s FIVE FORCEs MODEL
  • 8. Bargaining Power of Buyers Buyers compete with the supplying industry by: * Bargaining down prices * Forcing higher quality * Playing firms off of each other
  • 9. Threat of Substitute Products Threat of New Entrants Threat of New Entrants Bargaining Power of Buyers Bargaining Power of Suppliers PORTER’s FIVE FORCEs MODEL
  • 10. Threat of Substitute Products Products with similar function limit the prices firms can charge
  • 11. Threat of Substitute Products Threat of New Entrants Threat of New Entrants Rivalry Among Competing Firms in Industry Bargaining Power of Buyers Bargaining Power of Suppliers PORTER’s FIVE FORCEs MODEL
  • 12. Rivalry Among Existing Competitors Intense rivalry often plays out in the following ways: Using price competition Staging advertising battles Making new product introductions Increasing consumer warranties or service Occurs when a firm is pressured or sees an opportunity Price competition often leaves the entire industry worse off Advertising battles may increase total industry demand, but may be costly to smaller competitors
  • 13.  Traditional competition:  Prices of Pepsi, local brands  Market share  Promotional actions of competition • New entrants:  New “look-a-like” manufacturers • Substitute products:  Fashionable new drinks, milk drinks, coffee, beer, ...
  • 14.  Suppliers:  Price and availability of ingredients on world market  Quality speed safety, traceability, flexibility of supply chain • Buyers/consumers:  High as a result of intense competition both among branded and unbranded products.  Combined purchase power of shops, bars, supermarkets
  • 15.  The Competitive Advantage model of Porter learns that competitive strategy is about taking offensive or defensive action to create a defendable position in an industry, in order to cope successfully with competitive forces.  Companies can combat the pressure of the five forces and create competitive advantages.  There are 2 basics types of Competitive Advantage :  Cost leadership (low cost)  Differentiation
  • 16.  The model is strong tool for competitive analysis at industry level.  It provides useful input for performing a SWOT analysis.
  • 17.  Inside-out strategy is ignored (core competence)  It does not cope with synergies and interdependencies within the portfolio of large corporations (parenting advantage)  The environments which are characterized by rapid, systemic and radical change require more flexible, dynamic or emergent approaches to strategy formulation (disruptive innovation)  Sometimes it may be possible to create completely new markets instead of selecting from existing ones (blue ocean strategy)

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