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5 1 2 3 4 Guide: Porter’s Five Forces Industry and competition analysis
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Porter five forces

Aug 11, 2014

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Page 1: Porter five forces

5 1

2 3

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Guide: Porter’s Five Forces Industry and competition analysis

Page 2: Porter five forces

By Reportlinker.com

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Page 3: Porter five forces

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 ReportLinker.com

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Page 4: Porter five forces

What is Porter’s Model?

Objectives and Model

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Page 5: Porter five forces

Four main Objectives of Porter’s Model

To identify what factors shape the character of competition within an

industry

To assess and manage the

long-term attractiveness of an industry

To assess the structural attractiveness of the analysed

industry

To explain the relationship between the five dynamic forces

that affect an industry’s performance

Four Objectives

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Page 6: Porter five forces

Model of Competition

Industry Competitors

Potential Entrants

Buyer Power

Substitutes

Supplier Power

source: Porter, « Competitive Strategy », 1980

The threat of new entrants

The bargaining power of buyers

The bargaining power of suppliers

The threat of substitute products

The power of industry competitors

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Page 7: Porter five forces

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

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Page 8: Porter five forces

Calculated Degree of Power

Power + -

Competitive Rivalry

Supplier power

Substitute power

Buyers power

Power of new entrants

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Guidelines: Fill in the table with crosses by answering the questions from the following sections to measure the degree of power available in the industry. The analysis depends on the number of crosses in each of the boxes. For example: If the competitive rivalry has many crosses in the ‘+’ box, the power of competitors are low, etc.

Page 9: Porter five forces

What is the Rivalry among existing

Competitors?

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?

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Page 10: Porter five forces

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?

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Page 11: Porter five forces

What is the Bargaining power of

Suppliers?

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?

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Page 12: Porter five forces

What is the Bargaining Power of

Buyers?

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?

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Page 13: Porter five forces

What is the Threat of Substitute

Products?

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)

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Page 14: Porter five forces

Case Study: Apple Inc.

Porter’s Five Forces Model applied to Apple Inc.

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Page 15: Porter five forces

The Government Marketing and Advertising

regulations, Electronic device regulaions and

consumer laws

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Industry

Apple is strictly focused on design

and marketing

Potential Entrants

Concentration of power in the middle and proximity to the

customer

Buyer

Vertically orientated towards the customer-side, Apple does most

of its business in its retail-locations and

online stores

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

consumer

Suppliers

Apple has more power over its suppliers, able

to make strong demands

Threats

Threats

Power

Power

Five Forces

Model applied

to Apple Inc.

Source: http://foodandretail.blogspot.com/2007/10/porter-5-forces-how-they-work-3.html

Page 16: Porter five forces

Case Study: Apple Inc.

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Power + -

Competitive Rivalry X

Supplier power X, X

Substitute power X

Buyers power X, X

Power of new entrants X

Ranking of Power and Threats facing Apple Inc.

Page 18: Porter five forces

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Contact

Do you need more info about this guide? Or about a market you are analysing?

• www.reportlinker.com

• + 33 4 37 37 16 37

[email protected]

Page 19: Porter five forces

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