cafe 7 michael porter model

8/4/2019 Cafe 7 Michael Porter Model

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Amity School of Business

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International BUSINESS

MANAGEMENT

MODULE

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Michael Porters five forces model

Developed by Michael E. Porter in hisbook Competitive Strategy: Techniquesfor analyzing Industries and Competitors

in 1980.

Porter has identified five competitiveforces that shape every industry and every

market. These forces determine the intensity of

competition and hence the profitability and

attractiveness of an industry. 2
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Porters five forces model

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Bargaining Power of Suppliers

Suppliers bargaining power is likely to behigh when-

Dominance of few suppliers.

No substitute available.

suppliers customers are fragmented.

switching costs from one supplier toanother are high.

Integration of suppliers.

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Bargaining Power of CustomersCustomers bargaining power is likely to be high when-

concentration of buyers.

The supplying industry comprises a large number of

small operators. High fixed costs of supplying industry.

Availability of substitutes.

Customers are price sensitive. Customers could produce the product themselves.

The customer knows about the production costs of theproduct.

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Threat of New EntrantsThe threat of new entries will depend on-

High initial investments.

Cost advantages of experienced players.

Brand loyalty of customers.

Protected intellectual property.

Scarcity of important resources.

Existing players have close customer relations.

Legislation and government action.

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Threat of Substitutes

Threat of substitutes is determined byfactors like-

Brand loyalty of customers.

Close customer relationships.

Switching costs for customers.

The relative price for performance ofsubstitutes.

Current trends.

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Competitive Rivalry between Existing

PlayersCompetition between existing players is

likely to be high when-

many players of about the same size.

Players have similar strategies.

not much differentiation.

Low market growth rates.

Barriers for exit are high.

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Michael Porters model of

National competitiveAdvantage

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Why does nation achieve internationalsuccess in a particular industry?

The answer lies in four broad attributes ofa nation that shape the environment, in

which local firms compete and create thecompetitive advantage.

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Amity School of BusinessDiamond model

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Factor Conditions Demand Conditions

Related and supporting industries

Firm Strategy, structure and rivalryChance

Government


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Factor conditions

Availability of factor endowments.

Human resource

Physical resource.

Knowledge resource.

Capital resource.

Infrastructure.

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Demand conditions

Home demand composition.

Size and pattern of growth of homedemand.

Internationalization of home demand.

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Related and Supporting industrie

Competitive advantage in suppliers

industry. Competitive advantage in related

industry.

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Firm strategy structure andrivalry

Domestic rivalry creates pressure

on firms to innovate.

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Role of Chance.

Role of government.

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