PORTER'S FIVE FORCES
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CONTENTS
01 Threat of New Entrants
Discover how the threat of new
entrants impacts industry
02 Bargaining Power of
Suppliers
Unveil the significance of supplier power
profitability and how businesses and discover strategies to manage
relationships with suppliers effectively,
can create barriers to entry. negotiate favorable terms, and reduce
dependence.
03 Bargaining Power of
Buyers
Explore the factors that influence the
04 Threat of Substitute
Products or Services
Identify potential substitutes that pose a
threat to your business and learn how to
bargaining power of buyers and learn develop strategies to differentiate your
strategies to maintain strong customer offerings, increase customer loyalty, and
relationships and build customer loyalty. protect market share.
05 Intensity of Competitive
Rivalry
Dive into the factors that contribute to
intense competitive rivalry within an
industry. Explore strategies to navigate
competition, gain a competitive
advantage, and thrive in a crowded
market.
PORTER'S FIVE FORCES
DEFINITION
It is a method of analysing the operating
environment of a competition of a business.
It draws from industrial organization
economics to derive five forces that
determine the competitive intensity and,
therefore, the attractiveness of an industry in
terms of its profitability.
It is a model that identifies and analyzes
five competitiveforces that shape every
industry and helps determine an
industry's weaknesses and strengths.
Five Forces analysis is frequently used
to identify an industry's structure to
determine corporate strategy.
PORTER'S FIVE FORCES
MICHAEL E. PORTER
Porter's Five Forces of
Competitive Position Analysis
were developed in 1979 by
Michael E Porter of Harvard
Business School as a simple
framework for assessing and
evaluating the competitive
strength and position of a
business organisation.
IMPORTANCE THE USE OF FIVE FORCES
Porter's five forces help to identify where power lies in a This framework helps strategists understand what
business situation. This is useful both in understanding the makes an industry profitable and provides insights
strength of an organisation's current competitive position, needed to make strategic choices.
and the strength of a position that an organisation may look
to move into.
PORTER'S FIVE FORCES
67
EMPLOYEES
10
OFFICES
67 67
EMPLOYEES EMPLOYEES
01
Bargaining Power of Buyers
• This indicates the pressure that customers exert on the business
organisations to get high quality products at affordable prices with
excellent customer service.
• The bargaining power of buyers are high in the food and beverage industry
mainly because there is intense competition in the sector. The concentration
of buyers is low since food and beverage companies do not depend on a
few key buyers; instead, they sell to a large number of customers.
• The buyers have high bargaining power in a place where there are many
fast-food joints, as they can choose any one of them. For example, if the
queue is too long at one outlet, the buyer can probably go to another outlet
just across the road.
• Bargaining Profit of Buyers are important because the presence of powerful
buyers reduces the profit potential in a given industry. Buyers increase
competition within an industry by forcing down prices, bargaining for
improved quality or more services, and playing competitors against one
another. The result of this is diminished industry profitability.
02
BARGAINING POWER OF SUPPLIERSc
• Number andsize of suppliers
• Uniqueness of each suppliers product
• Focal company's ability to substitute
03 THREAT OF NEW ENTRANTS
•
•
•
•
Barriers to entry
Economies of scale
Brand loyalty
Capital requirements
• Cumulative experience
• Government policies
• Access to distribution channels
• Switching costs
04
THREAT OF SUBSTITUTE PRODUCT
• Is the availability of other product that a customer could purchase
from Out an industry
• Number of substitute product
• Buyer propensity to substitute
• Relative price of substitute
• Perceived level of product
• Switching cost
05
RIVALRY OF EXISTING COMPETETORS
It is a measure of the extent of competition among existing
firms. Intense rivalry can limit profits and lead to competitive
moves including price cutting, increased advertising
expenditures, or spending on service/product improvements
and innovation.We
THANKS FOR WATCHING
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