STRATEGIC MANAGEMENT II Porter’s five forces module

LEARNING OUTCOMES …to be able to identify the external threats facing the competitiveness of a firm ….to understand why these external forces affecting the competitiveness of a firm

FIVE FORCES MODEL INDUSTRY COMPETITORS SUBSTITUTES POTENTIAL ENTRANTS BUYERSSUPPLIERS Bargaining Power of Suppliers Threat of New Entrants Threat of Substitute Products or Service Bargaining Power of Buyers Rivalry among existing firms GOVERMENT

THREAT OF NEW ENTRANTS Economies of Scale Capital/Investment requirements Customer switching costs Access to industry distribution channels Access to technology Brand loyalty Government regulations

THREAT OF SUBSTITUTES Quality Buyer’s willingness to substitute The relative price and performance of substitutes The cost of switching to substitutes

BARGAINING POWER OF SUPPLIERS Supplier concentration Profitability of suppliers Threat of forward integration (suppliers) Threat of backwards integration (customers) Branding Role of quality and service Differentiation of input Importance of volume Switching costs

BARGAINING POWER OF BUYERS Concentration of buyers Buyer volume Buyer information Threat of backward and forward integration into the industry Profitability of buyers Differentiation Brand identity Role of quality and service Profitability of buyers Substitutes available Switching costs

INTENSITY OF RIVALRY Structure of competition Structure of industry costs Degree of product differentiation Switching costs Strategic objectives Exit barriers Industry growth

SUMMARY From individual company’s perspective Focus on external factors Underestimates core competencies Focus on competitiveness in a defined market Input for improvement strategies