Porter’s Five Force model

Members

• Eshaan Desai – 11BSP1999• Ankita Jhawar – 11BSP1413• Garima Joshi – 11BSP1415

• Himanshu Dhoot – 11BSP0282• Sujeet Dev – 11BSP1673• Nalini Singh – 11BSP0581• Rishiraj Bhatia – 11BSP

• M.S.Srivamsee – 11BSP0540

Overview

• Introduction• Bargaining Power of suppliers• Bargaining Power of Buyers• Industry Competition / Rivalry• Threat of Substitute Products/Services• Threats from new Entrants• Five Force in Retail• Blue Ocean vs Five Force model• Conclusion

Introduction

• Entering a market / Being the Best Brand• Understand your competitors• Apart from that analyze other factors as well

Five Competitive Forces

Importance of 5 Force model

• Powerful Tool• Current Position of business• Understand if new products Profitable

Other New Forces

• Organization Re-invention• Customer Expectation• Information Technology

Bargaining Power of Supplier

• Supplier concentration – Less Or More• Imp of volume to supplier• Uniqueness of inputs• Cost differentiation• Switching costs - High or Low• Presence of substitutes inputs• Threat of forward integration• Cost relative to total purchase in industry

Examples

• Personal Computer - Windows• Diamonds – DeBeers

• Airline – Boeing & Airbus

• Food processing companies – Farmers

• Also talk about Arvind mills – Levis

Video of Bourneville Ad

BARGAINING POWER OF BUYERS

• Definition• Few Buyers and Large Volume• Products - standardized and undifferentiated• Low switching cost• Backward Integration• Price Sensitivity

Examples

• Defense Equipment manufactures – Govt• Many successful fast-food chains and

supermarkets own farms• Wal-Mart – Manufactures• Retailers - Individual consumers

Video of Exo dish wash bar

INTERNAL RIVALRY

• What do we mean by Intensity of Rivalry?

• High Intensity of competitive rivalry = Decrease in profit potential of the existing firms.

• Low Intensity of competitive rivalry = Increase in profit Potential of the existing firms.

INTENSITY OF RIVALRY

Video of Apple Vs Blackberry

Threat of Substitution

• Definition• Product other than the industry product• Substitute source• Full substitute• Partial substitute

Examples

• Washing Powder • Liquid Soaps• Supermarkets• Petroleum• Pharmaceuticals

• Video Of Listerine (New)

ELIMINATION OF THREAT OF SUBSTITUTION

• Perceptual Mapping• Pricing strategy• Environmental • Customer Satisfaction

Threats of New Entrants

• The easier it is for new companies to enter the industry, the more cutthroat competition there will be. Factors that can limit the threat of new entrants are:

– Existing loyalty to major brands – Incentives for using a particular buyer – High fixed costs – Scarcity of resources – High costs of switching companies– Government restrictions or legislation

Examples

• Automobile Industry• Steel and mining • Airline Industry• Oil & Gas• Computer services• Hotels & Resturants

Video Of Big cola

Complementors

• Complementors is a term used to describe businesses that directly sell a product (or products) or service (or services) that complement the product or service of another company by adding value to mutual customers

• Intel and Microsoft (Pentium processors and Windows), or Microsoft and McAfee (Microsoft Windows & McAfee anti-virus)

Blue Ocean Strategy

• Creating products and services for which there are no direct competitors.

• Instead of searching within the conventional boundaries of industry, look beyond to find unoccupied market position which represents innovation

• Designing creative business venture to positively affect both a company’s cost structure and its value proposition to consumers.Cost saving results from eliminating and reducing

factors affecting traditional industry competition• Over the time cost drop as superior value

leads to higher sales volume leading to generate economies of scale

Comparision

Five Forces Blue Ocean1. Try to Dominate Existing market

1. Look for opportunities and search New markets

2. Use Competitive Strategy Eg: Cost of Product or Quality

2. Uses Innovative Strategy Eg: Change in Technology

3. Focus on Short run with profits covered quickly

3. Focus on Long run

Conclusion

• All this indicates that the business may want to use a blend of two approaches

• Eg: By Slowing down Profit erosion with an effective competitive Strategy for an existing market.

• Increase in funds for blue ocean investment will lead to finding of untapped markets with many costumers