MAIN OBJECTIVES OF PORTER’S MODEL

To assess the structural

To identify what factors attractiveness of the
shape the characters of analyzed industry
competition within an
industry

To assess and manage the long-

term attractiveness of an
industry
To explain the relationship
between the five dynamic
forces that affect an
industry’s performance
 LIMITATIONS OF PORTER’S MODEL

IT digitization Globalization

Unstable economic conditions or Porter’s model doesn’t clearly touch Customer

needs upon these forces expectations

Government laws and Organizational

environmental conditions reinvention
 NAVIGATING THE MODEL DEVELOPMENT
BEFORE
Understand the goals of the analysis
and expectations from it.
Understand the scope of the analysis
and who are the potential
beneficiaries.
Allow open and honest
brainstorming session regarding
these questions.
DURING
Keep a focus on the future
Do not focus on what could’ve been done
better in the past, but focus on future
improvements
Analyze positives and negatives
Be open to new ideas and possibilities
AFTER
Identify Lessons learnt and how the can
be used in the future
Document positives and negatives,
Identify best practices
Understand whether the analysis had the
required impact
Follow up on implementation plans
Record analysis to be used in future
decisions
 PORTER’S FIVE FORCES ANALYSIS

THREAT OF NEW ENTRANTS THREAT OF SUBSTITUTES

Time and cost of entry - - Substitute Performance

Specialist knowledge - - Cost of change

Economies of scale - - Buyer propensity to substitute

Cost advantages - - Relative price performance

COMPETITIVE
RIVALRY

BARGAINING POWER OF BUYER BARGAINING POWER OF SUPPLIERS

Number of customers - - Number of suppliers

Size of each order - - Size of suppliers

Diff. between competitors - - Uniqueness of service

Price Sensitivity - - Your ability to substitute

- Number of competitors - Switching Costs

- Quality Differences - Customer Loyalty

 PORTER’S FIVE FORCES ANALYSIS

THREAT OF NEW ENTRANTS THREAT OF SUBSTITUTES

Time and cost of entry - - Substitute Performance

Specialist knowledge - - Cost of change

Economies of scale - - Buyer propensity to substitute

Cost advantages - - Relative price performance

COMPETITIVE RIVALRY

Time and cost of entry

Specialist knowledge

Economies of scale
BARGAINING POWER OF BUYER BARGAINING POWER OF SUPPLIERS
Cost advantage
Number of customers - - Number of suppliers

Size of each order - - Size of suppliers

Diff. between competitors - - Uniqueness of service

Price Sensitivity - - Your ability to substitute


Threat of new
entrants
Profitable industries that yield
high returns will attract new
firms. New entrants eventually
will decrease profitability for
other firms in the industry
PORTER’S FIVE FORCES
Threat of Bargaining power of
substitutes customers
A substitute product uses a The market outputs. The ability
different technology to try to of customers to put the firm under
solve the same economic need. pressure, which also affects the
customer’s sensitivity to price
changes.
Bargaining power of
suppliers
The market inputs, Supplier of
raw materials, components,
labor, and services to the firm
can be a source of power over
the firm when there are few
substitutes
Competitive
rivalry
For most industries, the
intensity of competitive
rivalry is the major
determinant of overall
competitiveness of the
industry in question.
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