Entrepreneurdhip awaerness and marketing (porter)

GOOD
ENTREPRENEU
R
COMPILED BY BUDU BRIGHT
(2016)
9/20/2017
BUDU, BRIGHT. (2016)

PORTER'S FIVE FORCES:
ANALYZING THE
COMPETITION
COMPILED BY
BUDU BRIGHT
9/20/2017

BASIC ECONOMIC TERMS
PREFERENCE
SCALE OF PREFERENCE
CHOICE
ALTERNATIVES
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Cont’d
 Make ends meet definition. To earn enough income to provide for basic
needs: “The workers complained that on their present wages they could
hardly make ends meet, let alone enjoy any luxuries.”
 One important idea in economics is that of needs and wants.
 Needs would be defined as goods or services that are required. This
would include the needs for food, clothing, shelter and health care.
 Wants are goods or services that are not necessary but that we desire or
wish for.
 all things being equal Without considering or being affected by external
factors. So, all things being equal, who would you like to date?
 Scarcity: the state of being scarce or in short supply; shortage. "a time of
scarcity"
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Cont’d
 Preference: something that you prefer to
something else. Eg. I like economics in
preference to integrated science.
 Scale of preference: it is the arrangement of
ones want in order of importance with the most
pressing wants at the top and the least pressing
want at the bottom.
 Choice: the act of selecting from alternatives
(two or more things).
 Alternative: something that you can choose to
do instead of something else.
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Cont’d
Opportunity cost: is the alternative item that is forgone.
Factors of production: they are the factors that are put together to start
a business. Examples; land, labour, capital and entrepreneurship.
Land: it is the natural resources on the surface of the earth.
Labour: is the effort exhorted from human being in the production of a
venture.
Capital: is all the manmade resources used in the process of production.
Eg. Machines, money, buildings etc.
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UNTREPRENEURSHIP
Entrepreneurship is the willingness to take risks
and develop, organize and manage a business
venture in a competitive global market place
that is constantly evolving.
In other words, is the systematic process
that create something to achieve the output.
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AN ENTREPRENUER
An entrepreneur is a person who starts a new
business and usually risks his own money to
start the venture.
In other words, an entrepreneur is someone
who owns all the factors of production and risks
his money to start a business with the aim of
making profit.
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EXAMPLES OF ENTREPRENEURS
Eddie hopes that his entrepreneurial gamble will pay off as well as
the gambles of other well-known entrepreneurs, such as:
 Bill Gates, founder of Microsoft. There are probably not many
people that have not been touched by one of his products, such
as Microsoft Windows, Microsoft Office and Internet Explorer.
 Steve Jobs, co-founder of Apple computers, which produces
Macs, iPods and iPhones, as well as Apple TV.
 Mark Zuckerberg, the founder of Facebook.
 Pierre Omidyar, founder of eBay.
 Arianna Huffington, founder of the Huffington Post, a well-
known online news site.
 Caterina Fake, co-founder of Flikr, which hosts images and
videos on the Internet.
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CHARACTERITICS OF AN
ENTREPRENEUR
 Innovators/creative.
 Risk Tolerance.
 Time Orientation.
 Positive Self-concept.
 Flexibility and Open-Mindedness.
 Future oriented.
 Decision making.
 Ability to mobilize resources.
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Cont’d
 FLEXIBILITY: Most of the successful
entrepreneurs measure the pros and cons of
decision and tend to change if the situation
demands. They never feel reluctant to revise
their decisions. They are the persons with
open mind without rigidity.
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Cont’d
 INNOVATORS/CREATORS: Successful
entrepreneurs are innovators/creators. They
constantly put their efforts in introducing new
product, new method of production, opening
new markets and restructuring the enterprise.
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Cont’d
 RISK TOLERANCE/BEARING:
Entrepreneurs are the persons who take
decisions under uncertainty and thus willing to
take risk but never play with the results. They,
therefore, undertake calculated risk which is
high enough to be exciting, but with a fairly
reasonable chance to win.
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Cont’d
Future oriented: successful
entrepreneurs always tend to think ahead.
They have got telescopic faculties which
make them think for the future. Future
orientation make them quiet alert to the
changing conditions of the time and they tend
to produce goods and commodities as per the
changing demands.
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Cont’d
 Decision making: decision making skill is a
fundamental characteristic of an entrepreneur. This implies the
function of choosing a particular course of action out of several
alternatives for the purpose of achieving specified goals. It
reflects the quality and competence of the entrepreneur and is
very much necessary at every stage of creation of an enterprise.
The stages are as follow:
 Setting of goals
 Formulation of policies
 Designing organizational structure
 Motivation
 Communication
 Control, among others.
Hence decision making is necessary at all times and mostly at
conditions of uncertainty and risk.
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Cont’d
Ability to mobilize resources:
Entrepreneurs must have the ability to
marshal/gather all the inputs to obtain the end
product. They have to mobilize the 6Ms, that
is, Man, Money, Material, Machinery, Market
and Method effectively to realize the final
product as entrepreneurship is a function of
gap filling and input completing.
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Cont’d
 POSITIVE SELF-CONCEPT: Entrepreneurs
are always positive in their action. Being an
achiever, he directs his fantasies and dreams
towards achieving of excellent goals and sets
extraordinary standard of excellence in what
he is doing. This is based upon his awareness
of SWOT analysis. He utilizes his positive
knowledge to support his thinking. He never
go for negative thinking.
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Cont’d
 TIME ORIENTATION: Entrepreneurs
anticipate future trends basing upon their past
experience and exposure. They stick to the
time pragmatically while doing their job.
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ADVANTAGES
 Personal challenge.
 Do not share profit
 Flexibility (flexible working period)
 Unlimited earnings.
 Quick decision making
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DISADVANTAGES
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SUMMARY
ENTREPRENEURSHIP (process of creating)
ENTREPRENEUR ( owns a venture)
ENTERPRISE (the business)
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PORTER'S FIVE FORCES:
ANALYZING THE
COMPETITION
Whether you are starting a new business or looking
for more insight into your existing company's
prospects, you probably have questions about the
competition. One way to answer those questions is
by using Porter's Five Forces model.
Originally developed by Harvard Business School's
Michael E. Porter in 1979, the five forces model
looks at five specific factors that help determine
whether or not a business can be profitable based on
other businesses in the industry.
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Cont’d
"Understanding the competitive forces, and their
underlying causes, reveals the roots of an
industry's current profitability while providing a
framework for anticipating and influencing
competition (and profitability) over time," Porter
wrote in a Harvard Business Review article. "A
healthy industry structure should be as much a
competitive concern to strategists as their
company’s own position."
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Cont’d
According to Porter, the origin of profitability is identical
regardless of industry. In that light, industry structure is
what ultimately drives competition and profitability —not
whether an industry produces a product or service, is
emerging or mature, high-tech or low-tech, regulated or
unregulated.
"If the forces are intense, as they are in such industries as
airlines, textiles, and hotels, almost no company earns
attractive returns on investment," Porter wrote. "If the
forces are benign, as they are in industries such as
software, soft drinks, and toiletries, many companies are
profitable."
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UNDERSTANDING THE FIVE
FORCES
Porter regarded understanding both
the competitive forces and the overall
industry structure as crucial for
effective strategic decision-making.
In Porter's model, the five forces that
shape industry competition are:
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1. RIVALRY AMONGCOMPETITORS/THEEXISTING BUSINESS.
This force examines how intense the competition currently
is in the marketplace, which is determined by the number
of existing competitors and what each is capable of doing.
Rivalry competition is high when there are just a few
businesses equally selling a product or service, when the
industry is growing and when consumers can easily switch
to a competitors offering for little cost. When rivalry
competition is high, advertising and price wars can ensue,
which can hurt a business's bottom line. Rivalry is
quantitatively measured by the Concentration Ratio (CR),
which is the percentage of market share owned by the four
largest firms in an industry.
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Cont’d
In other words, a good entrepreneur should be
able to identify the existing ventures in that
particular area, what they produce, how it is
being produced as well as their marketing
strategies before going into that same business.
Considering these things will help the
entrepreneur to grow his/her business. (BUDU
BRIGHT, OCTOBER 13TH 2016: 6:08)
9/20/2017

2. BARGAINING POWEROF SUPPLIERS
(PRODUCERS)
This force analyzes how much power a business's
supplier has and how much control it has over the
potential to raise its prices, which, in turn, would
lower a business's profitability. In addition, it looks at
the number of suppliers available: The fewer there
are, the more power they have. Businesses are in a
better position when there are a multitude of
suppliers. Sources of supplier power also include the
switching costs of firms in the industry, the presence
of available substitutes, and the supply purchase
cost relative to substitutes.
9/20/2017

Cont’d
According to Budu (2016), a good business man
would have to take a critical look at the
bargaining spirit of the supplier(producer), who
has the final pronouncement.
This means that if the supplier (Mr. A) wins the
game of bargaining, then it may affect the
entrepreneur (Mr. B). On the other hand, if Mr. B,
wins the game, then he will be at a good starting
point.
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3. BARGAININGPOWER OF THE CONSUMERS
(CUSTOMERS/BUYERS)
This force looks at the power of the consumer to
affect pricing and quality. Consumers have
power when there aren't many of them, but lots
of sellers, as well as when it is easy to switch
from one business's products or services to
another. Buying power is low when consumers
purchase products in small amounts and the
seller's product is very different from any of its
competitors.
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Cont’d
BUDU, BRIGHT (2016) also added that for an
entrepreneur to be at the safer side of the fire,
he should have the spirit of bargaining over his
customers. But in a situation where the buyer
consumes the bargaining power, then the
entrepreneur is likely to be at the middle of
‘River Densu’ which is not the desire of any
good business man.
9/20/2017

SUMMURY
NB;
H = HIGHT
B = BARGAINING
W = WEAK
P = POWER
BUDU BRIGHT. (2016, 7:23am)
Supplier The
Entreprene
ur
Consumer REMAR
KS
HBP WBP Good
WBP HBP Good
HBP HBP Excellent
WBP WBP Danger
9/20/2017

THE ELABORATION OF THE
DIAGRAM
 If an entrepreneur had a High Bargaining Power(HBP) over the
supplier and a Weak Bargaining Power(WBP) over the
customer then is a good start in the setup.
 If an entrepreneur had a Weak Bargaining Power(WBP) over
the supplier and a High Bargaining Power(HBP) over the
customer then is a good start as well in the setup.
 If an entrepreneur had a High Bargaining Power(HBP) over the
supplier and a High Bargaining Power(HBP) over the customer,
then, he will be at the maximum profit margin which is excellent.
 If an entrepreneur has a Weak Bargaining Power(WBP) over
the supplier and a Weak Bargaining Power(WBP) again over
the customer then he is at a danger zone.
BUDU BRIGHT. (2016).
9/20/2017

4. THREAT OF NEWENTRANTS
This force examines how easy or difficult it is for
competitors to join the market place in the
industry being examined. The easier it is for a
competitor to join the marketplace, the greater
the risk of a business's market share being
depleted. Barriers to entry include absolute cost
advantages, access to inputs, economies of
scale and well-recognized brands.
9/20/2017

Cont’d
BUDU BRIGHT (2016),
described this force as
one which deals with how
other operators will be
pumping into the business
world.
9/20/2017

5. THREAT/AVAILABILITY OF SUBSTITUTE
PRODUCTSOR SERVICES.
This force studies how easy it is for consumers to
switch from a business's product or service to that of
a competitor. It looks at how many competitors there
are, how their prices and quality compare to the
business being examined and how much of a profit
those competitors are earning, which would
determine if they have the ability to lower their costs
even more. The threat of substitutes are informed by
switching costs, both immediate and long-term, as
well as a buyer's inclination to change.
9/20/2017

EXAMPLE OF PORTER'S FIVE
FORCES
There are several examples of how Porter's Five
Forces can be applied to various industries
online. As an example, stock analysis firm Trefis
looked at how Under Armour fits into the athletic
footwear and apparel industry.
9/20/2017

Cont’d
a. COMPETITIVE RIVALRY
 Under Armour faces intense competition from
Nike, Adidasand newer players.
 Nike and Adidas, which have considerably
larger resources at their disposal, are making a
play within the performance apparel market to
gain market share in this up-and-coming product
category.
 Under Armour does not hold any fabric or
process patents, and hence its product portfolio
could be copied in the future.
9/20/2017

Cont’d
b. BARGAINING POWER OF SUPPLIERS
 A diverse supplier base limits bargaining
power.
 In 2012, Under Armour's products were
produced by 27 manufacturers located across
14 countries. Of these, the top 10 accounted
for 49 percent of the products manufactured.
9/20/2017

Cont’d
c. BARGAINING POWER OF CUSTOMERS
 Under Armour'scustomers include both wholesale
customers as well as end customers.
 Wholesale customers, like Dick's Sporting Goods
and the Sports Authority, hold a certain degree of
bargaining leverage, as they could substitute Under
Armour's products with other competitors' to gain
higher margins.
 Bargaining power of end customers is lower as
Under Armour enjoys strong brand recognition.
9/20/2017

Cont’d
d. THREAT OF NEW ENTRANTS
 Large capital costs are required for branding,
advertising and creating product demand, and
hence this limits the entry of newer players in the
sports apparel market.
 However, existing companies in the sports
apparel industry could enter the performance
apparel market in the future.
9/20/2017

Cont’d
e. SUBSTITUTE PRODUCTS
 The demand for performance apparel, sports
footwear and accessories is expected to continue,
and hence we think this force does not threaten
Under Armour in the foreseeable future.
 Trefis has also completed Porter's Five Forces
analyses of companies, including Facebook,
Nike, Coach and Ralph Lauren.
9/20/2017

STRATEGIES FOR SUCCESS
. Once your analysis is complete, it is time to
implement a strategy to expand your competitive
advantage. To that end, Porter identified three
"generic strategies" that can be implemented in any
industry, and in companies of any size:
 Cost leadership: In this strategy, your goal is to
increase profits by reducing costs while charging
industry-standard prices, or to increase market
share by reducing the sales price while retaining
profits.
9/20/2017

Cont’d
 DIFFERENTIATION: This strategy aims to
make the company's products significantly
different from the competition, improving their
competitiveness and value to the public. This
strategy requires both good research and
development and effective sales and
marketing teams.
9/20/2017

Cont’d
 FOCUS: In the focus strategy, businesses
select niche markets in which to sell their
goods. This strategy requires intense
understanding of the marketplace, its sellers,
buyers and competitors. The use of this
strategy frequently requires the companies to
also implement a cost leadership or
differentiation position.
9/20/2017

Cont’d
Porter said the new strategy should be executed
at the corporate, business unit and departmental
levels. Of these, Porter considered the business
unit most significant.
More information about the generic strategies is
available in Porter's 1985 book, Competitive
Advantage (Free Press).
9/20/2017

ALTERNATIVES AND ADDENDUMS
While Porter's Five Forces is an effective and time-tested
model, it has been criticized for failing to explain strategic
alliances. In the 1990s, Yale School of Management
professors Adam Brandenbuger and Bare Nalebuff
created the idea of a sixth force, "complementors," using
the tools of game theory. In their model, complementors
sell products and services that are best used in
conjunction with a product or service from a competitor.
Intel, which manufactures processors, and computer
manufacturer Apple could be considered complementors
in this model. More information can be found at Strategic
CFO.
9/20/2017

Cont’d
Regardless of whether the complement force is
potent in your company's industry, additional
modeling tools are likely to help you round out your
understanding of your business and its potential. A
value chain analysis aims to help companies
understand where they have the best productive
advantage, while the BCG matrix helps companies
identify which products are likely to benefit the most
from increased investment.
9/20/2017

TEMPLATES AND MORE
INFORMATION
To learn more about Porter's Five Forces and find templates to
complete your own Five Forces analysis, visit the following websites:
 Quick MBA
 Mind Tools
 Business Balls
 Edraw
 Smart Insights
 Oxford Learning Lab
Additional reporting by Chad Brooks, Business News Daily senior
writer.
Originally published on Nov. 12, 2013. Updated Feb. 18, 2015.
9/20/2017

Reference
 Katherine Arline, Business News Daily
Contributor February 18, 2015 08:35 am EST
 Budu Bright. (2016). Good Entrepreneur. Not
Published.
9/20/2017

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