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Five+Forces 2024-09-04 19 - 01 - 05 2024-09-04 19 - 04 - 28

The document outlines Porter's Five Forces framework for analyzing competitive forces that affect profitability, including the threat of new entrants, supplier power, buyer power, and the threat of substitutes. It emphasizes the importance of understanding industry dynamics and conducting a thorough analysis to anticipate competition and market changes. Additionally, it addresses the concept of marketing myopia, urging businesses to focus on consumer needs rather than just product functions.

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14 views13 pages

Five+Forces 2024-09-04 19 - 01 - 05 2024-09-04 19 - 04 - 28

The document outlines Porter's Five Forces framework for analyzing competitive forces that affect profitability, including the threat of new entrants, supplier power, buyer power, and the threat of substitutes. It emphasizes the importance of understanding industry dynamics and conducting a thorough analysis to anticipate competition and market changes. Additionally, it addresses the concept of marketing myopia, urging businesses to focus on consumer needs rather than just product functions.

Uploaded by

akishgavp
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Porter’s Five

Forces
The Marketing Plan

• 5 Force Analysis
An • 5C Analysis
aly
sis

• Segmentation
Support Str • Targeting
Activities: • Positioning
 Market ate
Intelligence gy
 Customer
Insight • Product
 Data Ex • Promotion
Analytics • Placement
 Performance
ecu • Price
Evaluation tio
n
• Growth
Ou • Revenue
• Profit
tco • Market Share
me
s
Marketing Myopia

• What business are you really in?


– Start with consumer need, not product
function
• Examples?
Marketing Myopia

• Four Myths
1. An ever-expanding and more affluent
population with ensure growth
2. There is no competitive substitute
3. Mass production protects margin
through reduced costs
4. Research and Development will ensure
growth
Competitive Forces

• Rivalry limits profitability


• Intensity of competition based on
– Number of competitors
– Relative size and power of competitors
– No industry leader
– Growth is slow
– Exit barriers are high
– Competitor commitment
– Signals are opaque
Porter’s Five Forces

• Understanding competitive forces


provides a framework for anticipating
competition and profitability
Threat of New Entry

• Caps profitability
– Price and cost pressure
– Increased investment to maintain competitive relevance
• Depends on barriers to entry
– Economies of scale
• Bulk orderings
• Network effects
– Customer switching costs
– Incumbent Advantages
– Capital investments
– Distribution access
– Government policy
Supplier Power

• Caps profitability
– Through increased cost
• Power is based on
– If supplier industry is more concentrated
– Supplier has other revenue streams
– Industry switching costs
– Supplier products are differentiated
– Lack of substitutes
– Credible threat of vertical integration
Buyer Power

• Caps profitability
– Through price pressure
• Power is based on
– Number of buyers
– Products are undifferentiated
– Low switching costs
– Credible threat of vertical integration
Threat of Substitutes

• Caps profitability
– Widens options for buyers and exerts
price pressure
• Threat of substitution is based on
– Relative value of the substitute
– Buyer switching costs are low
Conducting a Five Forces Analysis

1. Define the Industry


– What is in? What is out? Why?
2. Identify and segment participants
3. Assess the drivers of each force and evaluate
the strength of each force
4. Test the analysis
– Does the current situation fit your model?
5. Forecast potential changes and consider
implications
6. Identify which forces your company may be
able to influence
Porter’s Five Forces
• What happens if there is an
increased threat of new entrants?
• What happens if the bargaining
power of suppliers increases?
• What happens if the bargaining
power of customers increases?
• What happens if there are increased
threats of substitutes?

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