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Zee Prese

Zee Prese







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    Zee Prese Zee Prese Presentation Transcript

    • Porter’s Five Forces Model Zeeshan Qureshi 35727 MBA-C
    • Analyzing Industry Structure
      • Opportunities and threats are competitive challenges arising for changes in industry conditions.
      • Analytic tools such as the five forces model help managers formulate appropriate strategic responses.
    • The Five Forces Model Source: Adapted and reprinted by permission of Harvard Business Review. An exhibit from “How Competitive Forces Shape Strategy” by Michael E.. Porter (March-April 1979), Copyright © 1979 by the President and Fellows of Harvard College: all rights reserved. FIGURE 3.1
    • Potential Competitors
      • New entrants into an industry threaten incumbent companies.
      • Barriers to entry:
        • Brand loyalty
        • Absolute cost advantages
        • Economies of scale
        • Switching costs
        • Government regulation
      • Entry barriers reduce the threat of new and additional competition.
    • Rivalry Among Established Companies
      • The intensity of competitive rivalry in an industry arises from:
        • Industry’s competitive structure.
        • Demand (growth or decline) conditions in industry.
        • Height of industry exit barriers.
    • The Bargaining Power of Buyers
      • Buyers are most powerful when:
        • There are many small sellers and few large buyers.
        • Buyers purchase in large quantities.
        • A single buyer is a large customer to a firm.
        • Buyers can switch suppliers at low cost.
        • Buyers purchase from multiple sellers at once.
        • Buyers can easily vertically integrate to compete with suppliers.
    • The Bargaining Power of Suppliers
      • Suppliers have bargaining power when:
        • Their products have few substitutes and are important to buyers.
        • The buyer’s industry is not an important customer to the supplier.
        • Differentiation makes it costly for buyers to switch suppliers.
        • Suppliers can vertically integrate forward to compete with buyers and buyers can’t integrate backward to supply their own needs.
    • Substitute Products
      • The competitive threat of substitute products increases as they come closer to serving similar customer needs.
      Close Far
    • A Sixth Force: Complementors
      • Complementors (Adam Brandenburger):
        • Companies whose products are sold in tandem with another company’s products.
        • Increased supply of a complementary product collaterally increases demand for the primary product.
      • Example:
        • Faster CPU chips fuel sales of personal computers.
        • (e.g. Microsoft and Intel)
    • Conclusion
      • Total Quality Management principles remain a requirement for success. “Organizations are made up of a complex system of customers and suppliers, with every individual executive, manager, and worker functioning as both a supplier and a customer.” (Finnigan, Schmidt; 5.)
      • Although many firms don’t use the TQM label any more, for most top companies customer driven quality has become a way of doing business. “They apply the notion of Return on Quality (ROC) and they make certain that the quality they offer is the quality that customers want.” (Kotler, Armstong; 681.)
      • This quality then results in what every company wants, improved sales and higher profits.