CIS 310 Management Information Systems Competitive Strategy Porter’s 5 Force Model Guthrie, Winter 2013

Competitive Strategy Thinking comes from Michael Porter of Harvard Late 70’s developed 3 models to help us think about strategy. – 5 Force Model – Value Chain – Generic Strategies

Porter’s 5 Force Model Industry Rivalry Threat of New Entrants Threat of Substitute Products Bargaining Power of Suppliers Bargaining Power of Buyers Government Regulation

Entry Barriers Creating a barrier to entry to would be competitors. Southern California Edison – Utility, captive market – To open an electric company would require a massive infrastructure Bar – Liquor license is a cost that might prohibit entrants Online mega-store like Amazon – New entrants cannot compete with branding, infrastructure and supply chain

Switching Costs Switching Cost – The cost of a customer to switch to another product or service. Used to reduce the threat of new entrants and substitute products. Increasing Switching Costs – Deals for Staying with You (loyalty programs) – Memberships – Contracts

Many Strategies to Compete Business Fundas - fundas.com/2011/michael-porters-5-forces- model/

5 Force Model and Cell Phones Industry Rivalry Threat of New Entrants Threat of Substitute Products Bargaining Power of Suppliers Bargaining Power of Buyers

Self Help Apps on Phones Industry Rivalry Threat of New Entrants Threat of Substitute Products Bargaining Power of Suppliers Bargaining Power of Buyers

CIS 310 Management Information Systems Competitive Strategy II The Value Chain Guthrie, Winter 2013

The Value Chain Model Graphic from Docstock.com Enterprise Resources Planning Supply Chain Management Customer Relationship Management

CIS 310 Management Information Systems Competitive Strategy III Generic Strategies Guthrie, Winter 2013

Porter’s Generic Strategies Three Generic Strategies – Differentiation: Making your products different from your competitors – Focus: Also niching. Appealing to a narrow market – Cost: Pricing yourself to appeal to a specific market

Generic Strategies Samsung Galaxy Walmart Big 5REI

Strategies and Forces