Porters Five Forces Analysis

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Week 22

• Porters Five Forces Analysis
• Corporate Appraisal

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Components of the General Environment
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Power of buyers ... is likely to be high when
Buyers concentrated High volume/value
purchases Alternative sources of supply Threat of
backward integration
Power of supplier ... is likely to be high when
Suppliers concentrated Switching costs
high Powerful brands Threat of forward
integration Suppliers customers unimportant
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The purpose of Five-Forces Analysis

• Five forces are environmental forces that impact
  on a companys ability to compete in a given
  market.
• The purpose of five-forces analysis is to
  diagnose the principal competitive pressures in a
  market and assess how strong and important each
  one is.

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Five Force Analysis key questions

• Which are the dominant forces in the industry?
• How may the five forces change?
• What are the impacts on key competitors?
• What are the underlying forces which are driving
• these five forces?
• What can be done to influence the impact of the
  five forces?
• In what way may forces for competitive
  intensity
• be speeding up?

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Porters Five Forces Model of Competition
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Threat of New Entrants
Expected Retaliation
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Porters Five Forces Model of Competition
Threat of New Entrants
Threat of New Entrants
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Bargaining Power of Suppliers
Suppliers are likely to be powerful if
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Porters Five Forces Model of Competition
Threat of New Entrants
Threat of New Entrants
Bargaining Power of Suppliers
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Bargaining Power of Buyers
Buyer groups are likely to be powerful if
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Porters Five Forces Model of Competition
Threat of New Entrants
Threat of New Entrants
Bargaining Power of Buyers
Bargaining Power of Suppliers
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Threat of Substitute Products
Keys to evaluate substitute products
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Porters Five Forces Model of Competition
Threat of New Entrants
Threat of New Entrants
Bargaining Power of Buyers
Bargaining Power of Suppliers
Threat of Substitute Products
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Rivalry Among Existing Competitors
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Rivalry Among Existing Competitors
Cut throat competition is more likely to occur
when
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The Five Forces are unique to any industry

• Five-Forces Analysis is a framework for analysing
  a particular industry.
• Yet, the five forces affect all the other
  businesses in that industry.

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Competitor Analysis
The follow-up to Industry Analysis is effective
analysis of a firms Competitors
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Competitor Analysis
What assumptions does your competitors hold
about the future of industry and themselves?
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Competitor Analysis
What Drives the competitor?
Future Objectives
How do our goals compare to our competitors
goals?
Where will emphasis be placed in the future?
What is the attitude toward risk?
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Competitor Analysis
Future Objectives
What is the competitor doing?
How do our goals compare to our competitors
goals?
What can the competitor do?
Current Strategy
Where will emphasis be placed in the future?
How are we currently competing?
What is the attitude toward risk?
Does this strategy support changes in the
competitive structure?
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Competitor Analysis
What does the competitor believe about itself and
the industry?
Assumptions
Do we assume the future will be volatile?
What assumptions do our competitors hold about
the industry and themselves?
Are we assuming stable competitive conditions?
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Competitor Analysis
What are the competitors capabilities?
Capabilities
What are my competitors strengths and weaknesses?
How do our capabilities compare to our
competitors?
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Competitor Analysis
Response
What will our competitors do in the future?
Where do we have a competitive advantage?
How will this change our relationship with our
competition?