PORTER’S FIVE

FORCES
12 HUMSS FLUORITE
GROUP 1
TNCT
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INTRODUCTION:
Michael Porter, a professor at Harvard
Business School, developed the Five Forces
Model, which was initially released in 1979.
Since then, firms have used the model to learn
more about the primary competitive forces
influencing their industry, making it one of the
most widely used corporate strategy tools.

The concept pushes businesses to

evaluate strategy by taking into account external
factors rather than just their direct rivals.
Organizations can improve and increase their
competitive position in the market by identifying
areas for improvement, redefining their strategy,
and making better decisions based on a
knowledge of these forces.

MICHAEL PORTER
According to Porter, there are five forces that represent the key sources of
competitive pressure within an industry They are:

Competitive Supplier Buyer Threat of Threat of

Rivalry Power Power Substitution New Entry
 Porter’s Five Forces’ first
factor examines the quantity and
quality of your rivals

Competitive Examples:
Pepsi and Coca-Cola for soft
Rivalry drinks, Apple and Samsung for
smartphones, Nike and Adidas
for sneakers, and Ford and
General Motors for autos.

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 If suppliers can simply raise
their prices or lower the quality of
their goods, they will gain leverage.

Example:
Assume for the moment that
manufacturing electronic devices
Supplier Power were your company’s idea. For a
variety of specialty components, you
would need to evaluate your supply
possibilities. One supplier may raise
prices without fear of competition if
they control the majority of the
components market. This could have
an impact on your product's viability.
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 A phenomenon known as "buyer
power" occurs when there are fewer
buyers than suppliers in an industry. This
implies that it may be simple for them to
move to new, less expensive competitors,
which ultimately drives down costs.

Example:

Buyer Power One important factor in food retail is

buyer power. Consider big-box stores that
compete fiercely in a crowded market.
The entry of low-cost, straightforward
food discounters has significantly altered
this sector. Here, consumers have a lot of
purchasing power. Supermarkets use
aggressive pricing, loyalty programs, and
couponing to get the biggest possible
portion of customers.
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 This speaks to the possibility
that your clients will figure out
how to accomplish what you do
with a different method. It might
be better, more affordable, or
Threat of both.
Substitution Example:
The smartphone industry faces
substitutes like tablets and
wearable devices

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 The danger that a new rival
brings to current businesses in a market.
The ability of possible
competitors to enter your market may
have an impact on your position.

Example:
Threat of New Problem: When new competitors enter
into an industry offering the same
Entry products or services, a business's
competitive position will be at risk.
Solution: A business that is facing it may
decide to patent its technology, bring
down costs to sell its product at a more
competitive price, or find ways to
differentiate its offerings by advertising
its unique features and benefits.
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You can learn a lot about the market
you're in or are thinking about entering
by using Porter's Five Forces. This can
assist you in formulating a winning plan.
Porter's Five Forces model can assist Conclusion
you in determining an industry's PORTER’S FIVE
attractiveness, assessing investment FORCES
opportunities, and determining the level
of competition in your market.
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How to use Porter’s Five (5) Forces Model:

STEP 1 STEP 2 STEP 3

• When applying the • Next, list the forces • When a force is highly on
approach, begin by influencing your industry your side, use "++"; when
examining each of the five and use your diagram to it's strongly against, use "--".
forces separately and visually represent their You can use "o." for a
considering how your relative sizes and scales. neutral force
industry is affected by them. Using a single “+” symbol to
indicate a force that is
somewhat in your favor or a
“-” sign to indicate a force
that is somewhat against you
is a simple approach to
accomplish this.

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How to use Porter’s Five (5) Forces Model:

STEP 4 STEP 5

• Finally, consider the • On top of that, the model

probable consequences of might assist you in
your analysis for yourself. considering how to transition
There are hardly any ideal from a structurally weak
circumstances. However, position to a stronger one if
applying Porter’s Five you find yourself in one.
Forces to your industry
analysis might assist you in
considering potential
changes that could boost
your profitability and
competitiveness.

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Porter’s Five Forces Illustration Example:
 THANK YOU!!!
12 HUMSS Fluorite
Group 1
References Links: TNCT
Porter's Five Forces - The Framework Explained - A G
uide to Analyzing Competitiveness Using Michael Port
er's Strategic Model (mindtools.com)
Porter's Five Forces Explained and How to Use the Mo
del (investopedia.com)
https://www.dreamendstate.com/2021/01/08/porters-5-
forces-who-has-the-upper-hand-and-why/
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