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    Chapter 3-External Analysis

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    Md. Rashed Kamal 221-45-042
    This document discusses Porter's five forces model of external analysis for assessing industry competition. It analyzes the soft drink industry specifically. The five forces are: 1) risk of entry by new competitors, 2) power of suppliers, 3) power of buyers, 4) threat of substitute products, and 5) rivalry among existing competitors. For the soft drink industry, the risk of entry is low due to brand loyalty and economies of scale. Rivalry is intense among major soda companies. Buyers and suppliers have moderate power. The threat of substitutes is also moderate.

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    Chapter 3-External Analysis

    Uploaded by

    Md. Rashed Kamal 221-45-042
    12 views18 pages
    This document discusses Porter's five forces model of external analysis for assessing industry competition. It analyzes the soft drink industry specifically. The five forces are: 1) risk of entry by new competitors, 2) power of suppliers, 3) power of buyers, 4) threat of substitute products, and 5) rivalry among existing competitors. For the soft drink industry, the risk of entry is low due to brand loyalty and economies of scale. Rivalry is intense among major soda companies. Buyers and suppliers have moderate power. The threat of substitutes is also moderate.

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    This document discusses Porter's five forces model of external analysis for assessing industry competition. It analyzes the soft drink industry specifically. The five forces are: 1) risk of entry by new competitors, 2) power of suppliers, 3) power of buyers, 4) threat of substitute products, and 5) rivalry among existing competitors. For the soft drink industry, the risk of entry is low due to brand loyalty and economies of scale. Rivalry is intense among major soda companies. Buyers and suppliers have moderate power. The threat of substitutes is also moderate.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    12 views18 pages

    Chapter 3-External Analysis

    Uploaded by

    Md. Rashed Kamal 221-45-042
    This document discusses Porter's five forces model of external analysis for assessing industry competition. It analyzes the soft drink industry specifically. The five forces are: 1) risk of entry by new competitors, 2) power of suppliers, 3) power of buyers, 4) threat of substitute products, and 5) rivalry among existing competitors. For the soft drink industry, the risk of entry is low due to brand loyalty and economies of scale. Rivalry is intense among major soda companies. Buyers and suppliers have moderate power. The threat of substitutes is also moderate.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 18

    Chapter: 3

    EXTERNAL
    ANALYSIS

    Prepared by: Samia Shanjabin


    Department of Innovation & Entrepreneurship
    CONTENTS
    • Porters five forces model
    • Risk of entry by potential competitors (Potential competitors,
    economics of scale, brand loyalty, absolute cost advantage).
    • Case study of soft drink industry (Forum discussion)
    • Rivalry among established companies
    • Bargaining power of buyer
    • Bargaining power of supplier
    EXTERNAL ANALYSIS
    Porter’s Five Forces model
    • Porter’s Five Forces analysis is a framework that helps analyzing the level of
    competition within a certain industry.
    • It is especially useful when starting a new business or when entering a new industry
    sector. According to this framework, competitiveness does not only come from
    competitors. Rather, the state of competition in an industry depends on five basic
    forces: threat of new entrants, bargaining power of suppliers, bargaining power of
    buyers, threat of substitute products or services, and existing industry rivalry.
    • The collective strength of these forces determines the profit potential of an industry
    and thus its attractiveness. If the five forces are intense (e.g. airline industry), almost
    no company in the industry earns attractive returns on investments. If the forces are
    mild however (e.g. softdrink industry), there is room for higher returns.
    1. Risk of entry by potential competitors

    Potential competitors
    Potential competitors are those that aren't currently in the market but
    may enter the market in the future. These organisations may be new
    entrants or existing firms that identify as having a strong potential to
    compete with you.
    1. Risk of entry by potential competitors

    Economics of scale
    1. Risk of entry by potential competitors
    Brand Loyalty
    1. Risk of entry by potential competitors

    Absolute cost advantage


    New entrants can not match with the established companies lower cost
    structure.
    - Superior production in operation
    - Control of particular inputs (labor, materials, equipment)
    - Cheaper funds
    - Managerial skills
    2. Competitive Rivals
    The number of competitors
    Industry competitive structure
    Industry growth
    Similarities in what's offered
    Exit barriers
    2. Competitive Rivals
    Industry competitive structure
    1. Fragmented industry: Consists of a large number of small and
    medium sized company. No one is here to set the industry price.

    2. Consolidated industry: Small number of large companies dominated


    the market. Oligopoly remains in the company.
    Bargaining power of buyer
    Bargaining power refers to the ability of customers to influence the
    prices of the products and services they buy and suppliers to set the
    prices they charge for what they sell.
     Buyers are dominant
     They purchase in large quantities
     Industry is dependent on buyer
     Buyer threaten to others to enter in the company
    Bargaining power of supplier
    The bargaining power of suppliers is one of Porter's Five Forces, and
    is the concept that suppliers can apply pressure to companies by
    lowering product quality or availability, or raising product prices.
     Number of suppliers relative to buyers
     Dependence of a supplier’s sale on a particular buyer
     Switching cost (switching costs of suppliers)
     Availability of suppliers for immediate purchase
     Possibility of forward integration by suppliers
    THREAT OF SUBSTITUTES
    The threat of substitutes is high when rivals or even companies outside
    the industry offer more attractive and/or lower cost products. Buyers
    then have the opportunity to make a price/performance trade-off. The
    cost of switching is also a factor; if it is high, the treat of substitution is
    low.

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