UNIT 7 porters 5 forces model Flashcards
what does porters 5 forces provide
simple framework for assessing and analysing competitive strength and position of an organisation
porters 5 forces can be used for good analytical effect with what other models
pest-c
SWOT
Porters 5 forces model provides suggested points under each heaidng which managers cna use develop
a broad analysis of comp position which might be used when creating strat plans or making I descisons about bs
what are the five forces
power of buyers
power of suppliers
threat of new entrants
competitve rivalry
threat of substitutes
if firm faced same comp pressures in all mkts then how would profitability e.g ROCE be
very similar
what can be explained to some extent through the analysis of diff competitive environments
why some industries have hig profits but others have low profits
state the 5 characteristics of high profit industries
mild comp between bs
suppliers w little power
customers having little power
little threat of sub products being developed
no rela prospect of new entrant to industry
state 5 likely characteristics of low profit industries
maybe low prof cuz so many so take up tiny parts of mkt share between them
intense rivalry between bs
very powerful suppliers
customers with considerable power
imminnent threat of develop of sub g/s
highly likelihood of new entrants to mkt
when was it developed
1980s
what does ocmpetitive envio refer to
mareket structure and teh dynamic system in whihc a business competes
what are teh 5 forces
THREAT of new enyrats
bargaining power of buyers
threat of subsitute products or services
bargaining power of suppliers
rivalry among existing compeitiros
entry threat relates to
barriers to entry
ENTRY THREAT - its not just exosting firm in industry that may pose a threat it can alos come from
new entrats to the inustry
ENTRY THREAT - what are the 5 barriers to entry
cost of entry
governemnt barroers
patents
economies of scale
access to suppliers
ENTRY THREAT - give an example of industry eith high cost to enter
aircraft manufacturere
oil company
ENTRY THREAT - government legislation can sometime s inhibit
a new entrant
highly regulated industries will find that incumbents have fine-tuned their business according to regulation
ENTRY THREAT - What do patents give the holder
a competitive advantage whihc may make it more difficult for a new entrant to access a market
as cant copy certain ideas, images
ENTRY THREAT - economeis of scale
if you cant benefit from them or quickly could acts as a barreir to entry
cuz firms have low cop and may ue this to give lower prices to customers
or may be getting higher profit margins meanign can for example reward theri staff or provide more training to make em competitive
ENTRY THREAT - access to suppliers
lack of easy access to suppleirs is a potential barrier
as cant employ tactics such as JIT ? askkkkk
ENTRY THREAT - market is easier to access when what 4 things are apparent
weak brand loyalty
easy access to suppliers
common tech available
low threshold to EOS
WHAT DOES buyer power relate to
impact customers have on a business
when is buyer power likely to be high
fewer customers more numerous the suppliers
to sum up when is buyer power more likely to be powerful
few buuyers and or buys a significant proportion of ouptut
buyers have a credible backward integration threat
to sum up when is buyer power more likey to be weak
many buyers
producers have a credible forward integration threat
singificant switiching costs
long lsit
what type of product would make buyer power strong and why , what may they look fr
how can we compete if got low buyer power and what are hte impacts
how can we get over prolem of low buyer pwoer (5 ways + considerations)
homogenous products as lots of witiching may occur - who can they get better deal from
so you may have to compete on prices whihc reduces rev and profits
or can try offer better quality but higher costs and lower profits at least in the short run
to get over it try differnetiate products and position it differnetly in the mkt - but may lead to cost issues
create a buyer group - clump togehter with otehr bs in your industry so you can make fewer seller
find new customers/ segments which means there are more buyers
increase marekting like promotion and adv
start price war as leads to less seller sin mkt , improving leverage when comes to buyers
any producing bs requires
suppliers
any producing bs requires supplier which necestates
relaitnoships with suppleirs
if supplier are powerful more likely to be able to
exert influence on the producing business
when are suppliers more lieklt to be poweful
business uses single suppleir
credible forward inegration threat by suppliers
customers are powerful ????
high cost to switch suppliers
when are suppliers more lieklt to be poweful
4 reaosns
business uses single suppleir
credible forward inegration threat by suppliers
customers are powerful ????
high cost to switch suppliers
when are suppliers more likely to be weak
many competitive suppliers
credible backward integration threat by purchasers
customers are weak
low cost to switch suppliers
what startegies can we use to get lower supplier power over us
lock in longer contracts with suppliers and guarantee your purchasing wiht tehm - may lead to them negotioating a better deal for you lowering your costs
max EOS drive up output , to bring down ACU, switch from JIT to JIC
offer to merge with them - be forward vertical interation partner which guarantees a poitn of sale for suuppliers
a bs ability to achieve profitability is affected by threat of
substitutes
why is a bs ability to ahcieve profitability affected by threat of substitutes
gives consuemrs ability to choose alternative product
what is a substitute product
one from another industry or bs that offers similar benefits to the one produced by a particular business
give examples of substitutes
bottles provide alt to cans
airlines provide alt to trains
e readers usb fro printed boos
good applicaiton of substiteus
as internete become a thing e books a thing whihc threatens book stores /puts pressure on them to adapt to change
threat of substitiues is simply the questino of
are there alternatives for consumers within your industry can they go to anotehr indsustry to get simliar product
if ive got losts of substitiutes why is that bad
lower your demand whihc may lad ot gfact you need to lower prices
problematic for liquidity
and profit
startegies to lower substitute threat
4
Porter generic stargy - lower prices ot avoid switching - cost leadership
create better brand loyalty - through more mkting
meet customer needs evenbetter than you do - means mkt research
build a moa around customers through something like prime - but unique and hard to do
rivalry is about how much
competition do you have
lots of competiiton is bad as
you may need to reduce prices
impacts on rev and cashflow
what are the 2 startegies to overcome intense rivalry
PGS cost leadership /differentaition
go all tu with marketing to ensure on top of ocmp but ££££
importance of P5F to managers in exising industr
help define strategy - if youc an define it you knwo where to postion yourselves and what youre value proposition is
if defined stargety and ocmm to employees - youre aligned as a bs and working towards same goal
potential bs looking to enter prtclr industry - value of PF5 for managers
look at it to see profitablity of industry and se whther if its even worth entering
in terms of number and sie of firms when is ribarly more likel
