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    Assignment# 1 Porter's Five-Force Model: Sheraz Hassan Mba 1.5 2nd Roll No F-016 - 019 Subject Strategic Management

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    Faisal Awan
    1. Porter's Five Forces model identifies five competitive forces that shape every industry: the threat of new entrants, the power of suppliers and buyers, the threat of substitutes, and rivalry among existing competitors. This allows analysis of an industry's structure to guide corporate strategy. 2. The five forces are: the rivalry among existing competitors in an industry, the threat of new entrants, the power of suppliers, the power of buyers, and the threat of substitute products. Understanding how these forces affect an industry allows companies to improve their profitability. 3. Porter's Five Forces model can be used to analyze any market and guide business strategy by considering barriers to entry, supplier and buyer power, the threat of

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    Assignment# 1 Porter's Five-Force Model: Sheraz Hassan Mba 1.5 2nd Roll No F-016 - 019 Subject Strategic Management

    Uploaded by

    Faisal Awan
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    1. Porter's Five Forces model identifies five competitive forces that shape every industry: the threat of new entrants, the power of suppliers and buyers, the threat of substitutes, and rivalry among existing competitors. This allows analysis of an industry's structure to guide corporate strategy. 2. The five forces are: the rivalry among existing competitors in an industry, the threat of new entrants, the power of suppliers, the power of buyers, and the threat of substitute products. Understanding how these forces affect an industry allows companies to improve their profitability. 3. Porter's Five Forces model can be used to analyze any market and guide business strategy by considering barriers to entry, supplier and buyer power, the threat of

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    1. Porter's Five Forces model identifies five competitive forces that shape every industry: the threat of new entrants, the power of suppliers and buyers, the threat of substitutes, and rivalry among existing competitors. This allows analysis of an industry's structure to guide corporate strategy. 2. The five forces are: the rivalry among existing competitors in an industry, the threat of new entrants, the power of suppliers, the power of buyers, and the threat of substitute products. Understanding how these forces affect an industry allows companies to improve their profitability. 3. Porter's Five Forces model can be used to analyze any market and guide business strategy by considering barriers to entry, supplier and buyer power, the threat of

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    361 views4 pages

    Assignment# 1 Porter's Five-Force Model: Sheraz Hassan Mba 1.5 2nd Roll No F-016 - 019 Subject Strategic Management

    Uploaded by

    Faisal Awan
    1. Porter's Five Forces model identifies five competitive forces that shape every industry: the threat of new entrants, the power of suppliers and buyers, the threat of substitutes, and rivalry among existing competitors. This allows analysis of an industry's structure to guide corporate strategy. 2. The five forces are: the rivalry among existing competitors in an industry, the threat of new entrants, the power of suppliers, the power of buyers, and the threat of substitute products. Understanding how these forces affect an industry allows companies to improve their profitability. 3. Porter's Five Forces model can be used to analyze any market and guide business strategy by considering barriers to entry, supplier and buyer power, the threat of

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    of 4

    Sheraz hassan

    Mba 1.5 2nd


    Roll no F-016 -019 Assignment# 1
    Subject Strategic Management
    Porter's Five-Force Model

    Introduction

    Porter's Five Forces is a model that identifies and analyzes five competitive forces that shape
    every industry and helps determine an industry's weaknesses and strengths. Five Forces analysis
    is frequently used to identify an industry's structure to determine corporate strategy. Porter's
    model can be applied to any segment of the economy to understand the level of competition
    within the industry and enhance a company's long-term profitability. The Five Forces model is
    named after Harvard Business School professor, Michael E. Porter.

    Porter's Five Forces is a business analysis model that helps to explain why various industries are
    able to sustain different levels of profitability. The model was published in Michael E. Porter's
    book, "Competitive Strategy: Techniques for Analyzing Industries and Competitors" in 1980.
    The Five Forces model is widely used to analyze the industry structure of a company as well as
    its corporate strategy. Porter identified five undeniable forces that play a part in shaping every
    market and industry in the world, with some caveats. The five forces are frequently used to
    measure competition intensity, attractiveness, and profitability of an industry or market.

    Porter's five forces are:

    1. Rivalry among competing firms


    2. Potential entry of new competitors
    3. Bargaining power of suppliers
    4. Bargaining power of consumers
    5. Potential development of substitute products.
    1. Rivalry among competing firms
    The first of the five forces refers to the number of competitors and their ability to undercut a
    company. The larger the number of competitors, along with the number of equivalent products
    and services they offer, the lesser the power of a company. Suppliers and buyers seek out a
    company's competition if they are able to offer a better deal or lower prices. Conversely, when
    competitive rivalry is low, a company has greater power to charge higher prices and set the terms
    of deals to achieve higher sales and profits.

    2. Potential entry of new competitors


    A company's power is also affected by the force of new entrants into its market. The less time
    and money it costs for a competitor to enter a company's market and be an effective competitor,
    the more an established company's position could be significantly weakened. An industry with
    strong barriers to entry is ideal for existing companies within that industry since the company
    would be able to charge higher prices and negotiate better terms.
    This force considers how easily other companies could enter your niche market and threaten your
    company’s position quickly and cheaply. Can they sell their minimum workable product that is, a
    product with enough features to satisfy real-time consumers, at a lower price than you? As a
    result, they could potentially sabotage your established market share and threaten your position
    in the industry.
    The frequency of these new players setting a foot in the current market depends on your
    industry’s entry barriers. If it costs extra money and time in building a minimum viable product,
    new businesses will only be able to afford to build a crude product. The main differentiating
    factor would be a slightly cheaper price.

    So, you need to step ahead with your industry entry barriers and shield yourself from the
    competitors!

    These entry barriers include:

     Absolute cost benefits


     Strong brand identity
     Access to inputs
     Expensive permits
    There could also be entry barriers in the market such as increased level of production which is
    based on the size of company and license requirements that keep the less-committed out of the
    game.

    These types of powerful barriers for entry can prevent new entrants from entering into your niche
    market. So, ask yourself, can an average startup easily jump into your industry?

    3. Bargaining power of suppliers


    The next factor in the five forces model addresses how easily suppliers can drive up the cost of
    inputs. It is affected by the number of suppliers of key inputs of a good or service, how unique
    these inputs are, and how much it would cost a company to switch to another supplier. The fewer
    suppliers to an industry, the more a company would depend on a supplier. As a result, the
    supplier has more power and can drive up input costs and push for other advantages in trade. On
    the other hand, when there are many suppliers or low switching costs between rival suppliers, a
    company can keep its input costs lower and enhance its profits.

    4. Bargaining power of consumers


    The ability that customers have to drive prices lower or their level of power is one of the five
    forces. It is affected by how many buyers or customers a company has, how significant each
    customer is, and how much it would cost a company to find new customers or markets for its
    output. A smaller and more powerful client base means that each customer has more power to
    negotiate for lower prices and better deals. A company that has many, smaller, independent
    customers will have an easier time charging higher prices to increase profitability.

    5. Potential development of substitute products.


    The last of the five forces focuses on substitutes. Substitute goods or services that can be used in
    place of a company's products or services pose a threat. Companies that produce goods or
    services for which there are no close substitutes will have more power to increase prices and lock
    in favorable terms. When close substitutes are available, customers will have the option to forgo
    buying a company's product, and a company's power can be weakened.
    Understanding Porter's Five Forces and how they apply to an industry, can enable a company to
    adjust its business strategy to better use its resources to generate higher earnings for its investors.

    Crux of the Porter's model

    Once your competitive analysis is complete, it’s time to implement a well-equipped strategy to
    expand your business horizons. Your goal should be to increase market share by reducing the
    sales price while retaining profits.

    If you are already in the market, a little barrier to entry would help you with protecting your
    business and give you fewer competitors to worry about!

    Successful implementation requires selecting niche markets in which you can sell your goods
    and requires an intense understanding of the marketplace, its buyers, sellers, and competitors.
    But you still have to measure how quickly the industry is growing and the number of competitors
    your industry can handle!

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