This document provides an overview of Michael Porter's five forces industry analysis framework. It describes the five competitive forces that shape industry competition and profitability - threat of new entrants, threat of substitutes, bargaining power of suppliers, bargaining power of buyers, and competitive rivalry. The document outlines how to apply the five forces analysis to understand an industry's structure and attractiveness. Analysts are advised to define the industry properly, assess each force individually, and consider the aggregate impact to determine profitability.
An Analysis of TESLA’s Strategy in Germany STRATEGIC MANAGEMENTJai Sharma
The objective of our report is to critically analyze the current business strategy of Tesla in the German car market and based on our analysis, provide recommendations for the future course of action.
OLMA Next presents this Company Review for Tencent, one of a number of high performing stocks on the American, European and Asian markets.
This report is intended to provide readers with sufficient data and insight to gain a thorough understanding of the big picture behind the world’s fourth largest Internet services company.
The report also highlights the vision of Tencent CEO Ma Huateng, that has made Tencent the most valuable company in Asia, beating Alibaba and Samsung, and one of the top ten in the world by market capitalisation. Tencent achievements rely on a wide and efficient diversification of its products and services through a coherent set of portals and platforms. Together, they have become a solid multi-platform digital ecosystem, with a market leading position in each of their sectors.
2018 Cross-Border Data Flows: A Review of the Regulatory Enablers, Blockers, ...accacloud
Access to data represents a huge potential in terms of potential economic growth and social enablement opportunities. It is not surprising then, that many governments are setting forth ‘digital economy’ agendas, including policy and regulatory frameworks, to ensure they maximize participation and opportunity. However, such a cross-cutting agenda is not without its challenges. Regulations put in place to enable or protect one part of the economy can damage growth in neighboring sectors or industries, often unintentionally. This research report takes an investigative look at the way five Asian economies—India, Indonesia, Japan, the Philippines, and Vietnam—are aggressively transitioning to more digitally enabled economies.
For more information, visit http://www.asiacloudcomputing.org
Operation management, toyota production systemOmar Hamdan
The success of Toyota Motor Company is due to the unique reduction systems that focus on continuous improvement and just in time management. Toyota has created a decentralised structure that encourages employee participation and team working. Toyota incorporated concepts just as supply chain management and inventory management to create high quality automobiles and gain a competitive edge in the highly competitive global automobile market. Toyota’s success and its lean manufacturing philosophy have been widely studied. The Toyota manufacturing system is centred on achieving a high level of productivity. The company has a unique approach to problem solving and it continuously trains its employees.
An Analysis of TESLA’s Strategy in Germany STRATEGIC MANAGEMENTJai Sharma
The objective of our report is to critically analyze the current business strategy of Tesla in the German car market and based on our analysis, provide recommendations for the future course of action.
OLMA Next presents this Company Review for Tencent, one of a number of high performing stocks on the American, European and Asian markets.
This report is intended to provide readers with sufficient data and insight to gain a thorough understanding of the big picture behind the world’s fourth largest Internet services company.
The report also highlights the vision of Tencent CEO Ma Huateng, that has made Tencent the most valuable company in Asia, beating Alibaba and Samsung, and one of the top ten in the world by market capitalisation. Tencent achievements rely on a wide and efficient diversification of its products and services through a coherent set of portals and platforms. Together, they have become a solid multi-platform digital ecosystem, with a market leading position in each of their sectors.
2018 Cross-Border Data Flows: A Review of the Regulatory Enablers, Blockers, ...accacloud
Access to data represents a huge potential in terms of potential economic growth and social enablement opportunities. It is not surprising then, that many governments are setting forth ‘digital economy’ agendas, including policy and regulatory frameworks, to ensure they maximize participation and opportunity. However, such a cross-cutting agenda is not without its challenges. Regulations put in place to enable or protect one part of the economy can damage growth in neighboring sectors or industries, often unintentionally. This research report takes an investigative look at the way five Asian economies—India, Indonesia, Japan, the Philippines, and Vietnam—are aggressively transitioning to more digitally enabled economies.
For more information, visit http://www.asiacloudcomputing.org
Operation management, toyota production systemOmar Hamdan
The success of Toyota Motor Company is due to the unique reduction systems that focus on continuous improvement and just in time management. Toyota has created a decentralised structure that encourages employee participation and team working. Toyota incorporated concepts just as supply chain management and inventory management to create high quality automobiles and gain a competitive edge in the highly competitive global automobile market. Toyota’s success and its lean manufacturing philosophy have been widely studied. The Toyota manufacturing system is centred on achieving a high level of productivity. The company has a unique approach to problem solving and it continuously trains its employees.
The mythology of world-changing startups is strong in Silicon Valley, the eye of the computing and internet cyclone. While its founding fathers have indeed revolutionized our economy, giving birth to GAFAnomics, their supremacy is increasingly challenged by Chinese behemoths, their karma is scrutinized by locked-in citizens, and their ability to tackle the crucial issues of our time - among which global warming - is cynically questioned. But wasn’t technology supposed to solve all our problems?
Elon Musk, a Silicon Valley entrepreneur, who is perfectly fit for an epic tale and a Marvel blockbuster, yet still believes so. Some of his companies - PayPal, SpaceX, Hyperloop and Tesla - are aiming at rebuilding structural industries for the better: Banking, Space, Transportation and Energy.
This is our take on one of them: Tesla, a company that intends to accelerate the world's transition to sustainable energy by laying out a clear vision for the future, by building a 21st century industrial from scratch, and by reinventing transportation and energy through software- enabled networks.
Business Strategy Development in Zain Group: A Case StudyAyat A. Saleh
The purpose of this case study is to evaluates the business strategy development and provide recommendations for pioneer telecommunication company in the MENA region; Zain Group. Three stages of strategy development are discussed as the following: Strategy formulation, strategy implementation and strategy evaluation. The final recommendations are formulated using TWOS Matrix. This case study was submitted as a part of the 'Business Strategy and Strategic
Management' course in the University of Warwick, United Kingdom, 2016.
For more details, you can check this blog post:
https://ayatsaleh.com/2017/01/04/business-strategy-development-art-or-science/
Sony Corporation is a leading Japanese manufacturer of electronic devices, games and entertainment products which incurred huge amount of loss for four consecutive years. The company declared that it incurred a total loss of 6.4 billion dollars for the year end in March 2012. The company’s main weakness lies in the numerous product lines In addition to this problem, the company also faces both internal and external challenges. Thus, a SWOT analysis and Porter’s Five Forces Analysis is carried out to understand the basic strengths and weaknesses of the organization. This helped to find out the basic reason behind the poor performance of Sony Corporation. Based on the analysis, a-five year recommendation plan have been framed that consist of four basic steps. Following this plan would help the organization to improve it current position in market.
SECTOR INFORMATION
INTRODUCTION
CONTRIBUTION TO GDP
MARKET OVERVIEW
GROWTH PATTERN
REASONS FOR GROWTH
PORTERS FIVE FORCE ANALYSIS OF THE SECTOR
Threat of New Entrants:
Threats of Substitute Products or Services:
Bargaining Power of Suppliers:
Bargaining Power of Buyers:
Rivalry Among Existing Firms:
COMPANY INFORMATION
COMPANY SNAPSHOT
MARKET SHARE
TARGET MARKET
COMPETITORS ANALYSIS
LAST 6 MONTHS NEWS:
MARKETING STRATEGY
SWOT ANALYSIS OF THE COMPANY
STP OF THE PRODUCT
BCG MATRIX
PRODUCT LIFE CYCLE
MARKETING MIX (4P’S):
COMPARISON OF SALES
MARKETING AND PROMOTIONAL STRATEGY
BUSINESS FINANCE
RATIO ANALYSIS
INCOME STATEMENT
BALANCE SHEET
STATEMENT OF CASH FLOWS
EQUITY
REVENUE
HUMAN RESOURCE MANAGEMENT
ORGANIZATION STRUCTURE
JOB DESCRIPTIONS AND JOB SPECIFICATIONS OF FORD
TRAINING NEEDS OF FORD
ORGANIZATION CULTURE OF FORD
CONCLUSION
BIBLIOGRAPHY/ REFERENCES
The mythology of world-changing startups is strong in Silicon Valley, the eye of the computing and internet cyclone. While its founding fathers have indeed revolutionized our economy, giving birth to GAFAnomics, their supremacy is increasingly challenged by Chinese behemoths, their karma is scrutinized by locked-in citizens, and their ability to tackle the crucial issues of our time - among which global warming - is cynically questioned. But wasn’t technology supposed to solve all our problems?
Elon Musk, a Silicon Valley entrepreneur, who is perfectly fit for an epic tale and a Marvel blockbuster, yet still believes so. Some of his companies - PayPal, SpaceX, Hyperloop and Tesla - are aiming at rebuilding structural industries for the better: Banking, Space, Transportation and Energy.
This is our take on one of them: Tesla, a company that intends to accelerate the world's transition to sustainable energy by laying out a clear vision for the future, by building a 21st century industrial from scratch, and by reinventing transportation and energy through software- enabled networks.
Business Strategy Development in Zain Group: A Case StudyAyat A. Saleh
The purpose of this case study is to evaluates the business strategy development and provide recommendations for pioneer telecommunication company in the MENA region; Zain Group. Three stages of strategy development are discussed as the following: Strategy formulation, strategy implementation and strategy evaluation. The final recommendations are formulated using TWOS Matrix. This case study was submitted as a part of the 'Business Strategy and Strategic
Management' course in the University of Warwick, United Kingdom, 2016.
For more details, you can check this blog post:
https://ayatsaleh.com/2017/01/04/business-strategy-development-art-or-science/
Sony Corporation is a leading Japanese manufacturer of electronic devices, games and entertainment products which incurred huge amount of loss for four consecutive years. The company declared that it incurred a total loss of 6.4 billion dollars for the year end in March 2012. The company’s main weakness lies in the numerous product lines In addition to this problem, the company also faces both internal and external challenges. Thus, a SWOT analysis and Porter’s Five Forces Analysis is carried out to understand the basic strengths and weaknesses of the organization. This helped to find out the basic reason behind the poor performance of Sony Corporation. Based on the analysis, a-five year recommendation plan have been framed that consist of four basic steps. Following this plan would help the organization to improve it current position in market.
SECTOR INFORMATION
INTRODUCTION
CONTRIBUTION TO GDP
MARKET OVERVIEW
GROWTH PATTERN
REASONS FOR GROWTH
PORTERS FIVE FORCE ANALYSIS OF THE SECTOR
Threat of New Entrants:
Threats of Substitute Products or Services:
Bargaining Power of Suppliers:
Bargaining Power of Buyers:
Rivalry Among Existing Firms:
COMPANY INFORMATION
COMPANY SNAPSHOT
MARKET SHARE
TARGET MARKET
COMPETITORS ANALYSIS
LAST 6 MONTHS NEWS:
MARKETING STRATEGY
SWOT ANALYSIS OF THE COMPANY
STP OF THE PRODUCT
BCG MATRIX
PRODUCT LIFE CYCLE
MARKETING MIX (4P’S):
COMPARISON OF SALES
MARKETING AND PROMOTIONAL STRATEGY
BUSINESS FINANCE
RATIO ANALYSIS
INCOME STATEMENT
BALANCE SHEET
STATEMENT OF CASH FLOWS
EQUITY
REVENUE
HUMAN RESOURCE MANAGEMENT
ORGANIZATION STRUCTURE
JOB DESCRIPTIONS AND JOB SPECIFICATIONS OF FORD
TRAINING NEEDS OF FORD
ORGANIZATION CULTURE OF FORD
CONCLUSION
BIBLIOGRAPHY/ REFERENCES
Business level strategies—Porter’s framework of competitive strategies, Conditions, risks and benefits of Cost leadership, Differentiation and Focus strategies,
Strategic Analysis and choice—Corporate level analysis (BCG, GE Ninecell, Hofer’s product market evolution and Shell Directional policy Matrix)
Industry level analysis; Porter’s five forces model, Qualitative factors in strategic choice.
Porter’s model is based on the understanding that corporate strategies should meet opportunities and threats within the external environment of organizations. The five competitive forces that Porter has identified shape every industry as well as every market. These forces regulate the intensity of competition, the profitability as well as attractiveness of an industry.
INDUSTRY ANALYSIS One of the major competences that str.docxcarliotwaycave
INDUSTRY ANALYSIS
One of the major competences that strategic managers need is the ability to define their business, conduct an effective industry analysis,
and identify the "key success factors" for firms competing in their industry. This brief note discusses the steps most often found in a
solid analysis of an industry.
A.DEFINE THE INDUSTRY.
The boundaries for an industry analysis are determined by the markets and products that best describe the domain of the industry. Once
you fully understand the business segment that is to be analyzed, you are in a position to identify the capabilities required to participate
successfully in that industry, and the competitors that are likewise able to effectively target the same business segments. These
elements set the parameters for understanding and analyzing the industry. As industries converge and shift, business definitions become
more difficult. In virtually all industries, consumers are becoming more demanding for customized products and services. These
demands encourage the development of innovations, products, and competitors.
B. DESCRIBE THE INDUSTRY STRUCTURE.
For each product-market segment, an industry analysis will describe the "five-forces" of competition. The five forces discussed briefly
below predict the long run profitability of an industry and are an important first step in analyzing the industry once it has been identified.
1. Bargaining Power of Buyers: This primary force comes from the customer segments that make up the markets in which firms
compete. The size and importance of customers influences their power to negotiate prices and terms that reduce the overall
profitability of the industry. The sizes and types of buyers present in an industry determine their potential influence on product
development and influence the level of competition to be found in the industry.
2. Intensity of Rivalry: A second force comes from the competitors and the ways they compete. Each competitor offers a set of
products and services that attempts to provide higher value to the product-market segments they address. Strategies can be
designed to provide combinations of higher performance, more fashion and features, higher quality, or lower price. Increased
rivalry always leads to price or service competition that reduces the profitability of the industry.
3. Bargaining Power of Suppliers: A third influence on the profitability of an industry comes from its suppliers. In some industries,
suppliers might control critical inputs that can affect all firms’ ability to compete. Analogous to Bargaining power of Buyers,
whenever suppliers are large or few, their leverage tends to be high. Limited access to critical factors of production, equipment,
materials, or components can increase prices and accordingly limit profit potential.
4. Threat of New Entrants; a fourth force represents the ease with which a new competitor can compete for exi ...
The Five Competitive Forces That Shape Strategyby Michael E..docxcherry686017
The Five Competitive Forces That Shape Strategy
by Michael E. Porter
Editor’s Note: In 1979, Harvard Business Review published “How Competitive Forces Shape Strategy” by a young economist
and associate professor, Michael E. Porter. It was his first HBR article, and it started a revolution in the strategy field. In
subsequent decades, Porter has brought his signature economic rigor to the study of competitive strategy for corporations,
regions, nations, and, more recently, health care and philanthropy. “Porter’s five forces” have shaped a generation of academic
research and business practice. With prodding and assistance from Harvard Business School Professor Jan Rivkin and
longtime colleague Joan Magretta, Porter here reaffirms, updates, and extends the classic work. He also addresses common
misunderstandings, provides practical guidance for users of the framework, and offers a deeper view of its implications for
strategy today.
In essence, the job of the strategist is to understand and cope with competition. Often, however, managers define competition
too narrowly, as if it occurred only among today’s direct competitors. Yet competition for profits goes beyond established
industry rivals to include four other competitive forces as well: customers, suppliers, potential entrants, and substitute products.
The extended rivalry that results from all five forces defines an industry’s structure and shapes the nature of competitive
interaction within an industry.
As different from one another as industries might appear on the surface, the underlying drivers of profitability are the same. The
global auto industry, for instance, appears to have nothing in common with the worldwide market for art masterpieces or the
heavily regulated health-care delivery industry in Europe. But to understand industry competition and profitability in each of
those three cases, one must analyze the industry’s underlying structure in terms of the five forces. (See the exhibit “The Five
Forces That Shape Industry Competition.”)
The Five Competitive Forces That Shape Strategy - Harvard Business Reviewhttp://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy/ar/pr
1 of 16 9/23/2013 8:58 AM
If the forces are intense, as they are in such industries as airlines, textiles, and hotels, almost no company earns attractive
returns on investment. If the forces are benign, as they are in industries such as software, soft drinks, and toiletries, many
companies are profitable. Industry structure 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. While a myriad of factors can affect industry
profitability in the short run—including the weather and the business cycle—industry structure, manifested in the competitive
forces, sets industry profitability in the medium and long run. (See the exhibit “Differences in Industry Profitability.”)
Differences in Ind ...
Key Terms
3
Chapter Outline:
3-1
The Organization’s Industry
3-2
The Organization’s
Macroenvironment
3-3
Managing Environmental
Uncertainty
3-4
Environmental Scanning
3-5
Forecasting the
Environment
3-6
Crisis Management
Summary
Review Questions
Endnotes
Managing the
External Environment
boundary-spanning
buffering
crisis
crisis management
culture
Delphi technique
environmental scanning
gross domestic product (GDP)
imitation
industry life cycle
judgmental forecasting
macroenvironment
multiple scenarios
population ecology
self-reference criterion
time series analysis
uncertainty
W
I
L
L
I
S
,
K
A
S
S
A
N
D
R
A
2
1
6
1
T
S
Organizational Theory 3-2
macroenvironment
the general environment
that affects all business
firms in an industry, which
includes political-legal,
economic, social, and
technological forces
industry
a group of competitors
that produces similar
products or services
An organization cannot function effectively unless its managers understand the
forces outside of the organization that influence its performance and survival. There
are two components of the organization’s external environment: the industry—the
collection of competitors that offer similar products or services—and the complex
network of political-legal, economic, social, and technological forces known
as the organization’s macroenvironment. This chapter addresses each of these
components.
3-1 The Organization’s Industry
Each business unit operates among a group of companies that produce competing
products or services known as an industry. Although there are usually some
differences among competitors, each industry has “rules of combat” governing
such issues as product quality, pricing, and distribution. This is especially true in
industries that contain a large number of firms offering standardized products and
services. For example, most service stations in the United States generally offer
regular unleaded, mid-grade, and premium unleaded gasoline at prices that do not
differ substantially from those at nearby stations. If a rival attempts to sell different
grades, it may experience difficulty securing reliable sources of supply and may
also confuse consumers by deviating from the standard.
In a perfect world, each organization would operate in one clearly defined industry.
In the real world, however, many organizations compete in multiple industries, and
it may be difficult to clearly identify the industry boundaries. As such, the concept
of primary and secondary industries may be useful in defining an industry. A
primary industry may be conceptualized as a group of close competitors, whereas
a secondary industry includes less direct competition. The distinction between
primary and secondary industry may be based on objective criteria such as price,
similarity of products, or location, but is ultimately a subjective call.
3-1a Porter’s Five Forces Model
Industry factors have been found to play a majo ...
Industry and Competitor Analysis | Five Competitive Forces | Five Primary Ind...FaHaD .H. NooR
Industry and Competitor Analysis | Five Competitive Forces | Five Primary Industry Types | What Is Industry | Competitor Analysis | Studying Industry Trends |
GETTING STARTED WITH MERGENTACCESSING MERGENT1 Go to tMatthewTennant613
GETTING STARTED WITH MERGENT
ACCESSING MERGENT
1 Go to the Library Homepage(access through Course Homepage or Student Portal)
2 Click “Find Articles & More”
3 Select “Databases by Subject”
4 Select “Business & Economics”
5 Select “Mergent”
RESEARCHING MERGENT
1 Enter the company name or ticker symbol
2 Select your company from the search results
3 Locate important information
}
}
Contact
information
Key
Figures
}
Company
information
in tabs
4 Select reports and download
5 Citation Format
Author. (year). Title of Document. Retrieved from name of database.
Examples:
Mergent. (2016). Acadia Healthcare Annual Report. Retrieved from Mergent Online database.
Mergent. (2017). Acadia Healthcare Company Details. Retrieved from Mergent Online database.
Mergent. (2017). Acadia Healthcare Company Financials. Retrieved from Mergent Online database.
LIBRARY
ASHFORD UNIVERSITY
October 2017
BUSINESS INSIGHTS: GLOBAL
Accessing Business Insights: Global
Watch a short video to
learn more about what this
resource has to offer,
including:
company information
industry information
data visualization tools
case studies
a business glossary
Go to the Library Homepage
(access through Course Homepage or Student Portal)
Click “Find Articles & More”
Select “Databases by Subject”
Select “Business & Economics”
Select “Business Insights: Global (Gale)”
1
2
3
4
5
https://www.youtube.com/watch?v=aXAKj6lQICg
Researching Business Insights: Global
1 Enter the company name or ticker symbol
2 Select your company from the search results
3 Locate important information
}Contact information
} CompanyInformation
Key
Figures}
4 Limit to Full Text
5 View Full Text
6
Share, save, print, download, or cite*
*always double-check database citations. For citation information, go to writingcenter.ashford.edu
LIBRARY
ASHFORD UNIVERSITY
November 2017
http://writingcenter.ashford.edu/
External Environmental
Analysis
Learning Objectives
By the time you have completed this chapter, you should be able to do the following:
• Conduct an industry and competitive analysis and understand why it is important.
• Conduct a market analysis and understand why it is important.
• Scan the general environment for any changes or trends that might favor or adversely affect the company.
4
Belinda Images / SuperStock
CHAPTER 4Section 4.1 Industry and Competitive Analysis
Chapter Outline
4.1 Industry and Competitive Analysis
4.2 Market Analysis
4.3 Environmental-Trend Analysis
An analysis of the external environment covers the industry or segment in which the company
competes, its competitors, markets, and other relevant environmental trends and changes. The
purpose is to understand how the company’s relevant environment is changing and might change
in the future—in this sense, “relevant” means anything the company might affect or could be
affected by. Without such an understanding, doing strategic planning becom ...
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Mtm4 white paper industry analysis (featuring the 5 forces)
1. BCG Growth/Share Portfolio Matrix
ITOTW 1
All Rights Reserved to Aurora WDC Page 1 of 8
Industry Analysis (Featuring the 5 Forces)
Intelligence Collaborative - Mastering the Methods Series
3. Industry Analysis (feat.the 5 Forces)
All Rights Reserved to Aurora WDC Page 3 of 8
Abstract
Business unit analysts and managers study their industry's characteristics since an industry's structure
determinesitsrelativeeconomicattractivenessandhence, the profit potential of all companies within
that particular industry. According to Harvard University Professor Michael Porter, industry analysis
featuring the five corners will help you determine any strategic modifications needed to enhance
profitabilityof an incumbent company, or help you determine whether your company should enter or
exit an industry in the first place. The model visually looks like the following figure:
The Method’s Primary Value
All industriesare notequal intermsof the profitabilityfirms can earn in them. Michael Porter provided
a frameworkthatmodelsanindustryasbeinginfluencedbyfive forces.The astute analyst and strategic
business managers who seek to develop an edge over rival firms can use this model to better
understand the industry context in which the firm operates.
Overview of the Method
The model requiresthe analysttounderstandfiveforces that acting together determines the nature of
competition in a focal industry. Each of the model's five components, (1) Threat of New Entrants, (2)
Threat of Substitutes,(3) BargainingPowerof Suppliers, (4) BargainingPower of Buyers, and (5) Degree
of Competitive Rivalry have measurable components which classify each force as having a "Low,"
"Moderate," or "High" strength. The collective strength of the five forces then determines how
attractive the industry is to potential entrants. Each of these forces is briefly described below:
4. Industry Analysis (feat.the 5 Forces)
All Rights Reserved to Aurora WDC Page 4 of 8
Threat 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 known as barriers to
entry. Some examples include:
Existing loyalty to major brands
Government inhibitions or regulations
High costs to switch from one provider to another
High fixed costs
Incentives for using a particular buyer (such as frequent shopper programs)
Resource unavailability
The Threat of Substitutes – This force examines the likelihood that an industry buyer will switch to a
competitiveproductorservice froma differentindustry. If the costof switchingislow,thenthis poses a
serious threat. The extent of the threat depends upon:
Customer loyalty levels and switching costs
The extent to which the substitute’s price and performance compares with the industry’s
product
The willingness of customers to switch
Bargaining Power of Suppliers - This is how much pressure suppliers can place on a business. If one
supplierhasalarge enoughimpacttoaffecta company'smarginsand volumes,thenitholdssubstantial
power. Here are a few reasons that suppliers might have power:
Switching to another (competitive) input will cost too much
The product is integral to the buyer’s ability to produce its product or service
The supplying industry has a higher profitability than the buying industry
There are only a few suppliers of a specialized product
There exist no or very few viable substitutes
Bargaining Power of Buyers - This examines how much influence customers can place on a company’s
offerings. If a customer has a large enough impact to affect a company's margins or volumes, then the
customer holds substantial power. Here are a few reasons that customers might have power:
Customers are price sensitive
Customer purchases large volumes of the product
It is easy to switching to another competitive product
There are only a few buyers
The product is less important to buyers; they can do without it for some period of time
Degree of CompetitiveRivalry - Thisdescribesthe intensityof competition existing between incumbent
firms “battling” for customers within an industry. Companies within highly competitive industries
generallyearnlow returns because of suffering from the high cost of competition. Highly competitive
markets are generally characterized by:
Many rivals of similar size (economists call this concept as nearing perfect competition)
There exists little to no differentiation between the products and services offered to buyers
The industryis mature,slowgrowing;companiescanonly grow by taking customers from rivals
5. Industry Analysis (feat.the 5 Forces)
All Rights Reserved to Aurora WDC Page 5 of 8
The analystexaminesthe forcesindividually,and then together, to determine the impact they have on
industry attractiveness, and potential profitability. The end goal is to participate in and help to shape
industry forces in more attractive ways so that your business achieves better profitability.
Where the Method Fits in Planning and Strategy
Industry Analysis featuring the 5 Forces is significant in terms of their potential impact on strategy
formulation.The potential of these forces to impact profitability is different from industry to industry.
These forcesjointlydetermine the profitability of industry because they shape the prices which can be
charged,the costs whichcan be borne,and the investmentrequiredtocompete in the industry. Before
making strategic decisions, the managers should use the five forces framework to determine the
competitive structure of industry. Decisions should be make that weaken forces which harm
profitability, strengthen forces that increase it, and otherwise make choices that leverage forces that
can uniquely help their firm succeed as a competitor.
6. Industry Analysis (feat.the 5 Forces)
All Rights Reserved to Aurora WDC Page 6 of 8
Cautions with Applying this Method
The biggest error analysts make in applying Porter’s model is not to define the industry at the line of
businesslevel.The model wasnotdesignedtodeal withstrategicgroups,ormulti-businesscompetition.
Also, applying it to a company will also produce misleading results in almost every case.
The model is about structural forms of advantage. It wasn’t designed to account for other forms
(capabilities, resources-based) factors.
Also, the five forces model largely overlooks the role of innovation as well as the significance of
individual firm differences.
Porter’s original formulation of the five forces was viewed by some to have ignored other factors. For
example, a sixth significant factor called the influence of complementors refers to the reliance that
developsbetweenthe companies indifferent industries (known today as adjacencies) whose products
work in combination with each other. Strong complementors can have a strong positive effect on the
industry if their joint ecosystem works to the benefit of both.
It presents a stagnant view of competition. For the model to be more useful, analysts need to
complementitwithothertemporally-sensitivemethodslike forecasting, futures, or scenarios that turn
the “photograph” of an industry’s structure into a “moving picture” of it!
Applying the Method
I alwaysrecommendthatanalystsstartwiththe endgoal in mind.The primary objective of a successful
strategybasedon IndustryAnalysisfeaturingthe five forcesshouldbe toidentifyand take advantage of
the existingcompetitive forcesinamannerthatwill enhance the competitive position of the company.
Decisions and actions must be aligned with that goal, or else the analysis is likely to turn into an
impractical exercise at best, and waste valuable resources like executive’s time, even worse.
1. Define yourindustryatthe line of businesslevel. Gettingthisdefinitionscopedright,andagreed
uponinternally,isacrucial firststep. Remember, you are analysing an industry, not a company
(unless the company has a monopoly, a rare circumstance, these days).
2. Identifythe keystakeholdersineachof the five categories.Forexamples,whoare the suppliers
that you are trying to determine the level of bargaining power for? Who/what are the
substitutes for your focal industry/market’s products/services?
3. Thoroughly assess each of the five forces individually. Each should be rated either “low,”
“medium” or “high.”
4. Consider the aggregate impact of the forces. Answer “is the industry attractive in terms of an
incumbent business achieving acceptable levels of profitability?” (see figure below)
5. Make decisionsaboutwhatyoucan doand how your company’sstrategy take advantage of the
existing forces in a manner that will enhance the competitive position of the company.
7. Industry Analysis (feat.the 5 Forces)
All Rights Reserved to Aurora WDC Page 7 of 8
Here are some other questions to think about when developing your Five Forces analysis.
Before
What exactly are you aiming to achieve? Be clear about your expectations.
What is the scope of this analysis? Where does the industry begin and end relative to each of
the five forces?
Who can potentially benefit from this?
Scope your industry at the line of business level. This tool looks at industries, not companies.
During
Focus on the present or future, not on the past. I usually recommend doing two of these, one
for the present,andone projected out 2, 3 or 5 years. Trying to understand how the forces will
change industry competition is one of the best value-adds from doing this analysis.
Do not play the "blame game." Stay focused on what can be improved, not what should have
been improved in past projects.
Remember to analyze both the positive and the negatives. Few industries will be attractive
across the board.
Be objective and open to new ideas, changes in thinking, etc.
After
What are the lessons learned? How can the company use them in the future?
How has this analysis assisted you, your project and/or organization?
Have you been able to implement any of the recommendations?
Remembertoutilize the analysisandyourlearningfromitinfuture projects,if/whenapplicable.
Complementary Methods
Competitor Profiling
Driving Forces Analysis
8. Industry Analysis (feat.the 5 Forces)
All Rights Reserved to Aurora WDC Page 8 of 8
Forecasting
Strategic Group Analysis
STEEP/PEST analysis
SWOT analysis
Trend analysis
Value Chain Analysis
Additional Resources
See chapter 7 (pg. 109-126) on Five Forces Industry Analysis in the (2013) book Analysis without
Paralysis: 12 Tools to Make Better Strategic Decisions, 2nd
Ed., by Babette E. Bensoussan and Craig S.
Fleisher, Upper Saddle River, NJ: FT Press.
Businessand CompetitiveAnalysis:EffectiveApplication of New and Classic Methods by Craig S. Fleisher
and Babette Bensoussan, 2007, Upper Saddle River, NJ: FT Press.
Strategicand CompetitiveAnalysis:Methodsand TechniquesforAnalyzing BusinessCompetition byCraig
S. Fleisher and Babette Bensoussan, 2003, Upper Saddle River, NJ: Pearson/Prentice Hall.
Standard &Poor'sIndustry Surveys:Thisis usually the best place to start. Use it to learn about industry
trends,challenges,externalmarket drivers, operations, and key competitors. It covers over fifty major
global industries.
Datamonitor360 (was called Marketline): This offers global and country-specific industry profiles,
drawingonDatamonitor'smarketresearch reports of a large range of industry sectors. Includes a basic
Five Forcesanalysis based on Datamonitor's primary research; helps analysts conduct due diligence to
validate assumptions.
First Research: Not as deep an analysis of the overall industry as S&P, but focuses on business
challenges, drivers and opportunities provides important data often left out by others. It covers 200+
broad industries and sectors.
IndustryAssociations: Most major industry associations publish industry surveys, outlooks, aggregate
data, benchmarks and more. While many post some information on the web, explore purchasing
publications (most are very reasonably priced) and speak to a staff for additional leads.
Industry Trade Magazine "Special Issues": Look at core industry trade magazines for special features,
such as annual "state-of-the-industry", top company rankings, and more. Use Factiva, Business Source
Complete and the actual magazine web site to locate.
Alan S. Michael’s LinkedIn group called “Corporate Planning, Strategy, and Strategic Market
Implementation” often has worthwhile discussions about industry analysis.