The document summarizes Porter's Five Forces model for analyzing industry competition and attractiveness. The model examines five competitive forces: threat of new entrants, threat of substitute products, bargaining power of suppliers, bargaining power of buyers, and rivalry among existing competitors. It is used to understand the competitive landscape of an industry and identify strategic options. While a useful framework, the model has limitations and does not consider factors like core competencies, synergies, or disruptive innovation.

1. PREPARED BY:
Bibhav Pal

2.  The Five Forces model of Porter is an outside-in
business unit strategy tool that is used to make an
analysis of the attractiveness (value...) of an industry
structure.
 It captures the key elements of industry competition.

3. BuyersSuppliers
Substitute
products
Potential
entrants
Industry competitors
Rivalry among
existing firms
Threat of
new entrants
Bargaining power
of suppliers
Bargaining power
of buyers
Threat of
substitutes
PORTER’s FIVE FORCEs MODEL

4. Threat of
New
Entrants
Threat of New
Entrants
PORTER’s FIVE FORCEs MODEL

5. Bargaining
Power of
Suppliers
Threat of
New
Entrants
Threat of New
Entrants
PORTER’s FIVE FORCEs MODEL

6. Bargaining Power of Suppliers
Suppliers exert
power in the
industry by:
* Threatening to raise
prices or to reduce
quality
Powerful suppliers
can squeeze
industry
profitability if firms
are unable to
recover cost
increases

7. Bargaining
Power of
Buyers
Threat of
New
Entrants
Threat of New
Entrants
Bargaining
Power of
Suppliers
PORTER’s FIVE FORCEs MODEL

8. Bargaining Power of Buyers
Buyers compete with
the supplying industry
by:
* Bargaining down prices
* Forcing higher quality
* Playing firms off of
each other

9. Threat of
Substitute
Products
Threat of
New
Entrants
Threat of New
Entrants
Bargaining
Power of
Buyers
Bargaining
Power of
Suppliers
PORTER’s FIVE FORCEs MODEL

10. Threat of Substitute Products
Products with
similar
function limit
the prices
firms can
charge

11. Threat of
Substitute
Products
Threat of
New
Entrants
Threat of New
Entrants
Rivalry Among
Competing Firms in
Industry
Bargaining
Power of
Buyers
Bargaining
Power of
Suppliers
PORTER’s FIVE FORCEs MODEL

12. Rivalry Among Existing Competitors
Intense rivalry often plays out in the following
ways:
Using price competition
Staging advertising battles
Making new product introductions
Increasing consumer warranties or service
Occurs when a firm is pressured or sees an
opportunity
Price competition often leaves the entire industry worse off
Advertising battles may increase total industry demand, but may
be costly to smaller competitors

13.  Traditional competition:
 Prices of Pepsi, local brands
 Market share
 Promotional actions of competition
• New entrants:
 New “look-a-like” manufacturers
• Substitute products:
 Fashionable new drinks, milk drinks, coffee, beer,
...

14.  Suppliers:
 Price and availability of ingredients on world market
 Quality speed safety, traceability, flexibility of supply
chain
• Buyers/consumers:
 High as a result of intense competition both among branded
and unbranded products.
 Combined purchase power of shops, bars,
supermarkets

15.  The Competitive Advantage model of Porter learns that
competitive strategy is about taking offensive or defensive
action to create a defendable position in an industry, in order
to cope successfully with competitive forces.
 Companies can combat the pressure of the five forces and
create competitive advantages.
 There are 2 basics types of Competitive Advantage :
 Cost leadership (low cost)
 Differentiation

16.  The model is strong tool for competitive analysis at
industry level.
 It provides useful input for performing a SWOT analysis.

17.  Inside-out strategy is ignored (core competence)
 It does not cope with synergies and interdependencies within the
portfolio of large corporations (parenting advantage)
 The environments which are characterized by rapid, systemic and
radical change require more flexible, dynamic or emergent
approaches to strategy formulation (disruptive innovation)
 Sometimes it may be possible to create completely new markets
instead of selecting from existing ones (blue ocean strategy)