porter 5 forces- swot -analyzing the business environment

7/31/2019 Porter 5 Forces- SWOT -Analyzing the Business Environment

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Porter 5 Forces, SWOT


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External Environment Political Environment

Political constraints Fair trade decisions, Tax programs, Pollution and pricing

policies, Administrative activities

Business Support Political Activities Patent laws, Government subsidies, Product research grants

Economic Environment

Factors affecting strategies planning GNP, Prime interest rates, inflation, trends in growth, credit

structure, disposable income etc.


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External Environment Social Environment

Values, beliefs, attitudes, opinions and lifestylesaffect the strategies

Cultural, demographics, religious, educationalfactors also affect

Technological Environment

Cost of technology Change of technology

Technology innovations


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Industry Level AnalysisPorters Industry Analysis: Five Forces Model

Industry

Competitors

Rivalry among

Existing firms

Substitutes

Buyers

Potential

Entrants

Suppliers

Threat of New

Entrants

Bargaining Power

of Buyers

Threat of Substitute

Products or Services

Bargaining Power

of Suppliers


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Porters Industry Analysis: Five Forces

Model Threat of new entrants

New entrants to an industry

Brings new capacity

Capture market share from existing players

More competition

Price wars

Falling returns - decline in profitability

Acquisition - the preferred way to enter into a newmarket


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Five Forces Model - Threat of New

Entrants Barriers of entry into new market

Product differentiation

Capital requirements Economies of scale

Access to distribution channels

Government policy Cost disadvantages independent of size


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Five Forces Model Intensity of rivalry among existing competitors

Lead to Price wars, Advertising battles, Launch of new

products and increased services and Warranties.

Intensity of rivalry depends on

Number of competitors

Slowdown in industrial growth

Lack of differentiation among products

Under-pricing to avoid spoilage of goods Perishable


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Five Forces Model The Bargaining Power of Buyers

Buyers are powerful when

The suppliers are many and the buyers are a few and large

The buyers purchase in large quantities The suppliers industry depends on the buyers for a large

percentage of its total orders (Indl Pd)

The buyers can switch orders between supply companies at a lowcost

Its is economically feasible for the buyers to purchase the inputfrom several companies at a time

The buyers can use the threat to provide for their own needsthrough vertical integration as a device for forcing down price


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Five Forces Model The Bargaining Power of Suppliers

Suppliers are powerful when

The product has few substitute and is important to the purchasing

company

No single industry is a major customer

Products are too much differentiated and switching cost is higher

for a buyer

Supplier can use the threat ofvertically integrating forward into

the industry and competing directly with the buying company

Buyers cannot use the threat of vertically integrating backward

and supplying their own needs


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Five Forces Model

Threat of Substitute Products

Substitute products can match the needs of the

customer in the same way as the original product A close substitute is a potential threat to the

companys product

It limits the price charged by a company


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SWOT Analysis

The process of analyzing the company and the environment inwhich it is operating

SWOT stands for strengths, weaknesses, opportunities andthreats.


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SWOT ANALYSIS

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SWOT Analysis

Internal Environment

Strengths

Infrastructure, Employees, Marketing team, Latest product innovation,

International quality standards, or even its closeness to the market The strength can be anything that adds value to its business

Weaknesses

Incompetent management, Untrained employees, Unevenly trained salesforce, Poor marketing strategies, Low quality products, or Lack ofproper financial capabilities


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SWOT Analysis

External Environment

Opportunity A new potential market with ample scope for growth, A

collaborative advantage (advantages through strategic alliancesand partnerships), or opportunities to fulfill the demand of alatent market

Any such activity in the environment that helps the organizationto grow, is an opportunity for it

Threats A new competitor in the market, Price reduction in the

competitors product or A new product introduced in the marketthat will eat into the companys market share

porter 5 forces- swot -analyzing the business environment

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