1 / 22

Five Forces Industry Analysis

Five Forces Industry Analysis. Nicole Fiamingo. Five Forces Industry Analysis Description & Purpose. Developed by Michael Porter Provides an understanding of an industry and its participants Used as a means to decrease the gap between a firm’s external environment and its internal resources.

veta
Download Presentation

Five Forces Industry Analysis

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Five Forces Industry Analysis Nicole Fiamingo

  2. Five Forces Industry Analysis Description & Purpose • Developed by Michael Porter • Provides an understanding of an industry and its participants • Used as a means to decrease the gap between a firm’s external environment and its internal resources

  3. Five Forces Industry Analysis Objective of the Five Forces • Identify the profit potential of an industry • Identify the forces that would harm your company’s profitability in that industry • Protect and extend your competitive advantage • Anticipate changes in industry structure

  4. Five Forces Industry Analysis Porter’s Five Forces • Threat of new entrants • Bargaining power of suppliers • Bargaining power of buyers • Threat of substitute products or services • Degree of rivalry among existing competitors

  5. Five Forces Industry Analysis 1. Threat of New Entrants • Entry-deterring price • Incumbent retaliation • High entry costs • Experience effects • Other cost advantages • Product differentiation • Distribution access • Government restrictions • Switching costs New entrants usually face several barriers to entry, including:

  6. Five Forces Industry Analysis 2. Bargaining Power of Suppliers Suppliers bargaining power may be influenced by: • Concentration • Diversification • Switching costs • Organization • Government

  7. Five Forces Industry Analysis 3. Bargaining Power of Buyers Buyer’s Bargaining power my be influenced by: • Differentiation • Concentration • Profitability • Quality

  8. Five Forces Industry Analysis 4. Threat of Substitute Products or Services Market displacement by existing/potential substitutes can be influenced by: • Relative price/performance trade off • Switching costs • Profitability

  9. Five Forces Industry Analysis 5. The Degree of Rivalry Among Existing Players The intensity of competition within an industry is determined by: • Market Growth • Cost Structure • Barriers to exit • Product switching • Diversity

  10. Five Forces Industry Analysis Strengths • Forecast future changes in each of the five forces • Discover how these changes will affect the other forces • Discover how the interrelated changes will affect the future profitability of the industry • Discover how you might change the strategy to exploit the changing industry structure

  11. Five Forces Industry Analysis Weaknesses • Underestimates the capabilities that may serve as the company’s competitive advantage in the long-term • Does not take into account the synergies and interdependence within a corporation’s overall portfolio • Strict interpretations ignore social & political factors • Does not address why or how companies are able to get advantageous positions

  12. Five Forces Industry Analysis How to Do It Step 1: Collect Information • Identify your industry • Look at existing demand & supply patterns • Identify the characteristics of each of the five forces • Examine & assess their impact on the industry

  13. Five Forces Industry Analysis How to Do It Main Sources of Competitive Pressures • Rivalry among competitors • Threat of substitute products • Threat of potential entry • Bargaining power of suppliers • Bargaining power of buyers

  14. Five Forces Industry Analysis How to Do It Step 2: Assess & Evaluate • Determine the direction of the force • Give each force a value indicating if it is strong, moderate, or weak. • Scale of 1 – 5, with 1 being the weakest • The ultimate goal: To identify the ability of your company to successfully compete within its industry, given the collective strength of the five forces

  15. Five Forces Industry Analysis How to Do It Step 3: Develop Strategy • Repeat the first two steps in light of industry change and evolution • Long-term industry trends should be analyzed to determine whether the profitability of the industry is sustainable and how this will affect your company’s competitive position.

  16. Five Forces Industry Analysis Conclusion • Understanding how an industry will evolve provides important direction for selecting and managing strategy around these five criteria • Not all industries are alike-for companies with product portfolios across numerous industries, this technique should be repeated for each industry

More Related