Porter's five forces model identifies five competitive forces that shape every industry: the threat of new entrants, the power of buyers, the power of suppliers, the threat of substitutes, and rivalry among existing competitors. The document analyzes how 3M Company can address each of these competitive forces based on Porter's model. It suggests that 3M focus on innovation, product differentiation, building economies of scale and brand loyalty to deal with the bargaining power of buyers, threat of new entrants, bargaining power of suppliers, threat of substitute products, and rivalry among existing firms in its industry.

1. Strategic Management
Assignment
Submitted By:-
Shashwat Shankar
(IMB2018017)

2. For any corporation of your interest to evaluate the scope of using porter's
models for initial assessment and getting the useful insight into the current
position?
Porter’s five competitive forces are depicted in Figure. Porter’s starting point was that he wanted
to account for long-term variances in the economic returns of one industry versus another. His
genius resided in distilling the complex microeconomic literature into five explanatory or causal
variables to explain superior and inferior performance, through:
1. The bargaining power of the buyers.
2. Entry barriers.
3. Rivalry.
4. Substitutes.
5. The bargaining power of the suppliers.
There are, however, several limitations to Porter’s framework, such as:
1. It tends to over-stress macro analysis, i.e. at the industry level, as opposed to the analysis
of more specific product-market segments at a micro-level.
2. It oversimplifies industry value chains: for example, invariably ‘buyers’ may need to be
both segmented and also differentiated between channels, intermediate buyers and end
consumers.
3. It fails to link directly to possible management action: for example, where companies
have apparently low influence over any of the five forces, how can they set about dealing
with them?
4. It tends to encourage the mindset of an ‘industry’ as a specific entity with ongoing
boundaries. This is perhaps less appropriate now where industry boundaries appear to be
far more fluid.

3. 5. It appears to be self-contained, thus not being specifically related, for example, to ‘PEST’
factors, or the dynamics of growth in a particular market.
6. It is couched in economic terminology, which may be perceived to be too much jargon
from a practicing manager’s perspective and indeed, it could be argued that it is
over-branded.
A brief overview of 3M Company
3M Company is one of the leading firms in the Diversified Machinery. Over the years 3M
Company has redefined the ways of doing business in Industrial Goods. 3M Company is listed at
New York Stock Exchange (NYSE) and has a market cap of 127.61B USD.
How 3M can tackle the Bargaining Power of Buyers?
1. 3M can focus on innovation and differentiation to attract more buyers. Product
differentiation and quality of products are important to buyers within the industry, and
3M can attract a large number of customers by focusing on these.
2. 3M needs to build a large customer base, as the bargaining power of buyers is weak. It
can do this through marketing efforts aimed at building brand loyalty.
3. 3M can take advantage of its economies of scale to develop a cost advantage and sell at
low prices to low-income buyers of the industry. This way it will be able to attract a large
number of buyers.
How 3M can tackle the Threat of New Entrants?
1. 3M can take advantage of the economies of scale it has within the industry, fighting off
new entrants through its cost advantage.
2. 3M can focus on innovation to differentiate its products from that of new entrants. It can
spend on marketing to build strong brand identification. This will help it retain its
customers rather than losing them to new entrants.
How 3M can tackle the Bargaining Power of Suppliers?
1. 3M can purchase raw materials from its suppliers at a low cost. If the costs or products
are not suitable for 3M, it can then switch its suppliers because switching costs are low.
2. It can have multiple suppliers within its supply chain. For example, 3M can have
different suppliers for different geographic locations. This way it can ensure efficiency
within its supply chain.
3. As the industry is an important customer for its suppliers, 3M can benefit from
developing close relationships with its suppliers where both of them benefit.
How 3M can tackle the Treat of Substitute Products?
1. 3M can focus on providing greater quality in its products. As a result, buyers would
choose their products, which provide greater quality at a lower price as compared to
substitute products that provide greater quality but at a higher price.

4. 2. 3M can focus on differentiating its products. This will ensure that buyers see its products
as unique and do not shift easily to substitute products that do not provide these unique
benefits. It can provide such unique benefits to its customers by better understanding their
needs through market research, and providing what the customer wants.
How 3M can tackle the Rivalry Among Existing Firms?
1. 3M needs to focus on differentiating its products so that the actions of competitors will
have less effect on its customers that seek its unique products.
2. As the industry is growing, 3M can focus on new customers rather than winning the ones
from existing companies.
3. 3M can conduct market research to understand the supply-demand situation within the
industry and prevent overproduction.