This document discusses Porter's five forces framework for analyzing industry competition and profitability. It explains the five competitive forces - competitive rivalry, threat of new entry, bargaining power of suppliers, bargaining power of buyers, and threat of substitutes. It provides examples of how these forces impact industry profitability. Strategies are presented for differentiating products to minimize competitive forces, including using perceptual maps to identify brand positioning opportunities.

2. Industry Analysis Why are some industries more profitable than others? Fortune's ranking of Industries by profits

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

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

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

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

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

24. Mnemonic 6

25. Mnemonic 7 Adapted from : http://en.wikipedia.org/wiki/Perceptual_mapping