FIVE COMPETITVE FORCES

THAT SHAPE STRATEGY

MICHAEL E. PORTER

SHARMISTHA PAL
SUMEET KUMAR
SUMIT MOURYA
Strategy refers to the plans made and
actions taken to enable an organization
tot fulfill its intended objectives.
FORCES THAT SHAPE COMPETITION
THREAT OF NEW ENTRANTS

 Entry Barriers
- Supply Side Economies of Scale
- Demand Side Benefits of Scale
- Customer Switching Costs
- Capital Requirement
- Incumbency Advantages Independent of Size
- Unequal access to distribution channels
- Restrictive government policy.
BARGAINING POWER OF SUPPLIERS
 Powerful supplier capture more of the value for
themselves.
 Companies depend on a wide range of different supplier
groups for inputs.
 Companies face switching costs in changing suppliers.
 Suppliers offer products that are differentiated.
 Sometimes there is no substitute for what the supplier
group provides.

For E.g. Microsoft

BARGAINING POWER OF BUYERS

 Buyers Choice
 Buyers Size/Number
 Service Importance
Large-volume buyers are particularly powerful
 Buyers also face switching cost in changing vendors
 Buyers sometimes start producing themselves if
vendors are too profitable. (Soft Drinks and Beer)
THREAT OF SUBSTITUTE

 More number of substitutes creates more

competition.

 Substitutes put ceiling on prices.

 Offers an attractive price – performance trade off.

 Substitution can also shift in favor of an industry.

RIVALRY AMONG EXISTING COMPETITORS

 Number of competing firms.

 Companies are similar in size and product offerings.

 High price, low frequency purchases.

 Slow industry growth.

 High rivalry limits the profitability of an industry.

Thank You