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5 1 2 3 4 Guide: Porter’s Five Forces Industry and competition analysis

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  • Guide: Porters Five Forces Industry and competition analysis 2 1 3 5 4
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  • What is in this Guide? What is Porters Model? Porters Five Forces Model of Competition How to use the Porters model? Table to Calculate the Degree of Power Competitive Rivalry Threat of New Entrants Bargaining Power of Suppliers Bargaining Power of Buyers Threat of Substitute Case Study: Apple Inc. Bibliography Contact at ReportLinker.com 3
  • What is Porters Model? Objectives and Model 4
  • Four main Objectives of Porters Model To assess and manage the To identify what factors shape the character of competition within an industry long-term attractiveness of an industry Four Objectives To explain the relationship between the five dynamic forces that affect an industrys performance To assess the structural attractiveness of the analysed industry 5
  • Model of Competition The power of industry competitors The bargaining power of suppliers Potential Entrants Supplier Power The threat of substitute products Industry Competitors The threat of new entrants Buyer Power The bargaining power of buyers Substitutes source: Porter, Competitive Strategy , 1980 6
  • How to use Porters Model? Guide: Answer the following questions and you will get a detailed and in-depth analysis of the competition and industry 7
  • Calculated Degree of Power Power + - Competitive Rivalry Supplier power Substitute power Buyers power Power of new entrants Guidelines: Fill in the table with crosses by answering the questions from the following sections to measure the degree of power available in the industry. The analysis depends on the number of crosses in each of the boxes. For example: If the competitive rivalry has many crosses in the + box, the power of competitors are low, etc. 8
  • What is the Rivalry among existing Competitors? Competitors How many direct or indirect competitors are there? What are the size of my competitors? How diverse are my competitors? Industry What is the industry growth rate? What are the strategic stakes? Products How different is my product? What are the buyers switching costs? 9
  • What are New Entrants Threats? Production costs Are there any economies of scale? What are the capital requirements? What is the absolute cost advantage? Brand How different is the product? How strong is the brand identity? How high are the switching costs? Distribution Is it easy to access distribution channels? What are the government policies? 10
  • What is the Bargaining power of Suppliers? Substitution What are the switching costs of suppliers and firms in the industry? Is there any presence of substitute inputs? Players What is the suppliers concentration? How high is the concentration of suppliers? Integration What is the suppliers threat of forward integration? What is the buyers threat of backward integration? 11
  • What is the Bargaining Power of Buyers? Buyers type How strong is the difference between buyer concentration vs. firm concentration? What is the buyer volume? What are the buyer switching costs relative to the firms switching costs? Is the buyer capable of backward integration? Information How much information does the buyer have? Are they attracted by substitutes? How much does product differences effect the buyer? Brand awareness How does the buyer judge the brand identity? How high is the impact of quality/performance? 12
  • What is the Threat of Substitute Products? What is the relative price performance of substitutes? What are the prices of my products comparatively? Are the substitute prices stable? (increase or decrease) How high are the switching costs? What are the differences relative to my products? What would the costs incurred be to change my products? What is the buyer propensity to substitute? What are the buyers preferences on the product category? What are the differences regarding my products? (quality, prices) 13
  • Case Study: Apple Inc. Porters Five Forces Model applied to Apple Inc. 14
  • Potential Entrants The Government Marketing and Advertising regulations, Electronic device regulaions and consumer laws Concentration of power in the middle and proximity to the customer Five Forces Model applied to Apple Inc. Threats Suppliers Apple has more power over its suppliers, able to make strong demands P o w e r Industry Apple is strictly focused on design and marketing Threats Substitutes (as far as they exist) Apple is better equipped to compete with horizontal players vs. HP or Sony, not as vertically integrated towards the consumer Source: http://foodandretail.blogspot.com/2007/10/porter-5forces-how-they-work-3.html 15 P o w e r Buyer Vertically orientated towards the customerside, Apple does most of its business in its retail-locations and online stores
  • Case Study: Apple Inc. Ranking of Power and Threats facing Apple Inc. Power + Competitive Rivalry X Supplier power X, X Substitute power X Buyers power X, X Power of new entrants - X 16
  • Bibliography Porter's Five Forces - Problem Solving Techniques , from MindTools.com Porter 5 Forces How they work What is Porters 5 Forces Analysis? , from Papers4You.com Michael Porters website on Harvard Business School: Faculty and Research Company Profile Apple Inc. , from ReportLinker.com 17
  • Contact Do you need more info about this guide? Or about a market you are analysing? www.reportlinker.com + 33 4 37 37 16 37 [email protected] 18
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