Q. What is Michael Porter’s five competitive forces model?

Ans: Michael Porter's five competitive forces model, also known as Porter's Five Forces analysis, is a strategic
framework developed by Michael E. Porter, a renowned economist and professor at Harvard Business School. The
model is widely used in business management, including in MBA programs, to analyze the competitive environment
of an industry and identify key factors that can affect a company's profitability and competitiveness. The model
consists of five forces that shape industry competition and influence a company's strategic decisions. Here are the
five forces of Porter's model:

1. Threat of New Entrants: This force examines the barriers to entry for new companies in the industry.
Higher barriers make it difficult for new players to enter the market, limiting competition and potentially
providing advantages to existing firms. Barriers can include factors like economies of scale, brand loyalty,
capital requirements, access to distribution channels, and government regulations. If the threat of new
entrants is low, existing firms can enjoy a more stable market position.
2. Bargaining Power of Suppliers: This force assesses the influence that suppliers have over the industry and
its firms. Suppliers' power can increase when there are limited alternatives for inputs or unique resources,
or when switching costs are high. In such cases, suppliers can dictate terms, prices, and quality, which may
negatively impact a company's profitability. Conversely, when suppliers have less power, firms can
negotiate better deals and reduce costs.
3. Bargaining Power of Buyers: This force considers the influence that customers or buyers have over the
industry and its firms. Buyers' power increases when they have many choices, low switching costs, and
access to information about products and prices. When buyers have significant power, they can demand
lower prices or higher product quality, which can squeeze profit margins for firms.
4. Threat of Substitutes: This force evaluates the availability of alternative products or services that can fulfill
similar needs to those offered by the industry's products. The presence of close substitutes can limit the
price-setting ability of firms and reduce their market share. Industries with a higher threat of substitutes
face greater competition and need to differentiate their offerings to maintain a competitive advantage.
5. Intensity of Competitive Rivalry: This force examines the level of competition among existing firms in the
industry. High competitive rivalry results from factors like a large number of competitors, slow industry
growth, and low differentiation among products or services. In such environments, firms often engage in
price wars and aggressive marketing to gain a competitive edge. On the other hand, industries with low
competitive rivalry tend to have more stable market conditions and higher profit potential.

By analyzing these five forces, businesses can gain valuable insights into their industry's competitive dynamics and

develop strategic plans to strengthen their market position, enhance competitiveness, and respond effectively to

market challenges. MBA programs often emphasize the importance of Porter's Five Forces model as a tool for

strategic analysis and decision-making in various industries and business scenarios.

Q. What is competitive analysis and how do you obtain it?

ANS: Competitive analysis is a critical strategic tool used by businesses to assess their competitive environment and
understand how they compare to their competitors in the market. It involves evaluating the strengths and weaknesses of
competing companies, identifying their strategies, and determining opportunities and threats they pose to one's own business.
Competitive analysis helps businesses make informed decisions and formulate effective strategies to gain a competitive
advantage and achieve their objectives. For MBA students, understanding competitive analysis is essential as it enables them to
develop strategic thinking and decision-making skills.

The process of obtaining competitive analysis involves several steps, and here are the key steps
that an MBA student should consider:

 The process of obtaining competitive analysis involves several steps, and here are the key steps that an
MBA student should consider:

 Define the Industry and Competitors: Identify the industry in which your business operates and list the
major competitors. The industry may be broad or narrow, depending on the scope of your business. Define
the market segments, customer groups, and geographic regions that are relevant to your business.
 Gather Data on Competitors: Collect comprehensive data on each competitor in your industry. This can
include information from publicly available sources, such as financial statements, annual reports, websites,
press releases, and news articles. Analyze their products, services, pricing strategies, market share, target
customers, distribution channels, and marketing efforts.
 SWOT Analysis: Conduct a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis for each
competitor. Identify their core competencies, unique selling propositions, and areas where they excel or lag
behind. Evaluate their market positioning and potential areas for growth or improvement.
 Analyze Market Trends: Understand the prevailing market trends, including technological advancements,
regulatory changes, consumer preferences, and macroeconomic factors. Analyze how these trends impact
your competitors and their strategies.
 Assess Competitive Advantage: Compare your business's strengths and weaknesses against your
competitors. Identify areas where your business has a competitive advantage and areas where you need to
improve to stay competitive. This analysis can help you focus on your unique selling points and
differentiation strategies.
 Identify Opportunities and Threats: Based on the competitive analysis, identify potential opportunities for
your business to expand or gain a stronger market position. Simultaneously, identify threats that your
competitors pose to your business, such as pricing wars or new product launches.
 Competitive Positioning: Develop a clear understanding of your competitive positioning relative to other
players in the industry. Determine whether your business is a market leader, follower, or niche player.
Define your competitive strategy and positioning to address market opportunities effectively.
 Monitor and Update: Competitive analysis is an ongoing process. Continuously monitor changes in the
competitive landscape and update your analysis regularly. Stay alert to new competitors entering the market
or shifts in customer preferences.

By obtaining and conducting a comprehensive competitive analysis, MBA students and businesses can gain valuable

insights into their market dynamics, develop effective strategies, and make informed decisions that lead to

sustainable competitive advantages and long-term success.

 Q. What are the methods to analyses an industry?
Ans: Analyzing an industry is a crucial step in strategic management and decision-making for businesses,
and it helps MBA students develop a comprehensive understanding of market dynamics and competitive
forces. There are several methods to analyze an industry, each providing unique insights into the
industry's structure, competitive landscape, and potential opportunities and threats. Here are the key
methods for industry analysis:

1. Porter's Five Forces Analysis: As discussed earlier, Porter's Five Forces analysis is a widely used method to
assess industry competitiveness. It examines five key forces that shape industry competition: threat of new
entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitutes, and intensity of
competitive rivalry. By analyzing these forces, businesses can understand the attractiveness of the industry
and the level of competition they face.
2. SWOT Analysis: SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis is a versatile tool for
evaluating an industry's internal and external factors. Businesses identify their own strengths and
weaknesses and assess the opportunities and threats present in the industry. SWOT analysis helps
companies understand their competitive position and develop strategies to capitalize on strengths and
opportunities while addressing weaknesses and threats.
3. PESTEL Analysis: PESTEL analysis considers the external macro-environmental factors that influence an
industry: Political, Economic, Social, Technological, Environmental, and Legal factors. This method helps
businesses understand the impact of broader environmental factors on their industry and identify
potential risks and opportunities.
4. Value Chain Analysis: Value chain analysis breaks down the various activities involved in producing a
product or service within an industry. It helps businesses identify cost drivers and potential areas for value
addition. By understanding the value chain of an industry, companies can determine how they can create
a competitive advantage through efficient operations and differentiation.
5. Industry Life Cycle Analysis: Industry life cycle analysis categorizes industries into different stages:
Introduction, Growth, Maturity, and Decline. Understanding the industry's life cycle helps businesses tailor
their strategies based on the current stage of the industry. Different strategies are appropriate in each
stage, such as innovation in the introduction stage or cost-cutting in the maturity stage.
6. Market Segmentation Analysis: Market segmentation analysis involves dividing the market into distinct
customer segments based on specific characteristics or preferences. This method helps businesses identify
target markets and tailor their products, marketing, and distribution strategies to meet the needs of
different customer segments.
7. Competitive Benchmarking: Competitive benchmarking involves comparing a company's performance and
practices with those of its competitors. This analysis provides insights into the relative strengths and
weaknesses of the business compared to its rivals. Benchmarking helps companies identify areas for
improvement and best practices to adopt.
8. Financial Ratio Analysis: Financial ratio analysis examines the financial performance of companies within
the industry. It assesses liquidity, profitability, efficiency, and other financial metrics. This analysis helps
businesses understand their financial health and compare it with industry averages.

By using a combination of these methods, MBA students and businesses can gain a comprehensive
understanding of the industry's dynamics, competitive forces, and growth opportunities. This information
is essential for formulating effective strategies, making informed decisions, and achieving sustainable
success in the industry.