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Strategic Analysis: Porter's Five Forces Model Demystified

Explore Porter's Five Forces model to understand market dynamics and gain competitive advantage. Learn how to assess industry competition, buyer power, supplier influence, entry barriers, and threat of substitutes effectively.

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Strategic Analysis: Porter's Five Forces Model Demystified

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  1. Contents Porter’s five forces – Competitor analysis Porter’s generic competitive strategies Porter’s model of competition – Risks and Threats Assessing the balance of power in a business situation Porter’s competitive advantage

  2. Porter’s five forces Five forces analysis looks at five key areas mainly the threat of entry, the power of buyers, the power of suppliers, the threat of substitutes, and competitive rivalry (advantage) The five forces model by Michael Porter is used to explore the environment where a company or products operate to generate competitive advantage New entrants Industry competitors and extent of rivalry & advantage Buyers Suppliers Substitutes

  3. Threat of new entrants Existing loyalty to major brands Brand equity Incentives for using a particular buyer (such as frequent shopper programs) Switching costs or sunk costs High fixed costs Capital requirements Scarcity of resources Access to distribution The easier it is for new companies to enter the market, greater are the chances of a fierce cut-throat competition. Factors that can limit the threat of new entrants are known as barriers to entry Government restrictions or legislation Absolute cost advantages Entry protection (patents, rights, etc.) Learning curve advantages Economies of product differences Expected retaliation by incumbents

  4. Competitive rivalry Competitive rivalry amongst companies sometimes extends to non-price dimensions as well like innovation and marketing amongst others Rate of industry growth Level of advertising expense Number of competitors Diversity of competitors Exit Barriers Fixed cost allocation per value added Informational complexity and asymmetry Intermittent industry overcapacity

  5. Influencing the power of five forces • • • • • • • • Reducing the Bargaining Power of Suppliers Reducing the Treat of New Entrants Reducing the Competitive Rivalry between Existing Players Reducing the Bargaining Power of Customers Reducing the Threat of Substitutes

  6. This is a DEMO Course On – Porters Model of Competition. • Join MSG Premium Membership and Get Access to around 120 Courses + New courses added every week. • What You Get: • View All Courses Online. • Download Powerpoint Presentation for Each Course. • Do the Knowledge Checks for Each Course. ManagementStudyGuide.com

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