PORTER’S FIVE FORCES MODEL
BYSREEJITH SREENIVASAN
Micheal Eugene Porter
Micheal Porter the Professor in industrial organization economics at Harward School Of Business Developed the Porter five forces analysis framework for analyzing industries
PROFITABLE MARKET YEILDING HIGH RETURN WILL DEFINITELY ATTRACT NEW BUSINESS TO VENTURE IN IT EXCEPT IF THERE IS AN ENTRY BARRIER AND EXIT BARRIER.
EXAMPLE E-COMMERCE SITES. WITH THE NEW ENTRANTS LIKE MYNTRA.COM, SHOPCLUES.COM, PAYTM, REDIFF.COM
POTENTIAL ENTRANTS
Suppliers of raw materials, components, labor, and services (such as expertise) to the Firm can be a source of power over the firm when there are few substitutes.
If you are making biscuits and there is only one person who sells flour, you have no alternative but to buy it from them.
Suppliers may refuse to work with the firm or charge excessively high prices for unique resources.
THREAT FROM THE SUPPLIERS
THREAT OF SUBSTITUTESThe existence of products outside of the
domain of the common product boundaries increases the tendency of customers to switch to alternatives.
EXAMPLE SOAPS HAVE SUBSTITUTES LIKE HANDWASH, LIQUID SOAP, PAPER SOAP, FACE WASH , HAND SANITIZER.
Threat From The Buyers
The ability of customers to put the firm under pressure, which also affects the customer's sensitivity to price changes.
The buyer power is high if the buyer has many alternatives.
They can force down the prices Availability of existing substitute
products. Example :- Smartphone market.
Threat From Competition And RivalryFor most industries the intensity of
competitive rivalry is the major determinant of the competitiveness of the industry.
Huge Advertising Expenses. Competitive Advantage through innovationPowerful competitive strategyExample :- major rivals in soft drink market
are Coco-Cola & Pepsi, Mountain Dew v/s Thums Up , Fanta v/s Mirinda, Slice v/s Maaza.
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