1. Finishing Porter’s 5 Forces and Impact of External Influences

2. To determine how a firm might cope with its competitors: apply…
PORTERS 5 FORCES

3. Michael Porter’s Five Forces Model
High industry profits
Low industry profits
Weak suppliers
Weak customers
High entry barriers
Few opportunities for substitutes
Little rivalry
Strong suppliers
Strong customers
Low entry barriers
Many opportunities for substitutes
Intense rivalry

4. On iPads have a go at the quiz:

5. Key Points: Porter’s 5 forces
Remember – Porter wrote about Firms that Achieve & Sustain a Competitive Advantage – establishing a strength rival’s struggled to copy
5 Forces can be used to shape the Firm’s Competitive Strategy
Criticism:
The 5 forces are static / point in time snapshots that ignore trends in market size: requires frequent updates
5 forces about reacting to pressures – in reality innovation and creative choices (creating new markets) are important – although Porter might argue Threat of Substitutes covers this
A Sixth Force? Yale Professors Brandenbuger/Nalebuff created the idea of a sixth force, "complementors“
Complementors sell products and services that are best used in conjunction with a product or service from a competitor. Intel, which manufactures processors, and computer manufacturer Apple could be considered complementors in this model. 

6. Impact of External Influences
PESTLE Analysis
Political, Economic, Social, Technological, Legal, Environmental Factors
In pairs Rank these in order of importance to Business

7. Ranking Exercise
Economic – high linkage between Gross Domestic Product changes and Business Cycle (Key factors: Unemployment, Inflation, Exchange Rate)
Legal factors: Employment law, minimum wage, Health and Safety standards, banning of dangerous goods, regulation of alcohol, tobacco sales etc.
Technological factors – yes social media, online shopping important but not as revolutionary as use of Electricity, Trains, Cars
Social – Trends low fat food, films, clothes etc. can dramatically affect Business, as does divorce rate, average size of family, migration
Environmental factors – short term environmental laws can effect the economic cycle; long term vital: life expectancy improved from 40 to 80 between 1850 and 2016 due to lower pollution.
Political factors: rarely a huge influence on business success or failure BUT local issues can be significant ie Hinkley Point, Fracking, London Airport expansion.

8. When and Why do we use PESTLE Analysis?
Environmental Checklist
Comparable to the “Opportunities / Threats” of SWOT
Scenario analysis for a firm’s management to ask “What if….”
Brexit for example will raise challenges for Firms – Working in Pairs/Threes consider a PESTLE analysis for TESCO

9. GDP and the Business Cycle

10. (If time activity) How do businesses respond to changes in the competitive environment?
What are the different strategies that firms have adopted above in response to changing environments?
Which one do you think is the best?
Can you evaluate any of the strategies – what is the issue with them?