PORTERS’S FIVE FORCES
Agenda
•The

Five Competitive Forces That Shape Strategy
•Various Factors That Shape Strategy
•Changes in Industry Structu...
Supply side economics
eg. Intel

Threat of New Entrant
Depends on height of
entry barriers

Threat of New
Entrant

Demand ...
Power of suppliers
Switching costs
eg. Bottling plants
for Coke, Pepsi

Differentiated
products being
offered
eg. Pharmace...
Power of Buyers

Causes for price sensitivity

Few buyers, High
volumes
eg. Offshore drilling
machines

Cost of purchase
h...
Threat of Substitutes

Price
Performance
trade-off

Cost of
switching is low
Rivalries among existing competition
Large in
number, equal in
power and size

Exit barriers are
high

Slow growth in
indu...
Factors not Forces
Industry Growth Rate
Technology and Innovation
Government

Complementary Products and
Services
Changes in Industry Structure
Shifting threat of new entry
Changing Supplier or Buyer Power
Shifting threat of substitutio...
Implications for Strategy
Possiblities

Shaping
industry
structure

Re-dividing
profitability

Positioning
the company

Ex...
Competition and Value
Porters’s five forces
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Porters’s five forces

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A detailed description of the five forces described by Michael Porter along with examples, along with various factors that go hand in hand with these forces in defining the competition for that industry.

Published in: Business

Porters’s five forces

  1. 1. PORTERS’S FIVE FORCES
  2. 2. Agenda •The Five Competitive Forces That Shape Strategy •Various Factors That Shape Strategy •Changes in Industry Structure Bargaining power of •Implications for Strategy suppliers •Competition and Values Threat of new entrants Rivalry among existing competitors Threat of substitutes Bargaining power of buyers
  3. 3. Supply side economics eg. Intel Threat of New Entrant Depends on height of entry barriers Threat of New Entrant Demand Side benefits of scale eg. eBay, IBM Customer switching costs eg. Telecom sector Capital Requirements eg. Oil drilling Barriers to entry Incumbency advantages independent of size Unequal access to distribution channels eg. ITC Restrictive government policy
  4. 4. Power of suppliers Switching costs eg. Bottling plants for Coke, Pepsi Differentiated products being offered eg. Pharmaceutical companies No. of industries being served No substitute eg. Labour eg. software Monopoly eg. Microsoft Suppliers Supplier groupForward integration eg. Intel
  5. 5. Power of Buyers Causes for price sensitivity Few buyers, High volumes eg. Offshore drilling machines Cost of purchase high Threat of backward integration Undifferentiated offerings eg. Services eg. Beer companies Low switching costs eg. Telecom sector Little effect on final product Low profit making product
  6. 6. Threat of Substitutes Price Performance trade-off Cost of switching is low
  7. 7. Rivalries among existing competition Large in number, equal in power and size Exit barriers are high Slow growth in industry Offerings are identical Highly committed competition High fixed costs and low marginal costs Product is perishable
  8. 8. Factors not Forces Industry Growth Rate Technology and Innovation Government Complementary Products and Services
  9. 9. Changes in Industry Structure Shifting threat of new entry Changing Supplier or Buyer Power Shifting threat of substitution Shifting threat of new entry New bases of rivalry
  10. 10. Implications for Strategy Possiblities Shaping industry structure Re-dividing profitability Positioning the company Expanding the profit pool Exploiting industry change Defining the industry
  11. 11. Competition and Value

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