THE FIVE COMPETITIVE FORCES THAT SHAPE STRATEGY

Slides:



Advertisements
Similar presentations
SM Winter Industry Rivalry Entrants Substitutes SuppliersBuyers Porter.
Advertisements

COMPETITIVENESS ANALYSIS AN INTRODUCTION. FORCES DRIVING INDUSTRY COMPETITION.
2 External Analysis: The Identification of Industry Opportunities and Threats.
Industry Analysis - Porter's Five Forces
External Analysis: The Identification of Industry Opportunities and Threats Porter, Five Forces and Industry Cycles.
What are the industry’s business and economic traits?
External Analysis: The Identification of Opportunities and Threats
A Framework for Industry Analysis
Environmental analysis
Industry & Competitive Analysis
Lecture 02: Strategic Analysis I: The External Context Niels-Erik Wergin Strategic Management.
COMPETITIVE STRATEGY - Dolly Dhamodiwala.
Michael Porter’s Five Forces Model.
Chapter 2 The External Environment:
EVALUATING A COMPANY’S EXTERNAL ENVIRONMENT
Lecture 2 External Environment Analysis & Globalisation.
Tutorial 5 Five forces and PEST analysis
Industry and Competitive Analysis
Robert E. Hoskisson Michael A. Hitt R. Duane Ireland
External Analysis BUSI 7130/7136 Dr. Shook. What’s an Environment? What’s an Environment? Analyzing the Industry Analyzing the Industry v Five Forces.
Competition. Direct Competitors - Firms likely to gain or lose a substantial share of customers from each other over time because they serve the same.
2 Chapter 2: External Analysis: The Identification of Industry Opportunities and Threats BA 469 Spring Term, 2005 Professor Dowling.
2 External Analysis: The Identification of Industry Opportunities and Threats.
Strategic Management: Concepts and Cases
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Conducting an Industry Analysis. Seven Questions for Industry Analysis 1. What are the industry dominant economic traits? 2. What competitive forces are.
Identifying Competitive Advantages
Yum! Brands, Pizza Hut, and KFC Jeffrey A. Krug
Fall 2000MGTO L1 & L2 (Dr. JT Li)1 Lecture #3: Analyzing the Industry Environment The objectives of industry analysis Porter’s Five Forces Model.
External Analysis: The Identification of Industry Opportunities and Threats Chapter 2.
Define the environment in the context of business Learn the difference between the general environment and the industry Explain how PESTEL analysis is.
External and Internal Analyses General Environment GeneralEnvironmentGeneral Environment Sociocultural Global Technological Political/Legal Demographic.
…………………...  Study the market, coupe with competition (direct and indirect).  New business create pressure on the market either in price, investment.
The Strategy Environment Session 2 Business Strategy.
The Honda Question (via Rumelt)  In 1977 my MBA final exam on Honda motorcycle case asked “Should Honda enter the global automobile business”?  Giveaway.
Chapter 2 --Market Imperfections and Value: Strategy Matters u Wealth creation is impossible in a perfect market u Porter’s five forces can be used to.
1 UNIT 7: STRATEGIC ANALYSIS: INDUSTRY, COMPETITORS, CUSTOMERS.
3. Competitive Forces Model Companies must contend with five competitive forces which you need to analyse (Figure 4-6) : 1Threat of new entrants 2Bargaining.
Chapter 2 --Market Imperfections and Value: Strategy Matters u Conditions necessary for a perfectly competitive product market and resource market: u No.
COM333 – IS3 IS and Competition. A number of techniques exists that support the analysis and assessment of Organisations’ competitive position from an.
Business Strategy and Policy
4-1 The Firm’s External Environment Remote Environment (Global and Domestic) Industry Environment (Global and Domestic) Operating Environment (Global and.
Chapter 2, Part II The External Environment: Opportunities, Threats, Industry Competition and Competitor Analysis Diane M. Sullivan, Ph.D., 2014 Sections.
McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. Evaluating a Company’s External Environment.
3 chapter Student Version EVALUATING A COMPANY’S EXTERNAL ENVIRONMENT McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights.
P ORTERS F IVE F ORCES. I NTRODUCTION Devised by Harvard Professor Michael Porter The five forces analysis is a framework used by strategist’s and consultants.
THE EXTERNAL ENVIRONMENT Chapter 2. The Organization Owners & Directors Managers Employees The Task Environment Gov’t agencies Competitors Unions Suppliers.
STRATEGIC MANAGEMENT II Porter’s five forces module.
The Porter Framework McIntire Investment Institute Presented by Michael Rosete.
Advanced Strategy Nathan Washburn Associate Professor Huntsman School of Business.
1 Industry Analysis  Basic econ conditions determine industry structure SCP model of firm performance Industry structure => firm conduct => Firm performance.
The External Environment: Opportunities, Threats, Industry Competition, and Competitor Analysis 1.
Porter’s Five Forces Model
PORTER’S FIVE FORCES MODEL
EXTERNAL (TASK) ENVIRONMENTAL SCANNING 1
Porter’s Competitive Forces dan Value chain
CHAPTER 2 The External Environment: Opportunities, Threats, Industry Competition, and Competitor Analysis © 2007 Thomson/South-Western. All rights reserved.
The external environment
The Five Competitive Forces… M.E. Porter
Chapter 2, Part II The External Environment:
Strategic Management B O S.
External Environmental Analysis
The external environment
Chapter 2, Part II The External Environment:
STRATEGIC ANALYIS OF BUSINESS
Chapter 2, Part II The External Environment:
Michael Porter’s Five Forces Model.
POWER OF SUPPLIERS IS HIGH WHEN:
Competitive Analysis Most widely used technique for analysing competitors was developed by Michael Porter He believed that when formulating strategy the.
What affects our business from the outside?
Presentation transcript:

THE FIVE COMPETITIVE FORCES THAT SHAPE STRATEGY MICHAEL E PORTER HARVARD BUSINESS SCHOOL

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 C.F KEY C.F SHAPES 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-Eg: 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 Eg;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 (Eg: Microsoft, Antivirus bundled PC)

CHANGES IN INDUSTRY STRUCTURE INDUSTRY DEVELOPMENTS DICTATE CHANGE SHIFTING THREAT OF NEW ENTRY (Eg;PATENT EXPIRY FOR DRUGS) CHANGING SUPPLIER OR BUYER POWER (BIG BAZAR) SHIFTING THREAT OF SUBSTITUTION (Eg: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 EXPNADING 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 “ PLEASSING THE WALL STREET”

THANK YOU SLIDES BY P. RAJU IYER