rajesh porters5forcemodel.ppt

8/7/2019 rajesh porters5forcemodel.ppt

1/17

PORTERS FIVE FORCES MODEL

PREPARED BY:RAJESH PATELNISHANT AGRAWAL

MANISH NASHA

SHIVENDRA UPPADHYACHAINIKA SWOMI


2/17

INTRODUCTION

The Five Forces model of Porter is an outside-inbusiness unit strategy tool that is used to make ananalysis of the attractiveness (value...) of an industry

structure.

It captures the keyelements ofindustrycompetition.


3/17

BuyersSuppliers

Substituteproducts

Potential

entrants

Industry competitors

Rivalry among

existing firms

Threat of

new entrants

Bargaining power

of suppliers

Bargaining power

of buyers

Threat of

substitutes



4/17

Bargaining

Power of

Suppliers

Bargaining

Power of

Suppliers

Threat of

New

Entrants

Threat of New

Entrants

Threat of New

Entrants



5/17

BARGAINING POWER OF SUPPLIERSBARGAINING POWER OF SUPPLIERS

Suppliers exert

power in the

industry by:

Suppliers exert

power in the

industry by:

* Threatening to raise* Threatening to raise

prices or to reduce

quality

prices or to reduce

qualityPowerful suppliers

can squeeze

industry

profitability if firmsare unable to

recover cost

increases

Powerful suppliers

can squeeze

industry

profitability if firmsare unable to

recover cost

increases

Suppliers are likely to be powerful if:Suppliers are likely to be powerful if:

Supplier industry is dominated by a fewSupplier industry is dominated by a fewfirmsfirms

Suppliers products have few substitutesSuppliers products have few substitutes

Buyer is not an important customer toBuyer is not an important customer tosuppliersupplier

Suppliers product is an important input toSuppliers product is an important input tobuyers productbuyers product

Suppliers products are differentiatedSuppliers products are differentiated

Suppliers products have high switchingSuppliers products have high switchingcostscosts


6/17

Bargaining

Power of

Buyers

Bargaining

Power of

Buyers

Threat of

New

Entrants

Threat of New

Entrants

Threat of New

Entrants

Bargaining

Power of

Suppliers

Bargaining

Power of

Suppliers



7/17

Power ofBuyersBuyers high when

* Customers are concentratedconcentrated, largelarge orbuy in volumebuy in volume .

* The products being purchased arestandardstandardorundifferentiatedundifferentiatedmaking it

easy to switcheasy to switch to other suppliers.


8/17

Some examples for bargaining

power of buyer when its high

Sam American choice was 25% cheaper then

tide and also has name and quality of wallmart

when the demand of product

is decreasing in the market but supplier is

having a huge stock in there hand.

Ambuja cement add. Says that I am proud to be

associated with Hyderabad airporthere they are signify that the

biggest project of India is using my product


9/17

When the bargaining power of

buyer effects

When the customer/buyer moves to or threat tomove backward.

When present prestige of the buyer adds brand

value of the seller

When the number of buyer is low


10/17

Threat of

Substitute

Products

Threat of

Substitute

Products

Threat ofNew

Entrants

Threat of New

Entrants

Threat of New

Entrants

Bargaining

Power of

Buyers

Bargaining

Power of

Buyers

Bargaining

Power of

Suppliers

Bargaining

Power of

Suppliers



11/17

THREAT OF SUBSTITUTE PRODUCTSTHREAT OF SUBSTITUTE PRODUCTS

Products withsimilarfunction limitthe pricesfirms cancharge

Products withsimilarfunction limitthe pricesfirms cancharge

Keys to evaluate substitute products:Keys to evaluate substitute products:

ProductsProducts withwith improvingimprovingprice/performanceprice/performance tradeoffstradeoffsrelativerelative toto presentpresent industryindustryproductsproducts

Example:Example:

Electronic security systems in placeElectronic security systems in placeof security guardsof security guards

Fax machines in place of overnightFax machines in place of overnightmail deliverymail delivery


12/17

COCA-COLA

Traditional competition:

Prices of Pepsi, local brands

Market share

Promotional actions of competition

New entrants:

New look-a-like manufacturers

Substitute products:

Fashionable new drinks, milk drinks, coffee, beer, ...


13/17

COCA-COLA

Suppliers:

Price and availability of ingredients on world market

Quality speed safety, traceability, flexibility of supply

chain

Buyers/consumers:

High as a result of intense competition both among

branded and unbranded products.

Combined purchase power of shops, bars, supermarkets


14/17

COMPETITIVE ADVANTAGE The Competitive Advantage model of Porter learns that

competitive strategy is about taking offensive or defensiveaction to create a defendable position in an industry, in orderto cope successfully with competitive forces.

Companies can combat the pressure of the five forces andcreate competitive advantages.

There are 2 basics types ofCompetitive Advantage : Cost leadership (lowcost)

Differentiation


15/17

STRENGTHS OF FIVE FORCES

MODEL:

The model is strong tool for competitive analysis atindustry level.

It provides useful input for performing a SWOTanalysis.


16/17

LIMITATIONS Inside-out strategy is ignored (core competence)

It does not cope with synergies and interdependencieswithin the portfolio of large corporations (parenting

advantage)

The environments which are characterized by rapid,systemic and radical change require more flexible, dynamicor emergent approaches to strategy formulation (disruptiveinnovation)

Sometimes it may be possible to create completely newmarkets instead of selecting from existing ones (blue ocean

strategy)


17/17

THANKS..

rajesh porters5forcemodel.ppt

Documents