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INDIAN BUSINESS
ENVIRONMENTPresented by : Sajith kumar.k
3rd
sem MBAPIMS
Munnad
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MICHAEL PORTERS FIVE FORCE MODEL
TOPIC :
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INTRODUCTION
American Michael Porter was born in 1947
Michael Porter's innovative research in the 1980'schanged
managers' perceptions of their own industry'simportance as a factor
for their company's strategy.
Porter focused on private policy rather than on publicpolicy,
that is, how to maximize profits.
Business unit managers would now have to study theirindustry's
characteristics since an industry's structuredetermines its
relative economic attractiveness
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How Competitive Forces Shape Strategy first Harvard Business
Review article and it started a revolution in the strategy
field
It is a framework for the industry analysis and business
strategydevelopment
Industry as being influenced by five forces
Forces determine the competitive intensity and therefore
attractiveness ofa market (Attractiveness in this context refers to
the overall industry
profitability)
The strategic business manager seeking to develop an edge over
rival firms
can use this model to better understand the industry context in
which the
firm operates
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PORTER'S FIVE FORCES
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1. Entry of competitorsassessing the ability of new entrants to
start operations
and the structural barriers they must overcome
Government policy
Patents and proprietary knowledge serve to restrict entry
into
an industry
Asset specificity inhibits entry into an industry
Access to distribution channels
Access to distribution inputs
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2. Threat of substitutes
assessing the ability of new products with
superiorcharacteristics to replace existing product(s) or
service(s);
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3. Bargaining power of buyers
assessing the relative strength and number of buyers;*
Buyer Volume
Buyer information
Brand identity
Price sensitivity
Product differentiation
Substitutes available
Buyers incentives
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4. Bargaining power of suppliers
assessing the relative strength and number of sellers;*
Supplier concentration
Importance of volume to supplier
Differentiation of inputs
Switching costs of firms in the industry
Threat of forward integration
Impact of inputs on cost or differentiation
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5. Rivalry among the existing players
assessing the relative competitive strength of rival firms.
Exit barriers
Industry concentration
Fixed Costs
Industry Growth
Product differences
Brand Identity
Diversity of rivals
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Porter is also particularly recognised for his
competitive'diamond' model, used for assessing relative competitive
strength
of nations, and by implication their industries:
Factor Conditions:
production factors required for a given industry,
eg., skilled labour, logistics and infrastructure.
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Demand Conditions:
extent and nature of demand within the nation concerned
for the product or service.
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Related Industries:
the existence, extent and international competitive strength
of
other industries in the nation concerned that support or
assist
the industry in question.
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Corporate Strategy, Structure and Rivalry:
the conditions in the home market that affect how
corporations are created, managed and grown; the idea being
that firms that have to fight hard in their home market are
more likely to be able to succeed in international markets
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CONCLUSION
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THANK YOU..
