Porter model

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Porter model

  1. 1. PREPARED BY: Bibhav Pal
  2. 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. 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. 4. Threat of New Entrants Threat of New Entrants PORTER’s FIVE FORCEs MODEL
  5. 5. Bargaining Power of Suppliers Threat of New Entrants Threat of New Entrants PORTER’s FIVE FORCEs MODEL
  6. 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. 7. Bargaining Power of Buyers Threat of New Entrants Threat of New Entrants Bargaining Power of Suppliers PORTER’s FIVE FORCEs MODEL
  8. 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. 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. 10. Threat of Substitute Products Products with similar function limit the prices firms can charge
  11. 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. 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. 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. 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. 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. 16.  The model is strong tool for competitive analysis at industry level.  It provides useful input for performing a SWOT analysis.
  17. 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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