porter five forces analysis
TRANSCRIPT
By: Masih Nabizadeh Research & Productivity Center ,Industrial Eng. Department, Tehran Polytechnic
What is STRATEGY? Is it similar to Operational Effectiveness (OE)?
What is Operational Effectiveness?
Introduction Porter five
forces
Life Cycle Analysis
Capability
Competitor Analysis
3 strategies
How to Conduct
For almost two decades, managers have been
learning to play by a new set of rules. Companies
must be flexible to respond rapidly to competitive and
market changes. They must benchmark continuously
to achieve best practice. They must outsource
aggressively to gain efficiencies. Other management
tools and techniques: total quality management,
time-based competition, partnering, reengineering,
Introduction Porter five
forces
Life Cycle Analysis
Capability
Competitor Analysis
3 strategies
How to Conduct
Is Positioning dynamic or static?
Although the resulting operational improvements have often been dramatic, many
companies have been frustrated by their inability to translate those gains into
sustainable profitability. And bit by bit, almost imperceptibly, management tools have taken the place of strategy. As managers push to improve
on all fronts, they move farther away from viable competitive positions.
Introduction Porter five
forces
Life Cycle Analysis
Capability
Competitor Analysis
3 strategies
How to Conduct
Case study: Japanese companies
Introduction Porter five
forces
Life Cycle Analysis
Capability
Competitor Analysis
3 strategies
How to Conduct
Introduction Porter five
forces
Life Cycle Analysis
Capability
Competitor Analysis
3 strategies
How to Conduct
Introduction Porter five
forces
Life Cycle Analysis
Capability
Competitor Analysis
3 strategies
How to Conduct
Introduction Porter five
forces
Life Cycle Analysis
Capability
Competitor Analysis
3 strategies
How to Conduct
Competition within the industry
Barriers to Entry
Power of buyers
Threat of substitute
Power of suppliers
introduction
Porter Five Forces Analysis
Life Cycle Analysis
Capability
Competitor Analysis
3 strategies
How to Conduct
Introduction
Introduction
• To sustain a long-term profitability you must
strategically respond to your competition
• As Porter explain in his 1979 HBR revolutionary
article, four additional competitive forces can hurt
your prospective profit:
Porter Five Forces Analysis
Life Cycle Analysis
Capability
Competitor Analysis
3 strategies
How to Conduct
Introduction
Powerful supplier may constrain your profit by charge
higher prices. 1
Introduction
• To sustain a long-term profitability you must
strategically respond to your competition
• As Porter explain in his 1979 HBR revolutionary
article, four additional competitive forces can hurt
your prospective profit:
Savvy customers can force down prices by playing
you and your rivals against one another. 1 2
Porter Five Forces Analysis
Life Cycle Analysis
Capability
Competitor Analysis
3 strategies
How to Conduct
Introduction
Introduction
• To sustain a long-term profitability you must
strategically respond to your competition
• As Porter explain in his 1979 HBR revolutionary
article, four additional competitive forces can hurt
your prospective profit:
Savvy customers can force down prices by playing
you and your rivals against one another.
Aspiring entrants, armed with new capacity and
hungry for market share, can ratchet up the
investment required for you to stay in the game. 1 2 3
Porter Five Forces Analysis
Life Cycle Analysis
Capability
Competitor Analysis
3 strategies
How to Conduct
Introduction
Introduction
• To sustain a long-term profitability you must
strategically respond to your competition
• As Porter explain in his 1979 HBR revolutionary
article, four additional competitive forces can hurt
your prospective profit:
Savvy customers can force down prices by playing
you and your rivals against one another.
Powerful supplier may constrain your profit by charge
higher prices.
Aspiring entrants, armed with new capacity and
hungry for market share, can ratchet up the
investment required for you to stay in the game.
Substitutes offerings can lure customers away 1 2 3 4
Porter Five Forces Analysis
Life Cycle Analysis
Capability
Competitor Analysis
3 strategies
How to Conduct
Introduction
Introduction
Introduction
• The underlying structure of an industry
should be distinguished from the many
short-run factors that can effect competition
and profitability in a transient way
• How a strategist can use Five Forces
Analysis?
Porter Five Forces Analysis
Life Cycle Analysis
Capability
Competitor Analysis
3 strategies
How to Conduct
Differences in industry Profitability
Threat of Entry
• New entrants to an industry bring new
capacity, the desire to gain market share,
and often substantial resources.
• The threat of entry into an industry depends
on the barriers to entry that are present,
coupled with the reaction from existing
competitor that the entrant can expect.
Porter Five Forces Analysis Introduction
Life Cycle Analysis
Capability
Competitor Analysis
3 strategies
How to Conduct
Barriers to Entry
• Economies of scale
• Product differentiation
• Capital requirements
• Switching costs
• Access to distribution channels
• Government policy
• Cost disadvantage independent of scale
Porter Five Forces Analysis
Life Cycle Analysis
Capability
Competitor Analysis
3 strategies
How to Conduct
- Proprietary product technology - Favorable access to raw materials - Favorable locations Government subsidies - Learning or experience curve
Introduction
Expected Retaliation
• The potential entrant’s expectations about
the reaction of existing competitors also will
influence the threat of entry
Porter Five Forces Analysis
Life Cycle Analysis
Capability
Competitor Analysis
3 strategies
How to Conduct
Experience & Scale as Entry Barriers
• Experience is more ethereal entry barrier than scale,
because the mere presence of an experience it is not
available to competitors by: (1) copying (2) hiring a
competitors employee (3) purchasing the latest machinery.
Introduction
Intensity of Rivalry among Existing
Competitors
Porter Five Forces Analysis
Life Cycle Analysis
Capability
Competitor Analysis
3 strategies
How to Conduct
• Equally balanced competitors
• Slow industry growth
• High fixed or storage costs
• Lack of differentiation & switching costs
• Capacity augmented in large increments
• High strategic stakes
• High exit barriers
Introduction
Pressure from Substitute Products
• Substitute limits the potential returns of an
industry by placing a ceiling on the prices
firms in the industry can profitably charge.
• Identifying substitute products is a matter of
searching for other products that can perform
the same function as the product of the
industry.
Porter Five Forces Analysis
Life Cycle Analysis
Capability
Competitor Analysis
3 strategies
How to Conduct
Introduction
Bargaining Power of Buyers
• A buyer group is powerful if the following
circumstances hold true:
- It is concentrated or purchased large
volumes relative to seller sales
- The products it purchase from the
industry represent a significant fraction of the
buyer’s costs or purchases.
- The products it purchases from the
industry is standard or undifferentiated.
- It faces few switching costs.
Porter Five Forces Analysis
Life Cycle Analysis
Capability
Competitor Analysis
3 strategies
How to Conduct
Introduction
Bargaining Power of Buyers
• A buyer group is powerful if the following
circumstances hold true:
- It earns low profits.
- Buyers pose a credible threat of
backward integration.
- The buyer has full information.
• Altering Buyer Power
Porter Five Forces Analysis
Life Cycle Analysis
Capability
Competitor Analysis
3 strategies
How to Conduct
Introduction
Bargaining Power of Suppliers
• A supplier group is powerful if the following
apply:
- It is dominated by a few companies and is
more concentrated that the industry it sells to.
- It is not obliged to contend with other
substitute products for sale to the industry.
- The industry is not an important customer
of the supplier group.
- the supplier’s product is an important
input to the buyer’s business.
Porter Five Forces Analysis
Life Cycle Analysis
Capability
Competitor Analysis
3 strategies
How to Conduct
Introduction
Structural Analysis & Competitive Strategy
• An effective competitive strategy takes offensive
or defensive action in order to create a defendable
position against the five competitive forces:
Porter Five Forces Analysis
Life Cycle Analysis
Capability
Competitor Analysis
3 strategies
How to Conduct
Introduction
Positioning the firm so that its capabilities provides
the best defense against existing forces.
Structural Analysis & Competitive Strategy
• An effective competitive strategy takes offensive
or defensive action in order to create a defendable
position against the five competitive forces:
Porter Five Forces Analysis
Life Cycle Analysis
Capability
Competitor Analysis
3 strategies
How to Conduct
Introduction
Positioning the firm so that its capabilities provides
the best defense against existing forces.
Anticipating shifts in the factors underlying the forces
and responding to them.
Structural Analysis & Competitive Strategy
• An effective competitive strategy takes offensive
or defensive action in order to create a defendable
position against the five competitive forces:
Porter Five Forces Analysis
Life Cycle Analysis
Capability
Competitor Analysis
3 strategies
How to Conduct
Introduction
Positioning the firm so that its capabilities provides
the best defense against existing forces.
Anticipating shifts in the factors underlying the forces
and responding to them.
Influencing the balance of forces through strategic
moves.
