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Porter'S Five Forces: A Simple Overview M. Akbar Bhatti
Porter'S Five Forces: A Simple Overview M. Akbar Bhatti
A SIMPLE OVERVIEW
M. AKBAR BHATTI
2 OUTLINE
• Definition
• Pillars
• Process
• Advantages
• Disadvantages
• Example
• Conclusion
• Lesson learned
3 MICHAEL PORTER
Bargaining power of suppliers: To what extent are suppliers able to influence the
company’s profit margins?
Strong bargaining power allows suppliers to sell higher priced or low quality
raw materials to their buyers.
This directly affects the buying firms’ profits because it has to pay more for
materials.
9 PILLARS
Bargaining power of buyers: Are buyers able to enforce special terms on the company?
Buyers have the power to demand lower price or higher product quality from industry
producers.
Lower price means lower revenues for the producer, while higher quality products
usually raise production costs.
Both scenarios result in lower profits for producers.
10 PILLARS
• Useful tool in the analysis of the external forces, especially in terms of competition.
• Helps organizations identifying opportunities in the external environment in order to exploit
them.
• Helps organizations predicting external imposed threats in order to absorb them and prepare
themselves to be proactive and to have a fast response.
• Provides important information to shape organization’s strategy. (Free- Management-
eBooks, 2018)
14 DISADVANTAGES
• Today, the competition becomes between ecosystems rather than companies. The
suppliers, retailers, producers, and service providers are working together as one
strong unit to compete with other ecosystems and guarantee their market share.
• Industries have no clear boundaries. They are interrelated and wider, that’s why
beside applying the Porter’s Five Forces Model, we need to introduce new forces
and take into consideration the new identity of companies in a global market.
24 THE END