This document summarizes Michael Porter's Five Forces model of strategic analysis. The five competitive forces that determine the profitability and attractiveness of an industry are: the bargaining power of suppliers, the bargaining power of customers, the threat of new entrants, the threat of substitutes, and the threat of existing competition. Each force is influenced by several factors that must be analyzed internally regarding a company's resources and externally regarding industry conditions. The model provides a framework for analyzing an industry's structure to determine where power lies and how a company can gain competitive advantages.

1. PORTER FIVE FORCES
OF STRATEGIC
ANALYSIS
Submitted by-
Narendra kumar
Central university of rajasthan
2014mcom009

2. MICHAEL PORTER
 “An industry’s profit potential is largely
determined by the intensity of competitive
rivalry within that industry”

3. Introduction
 The model of the five competitive forces was developed
by Michael Porter
 An important tool for analyzing an organizations industry
structure in strategic processes.
 These forces determine the intensity of competition and
hence the profitability and attractiveness of an industry
 Impact on a company’s ability to compete in a given
market

4. Porters 5 Forces Model

5. BARGAINING POWER OF
SUPPLIER
 The term 'suppliers' comprises all sources for inputs that
are needed in order to provide goods or services
 Example- one co. is manufacturing goods another one
co. is also doing the same but supplies goods to the first
one co. hence it will be regarded as supplier rather than
competitor.
 bargaining power means cut short the marginal power
of the co.
Supplier bargaining power is likely to be
high when:-

6. Contd..
 The market is dominated by a few large suppliers rather
than a fragmented source of supply
 There are no substitutes for the particular input
 Economies of scale
 Increased shifting cost
all these factors are studied internally and externally to
make analysis
availability of resources with the
co.
resource availability in the market

7. BARGAINING POWER OF
CUSTOMER
 Determines how much customers can impose pressure on
margins and volumes.
Factors
 increased market competition
 substitute availability
 buyer’s capacity to produce
 Less switching cost for buyer
 buying in large quantity
internal analysis- co should have sufficient amount of
resource.
External analysis- willingness and ability of customer to buy
and pay for product

8. THREAT OF NEW ENTRANT
when the market is having no barrier, it will affect
profitability of the co.
factors:
 Increase in competition
 Loss of existing customer
 Loss of market share
 Reduction in economies of scale
 High product differentiation
Therefore to deal internally more amount of tie up is
required for this goodwill and ability of association is req.

9. Contd..
to deal externally-
 healthy competition should be there
 The competitor goodwill is necessary to tie
up.
 Willingness of competitor to join hands

10. THREAT OF SUBSTITUTES
A threat from substitutes exists if there are
alternative
products with lower prices of better performance
parameters for the same purpose
 The threat of substitutes is determined by
following factors
 Brand loyalty of customers
 Close customer relationships
 Current trends.
 Increase product differentiation
 Increase product obsolescence

11. Contd..
 To deal with it internally- new technology co.
Should use with respect to product
differentiation and resource availability
 To deal externally –
 improve product quality
 complementary goods should also be
manufactured.

12. THREAT OF EXISTING
COMPETITION
This force describes the intensity of competition
between existing players (companies) in an industry
 Competition between existing players is likely to be
high when
 There are many players of about the same size
 Players have similar strategies
 There is not much differentiation between players and
their products

13. Contd..
 To deal internally –
 Technology
 Ability of association to create share in the
market
 resources
 to deal externally-
 Willingness of others to make association
 Goodwill of existing companies/competitor
should be analysed when co prepare strategy.

14. Application/Uses of five forces
model
 Statistical analysis
 dynamic analysis
 Analysis of options

15. Influencing the power of five forces

16. Criticism of porter’s five forces
model
 Applicability in the perfect market
situation
 Applicability in the static market
 applicability in the systematic market or
well organised market

17. Conclusion
 Thus, Porters Model of Five Competitive
Forces is a simple but powerful tool for
understanding where power lies in a business
situation.
 It helps to understand both the strength of your
current competitive position & the
strength of a position you are looking to move
into.