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What you will learn in this Section ? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],© Sunil Mehrotra
Industry Analysis Why are some industries more profitable than others? Fortune's ranking of Industries by profits
Industry Analysis: Porter's Insight © Sunil Mehrotra The incumbent firms Substitutes ,[object Object],[object Object],[object Object],[object Object],[object Object],Suppliers Customers New entrant
Porter's 5 Forces  impact on profitability The incumbent firms Competitive rivalry Suppliers Bargaining power  of Suppliers Customers Bargaining power of New entrant Threat of  New Entrants Substitutes Threat from Substitutes
Root causes that put pressure on industry profitability ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Better prices Better performance Similar functionality Many small players High cost to exit Undifferentiated products compete on price Low brand loyalty Low switching costs Slow/no growth market www.themanager.org © Sunil Mehrotra Low barriers to entry The incumbent firms Competitive rivalry Suppliers Bargaining power  of Suppliers Substitutes Threat from Substitutes Customers Bargaining power of New entrant Threat of  New Entrants
Impact on Profitability Competitive Intensity Bargaining power of Suppliers Bargaining power of Customers Threat of New Entrants Threat from Substitutes High Low Moderate Profits © Sunil Mehrotra Threat/Power Discount Stores Tobacco Industry
Porter's 5 Forces  impact on profitability Suppliers Bargaining power  of Suppliers Customers Bargaining power of New entrant Threat of  New Entrants Substitutes Threat from Substitutes The incumbent firms Competitive rivalry
Competitive Intensity impacts Industry profitability  Monopoly Single Firm ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],High Low Industry Profitability © Sunil Mehrotra Adapted from: Saloner, Shepard, & Podolny:  Strategic Management , Wiley and Sons, 2001 Utilities Computer OS Automobiles Commercial Aircrafts Clothing Stores Gas Stations Commodities 1000-1800 http://www.usdoj.gov/atr/public/testimony/hhi.htm HHI
Strategies for minimizing the power of competitive forces Threat of  New Entrants Adapted from :  www.themanager.org Reducing competitive rivalry within Differentiate your product Avoid price competition Reduce industry over capacity Focus on different customer segments New entrant Suppliers Bargaining power  of Suppliers The incumbent firms Competitive rivalry Substitutes Threat from Substitutes Customers Bargaining power of
Product Differentiation minimizes competitive intensity ,[object Object],[object Object],[object Object],[object Object],Adapted from :  http://en.wikipedia.org/wiki/Perceptual_mapping
Perceptual Map for Travel Agency Industry Online self-service In person, concierge service Extreme Adventure Guided tours
Perceptual Map of the Auto Industry Prestige Basic Sporty Conservative
Perceptual Map Example: Contemporary Classic Expensive Discount Zara   Nina Tooley, April 2008 MBA, Graziadio School of Business and Management Pepperdine University
Perceptual Map Example: Contemporary Classic Mature Young Zara   Nina Tooley, April 2008 MBA, Graziadio School of Business and Management Pepperdine University
Perceptual Map of the Beer Market Premium Adapted from :  Prof. Ganesh Iyer, UC Berkeley Popular with Men Heavy Special Occasions Dining Out Popular with Women Light Pale Color On a Budget Good Value Blue Collar Full Bodied Premium Budget Light Heavy Meister Brau Stroh’s Beck’s Heineken Old Milwaukee Miller Coors Michelob Miller Lite Coors Light Old Milwaukee Light Budweiser Less Filling
Perceptual Map of 2000 Presidential Candidates Colin Powell John McCain George W. Bush Alan Keyes Pat Buchanan Steve Forbes Donald Trump Elizabeth Dole Jesse Jackson Bill Bradley Al Gore Leader Opportunistic Religious Conservative Source: 12Americans.com, 2000 www.populus.com Traditional Liberal Republican Democrat Independent
 
 
Porter’s 5 Forces  Differentiation as a strategy Competitive Intensity Bargaining power of Suppliers Bargaining power of Customers Threat of New Entrants Threat from Substitutes Differentiation Brand loyalty to keep customers from switching Better able to pass on supplier price increases to customers Fewer alternatives available to switch to Customer loyalty can deter new entrants Customers less willing to accept substitutes www.studymarketing.org Example:
Differentiation is occupying a unique space in the customer's mind
Strategies for minimizing the power of competitive forces Threat of  New Entrants Adapted from :  www.themanager.org Reducing the threat of New Entrants Increasing minimum efficient scales of operations Creating brand image/loyalty Protection of intellectual property Alliances with linked products/services Tie up with suppliers Tie up with distributors Retaliation tactics Cut out intermediaries Reducing threat of substitutes Increase switching costs Form alliances Enter substitute market  Accentuate differences Reducing competitive rivalry within Differentiate your product Avoid price competition Reduce industry over capacity Focus on different customer segments Reducing the Bargaining Power of Suppliers Partnering Supply Chain Management Increase mutual dependency Build knowledge of supplier costs/methods Take-over supplier Reducing the Bargaining Power of Customers Partnering Increase loyalty Increase incentives and value added Increase switching costs Cut out intermediaries New entrant Suppliers Bargaining power  of Suppliers The incumbent firms Competitive rivalry Substitutes Threat from Substitutes Customers Bargaining power of
Porter's 5 Forces  impact on profitability Suppliers Bargaining power  of Suppliers Customers Bargaining power of New entrant Threat of  New Entrants Substitutes Threat from Substitutes The incumbent firms Competitive rivalry
Nappies 14-16? Porter's 5 forces insight -I ntensity of competition amongst incumbents -Bargaining power of suppliers and buyers - Threat from substitutes and new entrants Spectrum of competition-monopoly to perfect competition -Herfindahl-Hirschman index measure of intensity -strategies for minimizing intensity of competition Product and brand differentiation is a key strategy -Perceptual mapping technique -Using perceptual maps for positioning products and brands
Mnemonic 6
Mnemonic 7 Adapted from :  http://en.wikipedia.org/wiki/Perceptual_mapping

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Porters 5 Forces And Mapping

  • 1.
  • 2. Industry Analysis Why are some industries more profitable than others? Fortune's ranking of Industries by profits
  • 3.
  • 4. Porter's 5 Forces impact on profitability The incumbent firms Competitive rivalry Suppliers Bargaining power of Suppliers Customers Bargaining power of New entrant Threat of New Entrants Substitutes Threat from Substitutes
  • 5.
  • 6. Impact on Profitability Competitive Intensity Bargaining power of Suppliers Bargaining power of Customers Threat of New Entrants Threat from Substitutes High Low Moderate Profits © Sunil Mehrotra Threat/Power Discount Stores Tobacco Industry
  • 7. Porter's 5 Forces impact on profitability Suppliers Bargaining power of Suppliers Customers Bargaining power of New entrant Threat of New Entrants Substitutes Threat from Substitutes The incumbent firms Competitive rivalry
  • 8.
  • 9. Strategies for minimizing the power of competitive forces Threat of New Entrants Adapted from : www.themanager.org Reducing competitive rivalry within Differentiate your product Avoid price competition Reduce industry over capacity Focus on different customer segments New entrant Suppliers Bargaining power of Suppliers The incumbent firms Competitive rivalry Substitutes Threat from Substitutes Customers Bargaining power of
  • 10.
  • 11. Perceptual Map for Travel Agency Industry Online self-service In person, concierge service Extreme Adventure Guided tours
  • 12. Perceptual Map of the Auto Industry Prestige Basic Sporty Conservative
  • 13. Perceptual Map Example: Contemporary Classic Expensive Discount Zara Nina Tooley, April 2008 MBA, Graziadio School of Business and Management Pepperdine University
  • 14. Perceptual Map Example: Contemporary Classic Mature Young Zara Nina Tooley, April 2008 MBA, Graziadio School of Business and Management Pepperdine University
  • 15. Perceptual Map of the Beer Market Premium Adapted from : Prof. Ganesh Iyer, UC Berkeley Popular with Men Heavy Special Occasions Dining Out Popular with Women Light Pale Color On a Budget Good Value Blue Collar Full Bodied Premium Budget Light Heavy Meister Brau Stroh’s Beck’s Heineken Old Milwaukee Miller Coors Michelob Miller Lite Coors Light Old Milwaukee Light Budweiser Less Filling
  • 16. Perceptual Map of 2000 Presidential Candidates Colin Powell John McCain George W. Bush Alan Keyes Pat Buchanan Steve Forbes Donald Trump Elizabeth Dole Jesse Jackson Bill Bradley Al Gore Leader Opportunistic Religious Conservative Source: 12Americans.com, 2000 www.populus.com Traditional Liberal Republican Democrat Independent
  • 17.  
  • 18.  
  • 19. Porter’s 5 Forces Differentiation as a strategy Competitive Intensity Bargaining power of Suppliers Bargaining power of Customers Threat of New Entrants Threat from Substitutes Differentiation Brand loyalty to keep customers from switching Better able to pass on supplier price increases to customers Fewer alternatives available to switch to Customer loyalty can deter new entrants Customers less willing to accept substitutes www.studymarketing.org Example:
  • 20. Differentiation is occupying a unique space in the customer's mind
  • 21. Strategies for minimizing the power of competitive forces Threat of New Entrants Adapted from : www.themanager.org Reducing the threat of New Entrants Increasing minimum efficient scales of operations Creating brand image/loyalty Protection of intellectual property Alliances with linked products/services Tie up with suppliers Tie up with distributors Retaliation tactics Cut out intermediaries Reducing threat of substitutes Increase switching costs Form alliances Enter substitute market Accentuate differences Reducing competitive rivalry within Differentiate your product Avoid price competition Reduce industry over capacity Focus on different customer segments Reducing the Bargaining Power of Suppliers Partnering Supply Chain Management Increase mutual dependency Build knowledge of supplier costs/methods Take-over supplier Reducing the Bargaining Power of Customers Partnering Increase loyalty Increase incentives and value added Increase switching costs Cut out intermediaries New entrant Suppliers Bargaining power of Suppliers The incumbent firms Competitive rivalry Substitutes Threat from Substitutes Customers Bargaining power of
  • 22. Porter's 5 Forces impact on profitability Suppliers Bargaining power of Suppliers Customers Bargaining power of New entrant Threat of New Entrants Substitutes Threat from Substitutes The incumbent firms Competitive rivalry
  • 23. Nappies 14-16? Porter's 5 forces insight -I ntensity of competition amongst incumbents -Bargaining power of suppliers and buyers - Threat from substitutes and new entrants Spectrum of competition-monopoly to perfect competition -Herfindahl-Hirschman index measure of intensity -strategies for minimizing intensity of competition Product and brand differentiation is a key strategy -Perceptual mapping technique -Using perceptual maps for positioning products and brands
  • 25. Mnemonic 7 Adapted from : http://en.wikipedia.org/wiki/Perceptual_mapping