Guide Porter Five Forces Analysis


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Guide Porter Five Forces Analysis

  1. 1. Guide: Porter’s Five Forces Industry and competition analysis 2 3 1 4 5
  2. 2. By All content is protected by copyright, and may not be copied or distributed in any form without prior written permission from ReportLinker. It is for general information use only and is subject to change without notice. We do not guarantee the timeliness, completeness or suitability of the content on this document for any particular purpose. Please contact to request reproduction permission. 2
  3. 3. What is in this Guide? What is Porter’s Model? Porter’s Five Forces Model of Competition How to use the Porter’s model? • Table to Calculate the Degree of Power • Competitive Rivalry • Threat of New Entrants • Bargaining Power of Suppliers • Bargaining Power of Buyers • Threat of Substitute Case Study: Apple Inc. Bibliography Contact at 3
  4. 4. What is Porter’s Model? Objectives and Model 4
  5. 5. Four main Objectives of Porter’s ModelTo identify what factors shape the To assess and manage thecharacter of competition within an long-term attractiveness of an industry industry Four Objectives To explain the relationship To assess the structural between the five dynamic forces attractiveness of the analysed that affect an industry’s industry performance 5
  6. 6. Model of Competition The power of The threat of industry Potential new entrants competitors Entrants The bargainingThe power ofbargaining Supplier Industry Buyer buyerspower of Power Competitors Powersuppliers The threat of substitute Substitutes products source: Porter, « Competitive Strategy », 1980 6
  7. 7. How to use Porter’s Model? Guide: Answer the following questions and you will get a detailed and in-depth analysis of the competition and industry 7
  8. 8. Calculated Degree of PowerPower + -Competitive RivalrySupplier powerSubstitute powerBuyers powerPower of new entrantsGuidelines:Fill in the table with crosses by answering the questions from the following sections tomeasure the degree of power available in the industry. The analysis depends on thenumber of crosses in each of the boxes.For example: If the competitive rivalry has many crosses in the ‘+’ box, the power ofcompetitors are low, etc. 8
  9. 9. What is the Rivalry among existingCompetitors? Competitors • How many direct or indirect competitors are there? • What are the size of my competitors? • How diverse are my competitors? Industry • What is the industry growth rate? • What are the strategic stakes? Products • How different is my product? • What are the buyers’ switching costs? 9
  10. 10. What are New Entrants Threats? Production costs • Are there any economies of scale? • What are the capital requirements? • What is the absolute cost advantage? Brand • How different is the product? • How strong is the brand identity? • How high are the switching costs? Distribution • Is it easy to access distribution channels? • What are the government policies? 10
  11. 11. What is the Bargaining power ofSuppliers? Substitution • What are the switching costs of suppliers and firms in the industry? • Is there any presence of substitute inputs? Players • What is the suppliers’ concentration? • How high is the concentration of suppliers? Integration • What is the suppliers’ threat of forward integration? • What is the buyers’ threat of backward integration? 11
  12. 12. What is the Bargaining Power ofBuyers? Buyer‘s type • How strong is the difference between buyer concentration vs. firm concentration? • What is the buyer volume? • What are the buyer switching costs relative to the firm’s switching costs? • Is the buyer capable of backward integration? Information • How much information does the buyer have? • Are they attracted by substitutes? • How much does product differences effect the buyer? Brand awareness • How does the buyer judge the brand identity? • How high is the impact of quality/performance? 12
  13. 13. What is the Threat of SubstituteProducts? What is the relative price performance of substitutes? • What are the prices of my products comparatively? • Are the substitute prices stable? (increase or decrease) How high are the switching costs? • What are the differences relative to my products? • What would the costs incurred be to change my products? What is the buyer propensity to substitute? • What are the buyers preferences on the product category? • What are the differences regarding my products? (quality, prices) 13
  14. 14. Case Study: Apple Inc.Porter’s Five Forces Model applied to Apple Inc. 14
  15. 15. Potential Entrants The Government Concentration of Five Forces Marketing and Advertising regulations, Electronic power in the middle Model applied device regulaions and and proximity to the consumer laws customer to Apple Inc. Threats P P Buyer Suppliers Industry o o Vertically orientated Apple has more power towards the customer- over its suppliers, able w Apple is strictly w focused on design side, Apple does most to make strong e e of its business in its demands and marketing retail-locations and r r online stores Threats Substitutes (as far as they exist) Apple is better equipped to compete with horizontal players vs. HP or Sony, not as vertically integrated towards the consumerSource: forces-how-they-work-3.html 15
  16. 16. Case Study: Apple Inc. Ranking of Power and Threats facing Apple Inc.Power + -Competitive Rivalry XSupplier power X, XSubstitute power XBuyers power X, XPower of new entrants X 16
  17. 17. Bibliography Porters Five Forces - Problem Solving Techniques , from Porter 5 Forces How they work What is Porter’s 5 Forces Analysis? , from Michael Porter’s website on Harvard Business School: Faculty and Research Company Profile Apple Inc. , from 17
  18. 18. ContactDo you need more info about this guide? Or about a market you are analysing? • • + 33 4 37 37 16 37 • 18
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