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CIS 310 Management Information Systems Competitive Strategy Porter’s 5 Force Model Guthrie, Winter 2013
CIS 310 Management Information Systems
Competitive StrategyPorter’s 5 Force Model
Guthrie, Winter 2013
Competitive Strategy
• Thinking comes from Michael Porter of Harvard
• Late 70’s developed 3 models to help us think about strategy.– 5 Force Model– Value Chain– Generic Strategies
Porter’s 5 Force Model
Industry Rivalry
Threat of New Entrants
Threat of Substitute Products
Bargaining Power of Suppliers
Bargaining Power of
Buyers
Government Regulation
Entry Barriers• Creating a barrier to entry to would be
competitors.• Southern California Edison– Utility, captive market– To open an electric company would require a massive
infrastructure• Bar– Liquor license is a cost that might prohibit entrants
• Online mega-store like Amazon– New entrants cannot compete with branding,
infrastructure and supply chain
Switching Costs
• Switching Cost – The cost of a customer to switch to another product or service.
• Used to reduce the threat of new entrants and substitute products.
• Increasing Switching Costs– Deals for Staying with You (loyalty programs)– Memberships– Contracts
Many Strategies to Compete• Business Fundas - http://business-
fundas.com/2011/michael-porters-5-forces-model/
5 Force Model and Cell Phones
Industry Rivalry
Threat of New Entrants
Threat of Substitute Products
Bargaining Power of Suppliers
Bargaining Power of
Buyers
Self Help Apps on Phones
Industry Rivalry
Threat of New Entrants
Threat of Substitute Products
Bargaining Power of Suppliers
Bargaining Power of
Buyers
CIS 310 Management Information Systems
Competitive Strategy IIThe Value Chain
Guthrie, Winter 2013
The Value Chain Model
Graphic from Docstock.com
Enterprise Resources Planning
Supply Chain Management
Customer Relationship Management
CIS 310 Management Information Systems
Competitive Strategy IIIGeneric Strategies
Guthrie, Winter 2013
Porter’s Generic Strategies
• Three Generic Strategies– Differentiation: Making your products different
from your competitors– Focus: Also niching. Appealing to a narrow market – Cost: Pricing yourself to appeal to a specific
market
Generic Strategies
Samsung Galaxy Walmart
Big 5 REI
Strategies and Forces
