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Session06: Porter 5 Forces Industry Analysis Dr. Mark H. Mortensen 66.490.211 and 212 Tues &Thurs 2:00 to 3:15 3:30 to 4:45 Manning School of Business.

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Presentation on theme: "Session06: Porter 5 Forces Industry Analysis Dr. Mark H. Mortensen 66.490.211 and 212 Tues &Thurs 2:00 to 3:15 3:30 to 4:45 Manning School of Business."— Presentation transcript:

1 Session06: Porter 5 Forces Industry Analysis Dr. Mark H. Mortensen 66.490.211 and 212 Tues &Thurs 2:00 to 3:15 3:30 to 4:45 Manning School of Business

2 Mortensen Consulting Group Today 1. Attendance 2. Discussion on Porter 5 Forces Industry Analysis 3. Group workshop – create a 5 Forces chart for the industry that includes Starbucks, Dunkin Donuts and McDonalds 4. For next class

3 Mortensen Consulting Group Strategic Management Process: Environmental Scanning Assumptions Constraints Truisms TOOLS PEST(EL) analysis Porter 5-Forces model Company positioning chart Product positioning charts BCG product matrix GE product matrix Core competency analysis Value chain analysis Bowman’s Strategy Clock

4 Mortensen Consulting Group Porter 5 Forces Analysis of an Industry Five forces analysis: Technique for understanding an industry, by examining the interactions among:  Competitors in an industry  Potential new entrants to the industry  Substitutes for the industry’s offerings  Suppliers to the industry  Industry’s buyers Purpose of the analysis is to identify how much profit potential exists in an industry

5 Mortensen Consulting Group Porter 5 Forces Analysis

6 Mortensen Consulting Group Soft Drinks – Porter 5 Forces [1] Threat of New Entrants/Potential CompetitorsThreat of New Entrants/Potential Competitors: Median Pressure Entry barriers are relatively low for beverage industry: there is almost 0 consumer switching cost and very low capital requirement. There are more and more new brands appearing in the market with usually lower price than Coke products However Coca-Cola is seen not only as a beverage but also as a brand. It has a very significant market share for a long time and loyal customers are not very likely to try a new brand beverage.

7 Mortensen Consulting Group Soft Drinks – Porter 5 Forces [2] Threat of Substitute ProductsThreat of Substitute Products: Median to high pressure There are many kinds of energy drink and soda products in the market. Coca-cola doesn’t really have a special flavor. In a blind taste test, people couldn’t tell the difference between Coca-Cola and Pepsi

8 Mortensen Consulting Group Soft Drinks – Porter 5 Forces [3] The Bargaining Power of BuyersThe Bargaining Power of Buyers: Low pressure The individual buyer has little to no pressure on Coca-Cola The main competitor, Pepsi is priced almost the same as Coca-Cola. Consumer could buy those new and less popular beverages with lower price but the flavor is different and the quality is not guaranteed. Large retailers, like Wal-Mart, have bargaining power because of the large order quantity, but the bargaining power is lessened because of the end consumer brand loyalty. There are many kinds of energy drink and soda products in the market. Coca-cola doesn’t really have a special flavor. In a blind taste test, people couldn’t tell the difference between Coca-Cola and Pepsi. People are getting concerns of negative effects of carbonated beverages. Increasing number of consumers begin to drink fruit juice, lemonade and tea instead of soda products.

9 Mortensen Consulting Group Soft Drinks – Porter 5 Forces [4] The Bargaining Power of SuppliersThe Bargaining Power of Suppliers: Low pressure The main ingredients for soft drink include carbonated water, phosphoric acid, sweetener, and caffeine. The suppliers are not concentrated or differentiated. No supplier would want to lose a huge customer like Coca-Cola.

10 Mortensen Consulting Group Soft Drinks – Porter 5 Forces [5] Rivalry Among Existing FirmsRivalry Among Existing Firms: High Pressure Currently, the main competitor is Pepsi which also has a wide range of beverage products under its brand. Both Coca-Cola and Pepsi are the predominant carbonated beverages and commit heavily to sponsoring outdoor festivals and activities. As Coca-Cola has a longer history, it is advertised in a more classical approach while Pepsi tried to attract younger generation by using pop stars as brand ambassadors. Currently Coca-Cola slightly topped Pepsi as the possessor of the most U.S market share. There are other soda brands in the market that become popular, like Dr. Pepper, because of their unique flavors.

11 Mortensen Consulting Group Soft Drinks – Porter 5 Forces [6] So what do you think? Should we compete with Coca-Cola as a new entrant? As a Supplier going into their market? As a buyer going into their market? Medium High Low Med/Hi Low

12 Mortensen Consulting Group Discussion Is there an aspect industry activity that the five forces seems to leave out? Imagine that you are the president of UMass Lowell. Which of the five forces would be most important to you? Why?

13 Mortensen Consulting Group Today 1. Attendance 2. Discussion on Porter 5 Forces Industry Analysis 3. Group workshop – create a 5 Forces chart for the industry that includes Starbucks, Dunkin Donuts and McDonalds 4. For next class

14 Mortensen Consulting Group Today 1. Attendance 2. Discussion on Porter 5 Forces Industry Analysis 3. Group workshop – create a 5 Forces chart for the industry that includes Starbucks, Dunkin Donuts and McDonalds 4. For next class:  Read chapter 3, section 3 on Porter 5 Forces  Read Chapter 4, Section 4.5 on SWOT  Familiarize yourself with SWOT hand out (see Wiki)  #4 Duncan Donuts Case Study (Thursday)

15 Mortensen Consulting Group Assignment04 Read the assigned Dunkin’ Donuts Case Study (HBS 9-584-041 – Dunkin’ Donuts© Growth Strategy) and write a 2-5 page paper covering the following topics: How did the Dunkin’ Donuts of 1979 differ from the Dunkin’ Donuts of 2012? Compare and contrast the franchise and the company-owned store business models. The Dunkin’ Donuts management team decided to continue to follow the franchise model. Evaluate that decision, given what we know in 2012. ALSO Look up what happened in 2011-2012 involving Dunkin’ Donuts and Green Mountain Coffee. Be prepared to discuss this.

16 Mortensen Consulting Group Strategic Management – Spring 2014


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