lecture notes

1. Porter'S Five
ForceS Model
STRATEGIC BUSINESS
ANALYSIS

2. PorterS 5 ForceS Model
The model of the Five Competitive Forces was developed by Michael E.Porter in
his book, Competitive Strategy: Techniques for Analyzing Industries and
Competitors“ in 1980.
Porter's five forces are used to identify and analyze an industry's competitive
forces. The five forces are competitive rivalry, the threat of new entrants to the
industry, supplier bargaining power, customer bargaining power, and the ability of
customers to find substitutes for the sector's products.
The model guides businesses in determining the intensity of competition and
potential profitability within their market, helping them better understand where
power lies in their sector.

3. 1. Competitive Rivalry
This force examines the level of competition
among existing firms in the industry. High rivalry
can reduce profitability as companies may engage
in price wars, marketing battles, and increased
product development efforts. Factors influencing
rivalry include the number of competitors,
industry growth rate, and the level of product
differentiation

4. 2. Threat of New Entrants
This force assesses the potential for new
companies to enter the industry and increase
competition. High barriers to entry (such as high
capital requirements, economies of scale, or
strong brand identity) can deter new entrants,
while low barriers make the industry more
attractive to new players.

5. 3. Bargaining Power of Suppliers
This force looks at how much power suppliers
have in influencing the price and terms of supply.
When there are few suppliers or when they offer
unique resources, they hold more power. This can
impact the cost structure of companies in the
industry and their profitability.

6. 4. Bargaining Power of Buyers
This force evaluates the power of customers to
affect pricing and quality. When buyers have high
bargaining power, they can demand lower prices
or higher quality products. This is often the case
when there are few buyers or when buyers have
many options to choose from.

7. 5. Threat of Substitutes
This force explores the availability of alternative
products or services that can replace the
industry's offerings. High threat of substitutes
can limit profitability as customers may switch to
alternatives that meet their needs at a lower cost
or with added benefits.

8. USe of the Information form Five
ForceS AnalySiS
Statical Analysis
The Five Forces Analysis
allows determining the
attractiveness of an industry.
It can be used to compare the
impact of competitive forces
on the own organization with
their impact on competitors.
Dynamical Analysis
Five Forces Analysis can reveal insights
about the potential future attractiveness
of the industry. Expected political,
economical, socio-demographical and
technological changes can influence the
five competitive forces and thus have
impact on industry structures.

9. StrategieS
Competitive Rivalry
Focus on
Differentiation
Adopt Cost
Leadership
Strategic Alliances
Barrier Creation
Cost Advantages
Differentiation
Threat of New
EntrantS
Diversify Suppliers
Build Strong
Relationships
Bargaining Power of SupplierS

10. Strategies
Bargaining Power of
Buyers
Increase Customer
Loyalty
Differentiation
Segment the
Market
Innovate
Continuously
Enhance Value
Proposition
Monitor Industry
Trends
Threat of Substitute
Products or Services

11. Importance of Porter’S Five ForceS
Strategic Planning
Helps businesses
anticipate and prepare
for competitive
pressures.
Competitive Advantage
Identifies ways to
achieve and sustain a
competitive edge
through differentiation,
cost leadership, or niche
focus.
RiSk Management
Aids in recognizing and
mitigating risks
associated with
competitive dynamics
and market shifts.

12. COMPETITOR'S
ANALYSIS

13. A competitor analysis, also referred
to as a competitive analysis, is the
process of identifying competitors in
your industry and researching their
different marketing strategies. You
can use this information as a point of
comparison to identify your
company’s strengths and weaknesses
relative to each competitor.
C
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M
P
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T
I
T
O
RANALYSIS

14. STEPSINANALYZINGCOMPETITORS
strengths and
weaknesses, and
reaction patterns
Identify the company's Assess competitors' Select which
competitors objectives, strategies, competitors to attack
or avoid

15. OBJECTIVES IMPORTANCE
Explain why analyzing
competitors is crucial. This
might include understanding
market dynamics, identifying
opportunities, and
developing strategic plans.
Emphasize how competitor
analysis helps in refining
business strategies,
improving products/services,
and gaining a competitive
edge.

16. COMPARATIVEANALYSIS
STRATEGIES
Features and Benefits
01
Compare the key features and benefits of your competitors’
products or services with yours.
02 Pricing Strategies
Analyze how competitors price their products/services and how this
compares to your pricing.
03
Unique Selling Propositions
Highlight what makes each competitor’s offerings unique and how
they differentiate themselves from others.

17. COMPARATIVEANALYSIS
STRATEGIES
04
sales promotions, and public
Promotional Tactics
Examine their advertising,
relations efforts.
05 Strengths Highlighted by Customers
Note positive feedback from customers about competitors.
O
6
Common Complaints
Identify frequent issues or criticisms mentioned by customers.

18. STRATEGICIMPLICATIONS
O
P
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T
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SF
O
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F
E
R
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T
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Discuss ways your business can stand out based on the competitor analysis.
P
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A
LAREASF
O
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M
P
R
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V
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M
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N
T
Identify aspects of your business that could be enhanced to
better compete.
S
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M
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N
D
A
T
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N
S
Offer actionable recommendations based on your analysis, such as
adjustments in product offerings, marketing strategies, or pricing.

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21. Value chain analysis is a strategic process that
can increase rofi margins provide
competitive advantage for companies of all sizes.
Within this analysis, businesses identify areas
where the value of specific production and sales
activities can be increased.

22. PURPOSE OF VALUE
CHAIN ANALYSIS
The purpose of value chain analysis is to give
your company a clear path to greater profits.
By understanding the value that your
company brings to your audience, you con
croft a more strategic soles plan and alter
your chain activities to produce additional
revenue.

23. The analysis breaks down the company's operation into
two components:

24. PRIMARY
ACTI VITIES
delivery of products to customers,
including warehouse, transpomation, and
distribution.
availability of raw materials, warehousing,
and distribution
creati ïJgp oducts *ro raw materials.

25. INFRASTRUCTURE
any administrative,
finance, management,
planning, or legal
operations needed to
support primary
activities
TECHNOLOGY AND
DEVELOPMENT
any technological
improvements made to
existing machinery,
hardware, or software in
the name of supporting
primary activities
HUMANRESOURCE
MANAGEMENT
hiring and then placing
workers in the correct
and most efficient
positions
PROCUREMENT
all purchases related
to buying raw
materials or any fixed
assets (for example,
vendor fees and
selection)

26. Support or
Secondary
Activities
Primary Activities

27. 1.Establishes better vendormanagement
2. Reducescostanddelivery times
3. optimizes inventory
4.lmproves customer relationships
5.standardizes andoptimizes processes
6.Helps you gain a competitive edge

29. • pulling customers in with low prices.
• Cost advantage is all about lowering—
everything except expectations, that is. With
cost advantage analysis, you want to lower
both the cost of production and the cost of
products.

30. 01
02
03
04
OS
Steps:
Identify primary and support
activities.
Identify the cost of each activity
in re ga rds to the overall product
cost.
Identify cost drivers for each
activity.
Identify any lin ks between
activities.
Identify opportunities for
reduction. •

31. pulling customers in with unique benefits.
Di0erentiation analysis seeks to set a
company apart for its product quality and
brand value. Sometimes, this process can
actually increase production costs, but as
long as your overall profit margin increoses,
that's fine.

32. Steps:
identify a sustainable
differentiation.
Look at strategies for
improving those activities to
increase customer value.
d tue-creating
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