the five competitive forces that shape strategy
DESCRIPTION
the five competing forces that shape strategyTRANSCRIPT
THE
FIVE
COMPETI
TIVE
FORCES T
HAT S
HAPE
STRAT
EGY
PREPARED BY:
MITESH AGARWAL C002SUSHANT AGRAWAL C005ABHAY ARYA C008MAHESH BVS C017APOORV JAIN C031PARAS MEHTA C040DEEPANSHU RUSTAGI C044
PORTER’S FIVE FORCES
JOB OF A STRATEGIST
• UNDERSTAND AND COPE WITH COMPETITION• NOT ONLY DIRECT COMPETITION• DRIVERS OF PROFITABILITY SAME ACROSS INDUSTRIES• INTENSE FORCES - DRIVE DOWN PROFITABILITY• BENIGN FORCES - DRIVE UP• INDUSTRY STRUCTURE DECIDES THE FORCES
SHAPING STRATEGY
THE FIVE COMPETITIVE FORCES• POTENTIAL ENTRANTS• SUPPLIERS• CUSTOMERS• SUBSTITUTE PRODUCTS• EXISTING COMPETITION
DEFENDING & SHAPING THE COMPETITIVE FORCES
KEY COMPETITIVE FORCES SHAPE STRATEGY FORMULATION
POTENTIAL ENTRANTS –THREAT OF ENTRY
NEW ENTRANTS• ADD ADDITIONAL CAPACITY
• PUT A CAP ON PROFIT BY DRIVING DOWN PRICES
BARRIERS TO ENTRY
• SUPPLY SIDE (INTEL)• DEMAND SIDE (IBM, e-BAY)• CUSTOMER SWITHCING COSTS (SAP)• CAPITAL REQUIREMENTS• INCUMBANCY ADVANTAGES INDEPENDENT OF SIZE• UNEQUAL ACCESS TO DISTRBN CHANNELS-E.g. LOW COST
AIRLINES• RESTRICTIVE GOVT. POLICY• EXPECTED RETALIATION (Retail Associations in India)
POWER OF SUPPLIERS
• MORE POWERFUL CAPTURE MORE VALUE (MICROSOFT)
• SUPPLIER DEPENDENCY (BLOOMBERG)
• DIFFERENTIATED PRODUCTS
• HIGH CUSTOMER SWITCHING COSTS
POWER OF BUYERS
• FEW BUYERS HIGH VOLUMES E.g. BSNL
• STANDARDISED PRODUCTS
• LOW/MINIMUM SWITHCING COSTS
• POSSIBILITY OF BACKWARD INTERGARTION BY CUSTOMERS
THREATS OF SUBSTITUTES
• ALTERNATE CHEAPER PRODUCTS/ SERVICES
• ATTRACTIVE PRICE PERFORMANCE TRADE OFF
• SWITHCING COSTS TO NEW SUBSTITUTE LOW
RIVALRY AMONG EXISTING COMPETITORS
• NUMEROUS COMPETITORS OF EQUIVALENT SIZE
• SLOW GROWTH RATE
• HIGH EXIT BARRIERS
• HIGHLY COMMITTED RIVALS
• HIGH PRICE COMPETITION
VISIBLE INDUSTRY ATTRIBUTES
• INDUSTRY GROWTH RATE
• TECHNOLOGY AND INNOVATION
• GOVERNMENT
• COMPLEMENTARY PRODUCTS AND SERVICES (E.g. Microsoft, Antivirus bundled PC)
CHANGES IN INDUSTRY STRUCTURE
• INDUSTRY DEVELOPMENTS DICTATE CHANGE
• SHIFTING THREAT OF NEW ENTRY (E.g. PATENT EXPIRY FOR DRUGS)
• CHANGING SUPPLIER OR BUYER POWER (BIG BAZAR)
• SHIFTING THREAT OF SUBSTITUTION (E.g. PENDRIVE)
• NEW BASES OF RIVALRY
IMPLICATIONS FOR STRATEGY
• FIVE FORCES REVEAL MOST SIGNIFICANT OF THE INDUSTRY ASPECTS
• SWOT ANALYSIS
• SHAPING THE FORCES
• POSITIONING THE COMPANY
• EXPLOITING INDUSTRY CHANGE (Apple i-tunes)
• SHAPING INDUSTRY STRUCTURE• REDIVIDING PROFITABILITY• EXPANDING PROFIT POOL
DEFINING INDUSTRY
• SCOPE OF PRODUCTS/ SERVICES
• GEOGRAPHICAL SCOPE
TYPICAL STEPS IN INDUSTRY ANALYSIS
• DEFINE THE RELEVANT INDUSTRY
• IDENTIFY PARTICIPANTS
• ASSESS DRIVERS OF COMPETITIVE FORCES
• DETERMINE OVERALL INDUSTRY STRUCTURE
• TEST ANALYSIS FOR CONSISTENCY
TYPICAL STEPS IN INDUSTRY ANALYSIS (CONTD..)
ANALYSE RECENT AND LIKELY FUTURE CHANGES• POSITIVE / NEGATIVE
INDUSTRY ASPECTS INFLUENCED BY OTHER FORCES
COMMON PITFALLS
COMPETITION AND VALUE
• UNCOVERING OPPORTUNITIES
• THINKING STRUCTURALLY ABOUT COMPETITION
• ATTRACTION TO THE INDUSTRY
• CREATE TRUE ECONOMIC VALUE THAN “ PLEASING THE WALL STREET”
THANK YO
U