Comprehensive Analysis of Porter's Five Forces Framework
Porter’s Five
Forces
Michael Porter
Porter’s Five Forces
Market
Profitability
Intensity
of Current
Competiti
on
Threat of
Substitute
Products
Bargainin
g Power
of
Customers
Bargainin
g Power
of
Suppliers
Threat of
Potential
Competit
ors
Threat of New Entrants
Government Policy
Economies of Scale
Product Differentiation
Capital Requirements
Access to Distribution Channels
Threat of
Potential
Competit
ors
Porter’s Five Forces
Market
Profitability
Intensity
of Current
Competiti
on
Threat of
Substitute
Products
Bargainin
g Power
of
Customers
Bargainin
g Power
of
Suppliers
Threat of
Potential
Competit
ors
Bargaining Power of Suppliers
Suppliers are likely to be powerful if:
Supplier industry is dominated by a few
firms
Suppliers’ products have few substitutes
Buyer is not an important customer to
supplier
Suppliers’ product is an important input to
buyers’ product
Suppliers’ products have high switching
costs
Supplier poses credible threat of
forward integration
Bargainin
g Power
of
Suppliers
Porter’s Five Forces
Market
Profitability
Intensity
of Current
Competiti
on
Threat of
Substitute
Products
Bargainin
g Power
of
Customers
Bargainin
g Power
of
Suppliers
Threat of
Potential
Competit
ors
Bargaining Power of Buyers
Buyer groups are likely to be powerful if:
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 face few switching costs
Buyer presents a credible threat of
backward integration
Product unimportant to quality
Bargainin
g Power
of
Customers
Porter’s Five Forces
Market
Profitability
Intensity
of Current
Competiti
on
Threat of
Substitute
Products
Bargainin
g Power
of
Customers
Bargainin
g Power
of
Suppliers
Threat of
Potential
Competit
ors
Threat of Substitute Products
Keys to evaluate substitute products:
Keys to evaluate substitute products:
Threat of
Substitute
Products
Porter’s Five Forces
Market
Profitability
Intensity
of Current
Competiti
on
Threat of
Substitute
Products
Bargainin
g Power
of
Customers
Bargainin
g Power
of
Suppliers
Threat of
Potential
Competit
ors
Rivalry Among Existing Competitors
Thank You!
Thank You!
The five forces are environmental forces that impact on a company’s 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.
Porter's Five Forces framework, developed by Michael Porter, is a strategic tool used to analyze competitive forces within an industry. The model considers factors like the threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products, and intensity of rivalry among existing competitors. Understanding these forces helps businesses assess their competitive position and develop effective strategies to strengthen their market position.
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Presentation Transcript
Porters Five Forces Michael Porter
Porters Five Forces Threat of Potential Competit ors Intensity of Current Competiti on Threat of Substitute Products Market Profitability Bargainin g Power of Customers Bargainin g Power of Suppliers
Threat of New Entrants Economies of Scale Product Differentiation Threat of Potential Competit ors Capital Requirements Access to Distribution Channels Government Policy
Porters Five Forces Threat of Potential Competit ors Intensity of Current Competiti on Threat of Substitute Products Market Profitability Bargainin g Power of Customers Bargainin g Power of Suppliers
Bargaining Power of Suppliers Suppliers are likely to be powerful if: Supplier industry is dominated by a few firms Suppliers products have few substitutes Bargainin g Power of Suppliers Buyer is not an important customer to supplier Suppliers product is an important input to buyers product Suppliers products have high switching costs Supplier poses credible threat of forward integration
Porters Five Forces Threat of Potential Competit ors Intensity of Current Competiti on Threat of Substitute Products Market Profitability Bargainin g Power of Customers Bargainin g Power of Suppliers
Bargaining Power of Buyers Buyer groups are likely to be powerful if: Buyers are concentrated or purchases are large relative to seller s sales Purchase accounts for a significant fraction of supplier s sales Bargainin g Power of Customers Products are undifferentiated Buyers face few switching costs Buyer presents a credible threat of backward integration Product unimportant to quality
Porters Five Forces Threat of Potential Competit ors Intensity of Current Competiti on Threat of Substitute Products Market Profitability Bargainin g Power of Customers Bargainin g Power of Suppliers
Threat of Substitute Products Keys to evaluate substitute products: Products with improving price/performance tradeoffs relative to present industry products Threat of Substitute Products Example: Electronic security systems in place of security guards Fax machines in place of overnight mail delivery
Porters Five Forces Threat of Potential Competit ors Intensity of Current Competiti on Threat of Substitute Products Market Profitability Bargainin g Power of Customers Bargainin g Power of Suppliers
Rivalry Among Existing Competitors Intense rivalry often plays out in the following ways: Using price competition Staging advertising battles Increasing consumer warranties or service Making new product introductions
