this include porters 5 force model and aakers brand equity model. it helps MBA and BBA students

1. Porters 5 Force Model
&
Aaker’s Brand Equity Model
Presented by
Harshal Verma

2. Porter 5 force model
 “The Porter's 5 Forces Model” is introduced by Michael E.
Porter, Professor in Harvard Business School.
 Five Forces Analysis assumes that there are five important
forces that determine competitive power in a business
situation.
 Three forces from 'horizontal' competition:
1. The threat of substitute products or services,
2. The competitive rivalry in industry,
3. The threat of new entrants;
 Two forces from 'vertical' competition:
4. The bargaining power of suppliers and,
5. The bargaining power of customers.
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4. Importance of The 5 Forces
 What strategy to use?
 Basic knowledge of business strategy & forces that influence
the decision making.
 Industry analysis (relevance, players, structure, Future
changes)
 Strategize (Competitive advantage, Cost advantage,
Market dominance, New product development,
Diversification, Price leadership, Global, Re-engineering,
Restructuring)
 Measure and monitor strategy effectiveness.
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5. Threats of New Entrants
 The easier it is for new companies to enter the industry, the
more cutthroat competition there will be.
 Factors that can limit the threat of new entrants are
 Time & Cost of entry
 Specialist knowledge
 Economies of scale
 Cost advantage
 Technology protection
 Loyal customers
 Barriers of entrants
Example – MacDonalds
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6. Threat of Substitutes
 Threats of Substitute in the Porter’s theory actually means
goods and services that does similar functions.
 If substitution is easy and substitution is viable, then this
weakens your power.
 Factors
 Relative price performance of substitute
 Buyer switching costs
 Ease of substitution
 Substandard product
 Quality depreciation
 level of product differentiation
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7. Contd.
 Porter recommends that by doing advertising, product quality
improvement, marketing, R&D and product distribution, an
industry can improve its collective position against the
substitute.
 Example- landline phone with a cellular phone, coke and
water, facebook and twitter.
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8. Competitive Rivalry in industry
 For most industries the intensity of competitive rivalry is the
major determinant of the competitiveness of the industry.
 Factors
 Numbers of competitors
 Quality differences
 Switching cost
 Customer loyalty
 Current industry growth rate
 Industry structure
 Level of advertising expense
 Degree of transparency
Example- KFC, MacDonalds, Pizza Hut, Subway
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9. Bargaining power of Customers
 The ability of customers to put the firm under pressure, which
also affects the customer's sensitivity to price changes.
 The buyer power is high if the buyer has many alternatives.
 The buyer power is low if they act independently e.g. If a large
number of customers will act with each other and ask to make
prices low the company will have no other choice because of
large number of customers pressure.
 Factors
 Number of customers
 Size of each order
 Buyer Price sensitivity
 Buyers switching cost relative to firm switching Cost
Example- Coca-Cola
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10. Bargaining power of Suppliers
 Suppliers of raw materials, components, labor, and services
(such as expertise) to the firm can be a source of power over
the firm when there are few substitutes.
 The fewer the supplier choices you have, and the more you
need suppliers' help, the more powerful your suppliers are.
 Factors
 Numbers of suppliers
 Size of the suppliers
 Uniqueness of services
 Your ability of substitute
 Employee solidarity
 Cost of changing
 Supplier switching costs relative to firm switching costs
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11. Aaker’s Brand Equity Model
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 The Aaker Model, created by David Aaker,
marketing professor at the University of California-Berkeley.
 Aaker views brand equity as a set of five categories of brand
assets and liabilities linked to a brand that add to or subtract
from the value provided by a product or service to a firm
and/or to that firm’s customers.
BRAND EQUITY = BRAND AWARENESS + BRAND LOYALTY +
BRAND ASSOCIATION + PERCEIVED QUALITY
+ OTHER PROPRIETARY ASSETS

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13. Brand loyalty
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The extent to which people are loyal to a brand is expressed in
the following factors.
 Reduced marketing costs : hanging on to loyal customers is
cheaper than charming potential new customers.
 Trade leverage : loyal customers represent a stable source of
revenue for the distributive trade.
 Attracting new customers : current customers can help
boost name awareness and hence bring in new customers.
 Time to respond to competitive threats : loyal customers
that are not quick to switch brands give a company more time
to respond to competitive threats.

14. Brand Awareness
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The extent to which a brand is known among the public, which
can be measured using the following parameters.
 Anchor to which associations can be attached : depending
on the strength of the brand name, more or fewer
associations can be attached to it, which will, in turn,
eventually influence brand awareness.
 Familiarity and liking : consumers with a positive attitude
towards a brand, will talk about it more and spread brand
awareness.
 Commitment to a brand.
 Brand to be considered during the purchasing process : to
what extent does the brand form part of the evoked set of
brands in a consumer’s mind.

15. Perceived Quality
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The extent to which a brand is considered to provide good
quality products can be measured.
 The quality offered by the product/ brand is a reason to buy it
 Level of differentiation/ position in relation to competing
brands.
 Price : as the product becomes more complex to assess, and
status is at play, consumers tend to take price as a quality
indicator.
 Availability in different sales channels : consumers have a
higher quality perception of brands that are widely available.
 The number of line/ brand extensions : this can tell the
consumer the brand stands for a certain quality guarantee
that is applicable on a wide scale

16. Brand Association
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Associations triggered by a brand can be assessed on the basis of the
five following indicator.
 The extent to which a brand name is able to ‘retrieve’ associations
from the consumer’s brain : such information from TV advertising.
 The extent to which association contribute to brand differentiation
in relation to the competition : these can be abstract associations,
such as ‘vitality’
 The extent to which brand associations play a role in the buying
process : the greater this extent, the higher the total brand equity.
 The extent to which brand associations create positive attitude/
feelings : the greater this extent, the higher the total brand equity.
 The number of brand extensions in the market : the greater this
number, the greater the opportunity to add brand associations

17. Other Proprietary Assets
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 Patent and Intellectual property rights
 Relations with trade partners and,
 Airlines landings slots ( The more proprietary rights a brand
has accumulated the greater the brand competitive edge in
those fields)

18. Contd.
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19. References
 https://en.wikipedia.org/wiki/Porter's_five_forces_analysis
 http://onlinelibrary.wiley.com/doi/10.1002/smj.4250121008/
pdf
 https://www.mindtools.com/pages/article/newTMC_08.htm
 https://en.wikipedia.org/wiki/Aaker_Model
 http://marketinglessons.in/2015/03/16/aaker-model-
defining-brand-identity/
 http://www.eurib.org/fileadmin/user_upload/Documenten/P
DF/Merkmeerwaarde_ENGELS/s_-
_Brand_equity_model_by_Aaker_EN_.pdf
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