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Strategic Management

Porter's Five Forces Analysis outlines the competitive dynamics within an industry, focusing on the threat of new entrants, bargaining power of suppliers and buyers, threat of substitute products, and rivalry among existing competitors. Each force influences market competition and profitability, with factors such as economies of scale, product differentiation, and supplier concentration playing key roles. Understanding these forces helps businesses strategize effectively in their respective markets.

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Tonoy Roy
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2 views8 pages

Strategic Management

Porter's Five Forces Analysis outlines the competitive dynamics within an industry, focusing on the threat of new entrants, bargaining power of suppliers and buyers, threat of substitute products, and rivalry among existing competitors. Each force influences market competition and profitability, with factors such as economies of scale, product differentiation, and supplier concentration playing key roles. Understanding these forces helps businesses strategize effectively in their respective markets.

Uploaded by

Tonoy Roy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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PORTER'S FIVE FORCES

ANALYSIS
Five forces that shape industry competition
THREAT OF NEW ENTRANTS

Economies of Scale
Product Differentiation

Barriers Capital Requirements


to Entry
Switching Costs
Access to Distribution Channels

Cost Disadvantages Independent


of Scale
Government Policy
BARGAINING POWER OF SUPPLIERS

Supplier industry is dominated by a few


firms
Suppliers’ products have few substitutes

Suppliers
Suppliers Buyer is not an important customer to
exert
exert power
power supplier
if
if
Suppliers’ product is an important input to
buyers’ product

Suppliers’ products are differentiated

Suppliers’ products have high switching


costs
BARGAINING POWER OF BUYERS

Buyers are concentrated or purchases


are large relative to seller’s sales
Purchase accounts for a significant
fraction of supplier’s sales
Products are undifferentiated Buyers
Buyers exart
exart
Buyers face few switching costs power
power if
if

Buyers’ industry earns low profits


Buyer presents a credible threat of
backward integration
Product unimportant to quality
Buyer has full information
THREAT OF SUBSTITUTE PRODUCTS

Products with improving


price/performance tradeoffs Products
Products with
with
similar
similar function
function
relative to present industry
products
RIVALRY AMONG EXISTING
COMPETITORS
Intense rivalry often plays out in the following ways:

Jockeying for strategic position


Using price competition
Staging advertising battles
Increasing consumer warranties or service
Making new product introductions
Occurs when a firm is pressured or sees an opportunity

Price competition often leaves the entire industry worse off


Advertising battles may increase total industry demand, but
may be costly to smaller competitors
THANK YOU

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