PREPARED BY: MITESH AGARWAL SUSHANT AGRAWAL ABHAY ARYA MAHESH BVS APOORV JAIN PARAS MEHTA DEEPANSHU

RUSTAGI C002 C005 C008 C017 C031 C040 C044

PORTERS FIVE FORCES

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 COMPETITIVE FORCES KEY COMPETITIVE FORCES SHAPE 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-E.g. 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 E.g. 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 (E.g. Microsoft, Antivirus bundled PC)

CHANGES IN INDUSTRY STRUCTURE

INDUSTRY DEVELOPMENTS DICTATE CHANGE SHIFTING THREAT OF NEW ENTRY (E.g. PATENT EXPIRY FOR DRUGS) CHANGING SUPPLIER OR BUYER POWER (BIG BAZAR) SHIFTING THREAT OF SUBSTITUTION (E.g. 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 EXPANDING 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 PLEASING THE WALL STREET