Swot and porter

1. PORTER’s FIVE FORCES MODEL

2. Michael E. Porter
 Born in 1947.
 Professors in Harvard
Business School.
 Introduced Porter's 5
Forces Model.
 Written 18 books & over
125 Articles.

3. Porter’s Five Forces Chart

4. INTRODUCTION
• The Five Forces model of Porter is an outside-in
business unit strategy tool that is used to make an
analysis of the attractiveness (value...) of an industry
structure.
• It captures the key elements of industry competition.

5. BuyersSuppliers
Substitute
products
Potential
entrants
Industry competitors
Rivalry among
existing firms
Threat of
new entrants
Bargaining power
of suppliers
Bargaining power
of buyers
Threat of
substitutes
PORTER’s FIVE FORCES MODEL

6. Threat of New Entrants
Barriers to
Entry
Government Policy
Expected Retaliation
Economies of Scale
Product Differentiation
Capital Requirements
Customer Switching Costs
Access to Distribution Channels

7. Bargaining Power of Suppliers
Suppliers exert
power in the
industry by:
* Threatening to raise
prices or to reduce
quality
Powerful suppliers
can squeeze
industry
profitability if firms
are unable to
recover cost
increases
Suppliers are likely to be powerful if:
Supplier industry is dominated by a few
firms
Suppliers’ products have few substitutes
Buyer is not an important customer to
supplier
Suppliers’ product is an important input to
buyers’ product
Suppliers’ products are differentiated
Suppliers’ products have high switching
costs

8. Bargaining Power of Buyers
Buyers compete with
the supplying industry
by:
* Bargaining down prices
* Forcing higher quality
* Playing firms off of
each other
Buyer groups are likely to be powerful if:
Buyers are concentrated
Purchase accounts for a significant fraction of
supplier’s sales
Products are undifferentiated
Buyers face few switching costs
Buyer presents a credible threat of backward
integration
Buyer has full information

9. Threat of Substitute Products
Products with
similar
function limit
the prices
firms can
charge
Keys to evaluate substitute products:
Products with improving
price/performance tradeoffs
relative to present industry
products
Example:
Electronic security systems in place
of security guards
Fax machines in place of overnight
mail delivery

10. Threat of Substitute: Examples

11. Rivalry Among Existing Competitors
Intense rivalry often plays out in the following
ways:
Using price competition
Staging advertising battles
Making new product introductions
Increasing consumer warranties or service
Occurs when a firm is pressured or sees an
opportunity
Price competition often leaves the entire industry worse off
Advertising battles may increase total industry demand, but may
be costly to smaller competitors

12. Intensity of rivalry among established firms
: Examples

13. Coca-cola
• Traditional competition:
 Prices of Pepsi, local brands
 Market share
 Promotional actions of competition
• New entrants:
 New “look-a-like” manufacturers
• Substitute products:
 Fashionable new drinks, milk drinks, coffee, beer, ...

14. Coca-cola
• Suppliers:
 Price and availability of ingredients on world market
 Quality speed safety, traceability, flexibility of supply
chain
• Buyers/consumers:
 High as a result of intense competition both among
branded and unbranded products.
 Combined purchase power of shops, bars, supermarkets

15. Strengths of five forces model:
 The model is strong tool for competitive analysis at
industry level.
 It provides useful input for performing a SWOT
analysis.

16. Limitations
• Inside-out strategy is ignored (core competence)
• It does not cope with synergies and interdependencies
within the portfolio of large corporations (parenting
advantage)
• The environments which are characterized by rapid,
systemic and radical change require more flexible, dynamic
or emergent approaches to strategy formulation (disruptive
innovation)
• Sometimes it may be possible to create completely new
markets instead of selecting from existing ones (blue ocean
strategy)

17. SWOT ANALYSIS

18. STRENGHTS:
• good capabilities
• capacities of producing good products
• products
• technologies
• R&D efforts
• human resources
• demand from the client- from the
• amount of knowledge
• technical skills

19. WEAKNESS:
• product mass become obsolete
• technology has become obsolete
• key management power may not be there
• key man power may not be there
The point is not that the company is having weaknesses
and that the company should closedown; the best part is
that whether this company is able to trace this weakness
and take the corrective measures or not.

20. CONT….

21. OPPORTUNITIES:
• a company can identify new products
• the company can go for new sectors
• the company can go for new geography
• new economy - the company can go and extend
their market
• company can take the advantage of the changing
lifestyle
• can go for the opportunities available technology
changing

22. THREATS:
• political threats
• legislative threat
• environmental threat
• technology threat
• from the partners
• joint venture alliances
• from the buyers
• from the suppliers
• from the key staff
How the company is take the advantage - take care of
these threats and go for a counter actions so that the
threats are minimized.