STRATEGIC MANAGEMENT REVISIONCHAPTER-4

STRATEGIC MANAGEMENT REVISIONCHAPTER-4

STRATEGIC MANAGEMENT REVISIONCHAPTER-5

COMPETITION ANALYSIS

5ForcesModel

MichaelPorter

Forces Process(Steps)

i)Rivalryamong�irm

ii)ThreatofNewentrant

iii)ThreatofSubstituteProduct

iv)BargainingPowerofSupplier

v)BargainingPowerofBuyer

Step1:IdentifyPressuresassociatedwitheachforce

Step2:EvaluatehourStrongthepressurecomprisingeachof�iveforcesare

Step3:Determinewhetherthecollectivestrengthofthe�ivecompetitiveforcesisconductivetoearningattractivepro�its

3Steps

STRATEGIC MANAGEMENT REVISIONCHAPTER-5

RivalryTendstobecutthroatandpro�itabilitylowwhen:

i)NowClearleaderii)Competitorsinindustryarenumerousiii)Competitorsoperatewithhigh�ixedcostiv)Highexitbemeansv)LittleOpp.todifferentiateofferingsvi)Industryfacesslowgrowth

RIVATRY AMONG FIRM

q

Threat of New Entrants

PowerfulsourceofcompetitionMayreducepro�itabilityPressuresintermsof:

uProductrange uLowPrice uBigSize�irm uBrandImage

CapitalRequirement

Larger Capital Requirement

Threat of Substitute Product

Pressures:

*AdvanceTechnology*Price*UsefulLife*Availability*Easeofuse

q

Bargaining Power of Buyers

In�luencePrice&Qualityq

q

FactorsIn�luencing

•CartelFormedbyBuyer•BigBuyers•KnowledgeofSubstitutes•NumberofBuyers•UndifferentiatedProducts

Bargaining Power of Suppliers

q

FactorsIn�luencing:

•VolumeofPurchase•No.ofSuppliers•Availabilityofresource•UnavailabilityofSubstitutes•HighSwitchingCosts

EconomiesofScale

• Reduced per-unit cost• High volm at lower cost

ProductDifferentiation

Physical or perceptual difference in eye of cust.

SwitchingCost

High Cost

"Brand Identity of product"Infrequent"Vantly Purchased Product

BrandIdentity

Accesstodistributionchannel

Unavailability of distribution

ChanneltoNewEntrant

Aggressive retaliation : Through pricing, advertising etc.

STRATEGIC MANAGEMENT REVISIONCHAPTER-5

COMPETITIVE STRATEGY