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Introduction:

Through his model, Porter classifies five main competitive forces that affect any market and all industries.
It is these forces that determine how much competition will exist in a market and consequently the
profitability and attractiveness of this market for a company. Through sound corporate strategies, a
company will aim to shape these forces to its advantage to strengthen the organizations position in the
industry.

For the purpose of this model, industry attractiveness is the overall profitability potential of the industry.
An attractive industry will be one where the combined power of the competitive forces will increase
profitability potential. While an unattractive industry will be one where the collective impact of the forces
will drive down profitability potential.

These forces, termed as the micro environment by Porter, influence how a company serves its target
market and whether it is able to turn a profit. Any change in one of the forces might mean that a company
has to re-evaluate its environment and realign its business practices and strategies.An attractive market
place does not mean that all companies will enjoy similar success levels. Rather, the unique selling
propositions, strategies and processes will put one company over the other.

Background:
The model originated from Michael E. Porter's 1980 book "Competitive Strategy: Techniques for
Analyzing Industries and Competitors." Since then, it has become a frequently used tool for analyzing a
company's industry structure and its corporate strategy.In his book, Porter identified five competitive
forces that shape every single industry and market. These forces help us to analyze everything from the
intensity of competition to the profitability and attractiveness of an industry. Figure 1 shows the
relationship between the different competitive forces.
1. Competitive Rivalry:
One important force that Porter describes is the degree of rivalry between existing companies in the
market. If there are more companies competing with each other, the resulting competitive pressure will
mean that prices, profits and strategy will be driven by it.

One company may end up having little or no power in its own industry if there is a variety of quality
products are offered in the market in direct competition with it. Customers have the option of simply
moving on to a different company easily. Conversely, in the absence of this rivalry, the company may be
able to freely set prices and profit margins without being dictated by what the customer finds attractive.

When is competitive rivalry high?

Competitive rivalry may be higher when:

1. Similar sized companies operate in one market

2. These companies have similar strategies

3. Products on offer have similar features and offer the same benefits

4. Growth in the industry is slow

5. There are high barriers to exit or low barriers to entry

2. Threat of new Entrants


The competitive threat to a companys business may not only be from existing players in the market but
also from potential new entrants into the market place. If an industry is profitable, or attractive in a long
term strategic manner, then it will be attractive to new companies. Unless there are barriers to entry in
place, new firms may easily enter the market and change the dynamics of the industry.

The particular dynamics of an industry that restrict entry into it are called barriers to entry The most
attractive scenario for a new company is when a potential market has low barriers to exit but high barriers
to entry. The economics of any industry will determine the level of difficulty faced when trying to enter
this market.

When are barriers for new entrants high?

Barriers to entry may stem from things like:

1. Patents and proprietary knowledge

2. Access to specialized technology or infrastructure

3. Economies of scale or government driven obstacles

4. High initial investment needed

5. High switching costs for consumers, loyal consumers


3. Threat of Substitutes:
Within the framework defined by Porter, substitute products are those that exist in another industry but
may be used to fulfill the same need. The more substitutes that exist for a product, the larger the
companys competitive environment and the lower the potential for profit. An example of this is that for a
boxed juice producer, fresh juice, water and soft drinks are all substitutes though they exist in separate
categories.

A high threat of substitutes will impact a companys ability to set prices that it wants. If a substitute is
priced lower or fulfills a need better than it may end up attracting consumers towards it and reduce sales
for existing companies.

When is there a threat from substitutes?

The threat of substitutes is affected by factors such as brand loyalty, switching costs, relative prices, as
well as trends and fads.

4. Bargaining Power of Buyers:


When buyers have the power to affect prices in an industry, it becomes an important factor to consider for
a company.

When is buyer power high?

Buyers tend to have power over an industry if they are important to the company, this may be if the
industry is such that buyers either buy in bulk, or can easily switch to another supplier. A limited number
of strong buyers may be able to exert significant control over a seller. In addition, if a product is similar to
its competitor with little or no differentiation, then there are chances that the company may need to let the
supplier dictate terms in order to avoid losing the customer.

5. Bargaining Power of Suppliers


Suppliers provide the raw material needed to provide a good or service. This means that there is usually a
need to maintain strong steady relationships with suppliers. Depending on the industry dynamics,
suppliers may be in the position to dictate terms, set prices and determine availability timelines. Powerful
suppliers may be able to increase costs without affecting their own sales volume or reduce quantities that
they sell.

When do suppliers have power?

Supplier may enjoy more power if there are less of them. Costs of switching to an alternate are high, or
there are no alternates. A supplier may also be the only provider of a certain raw material. This may be
the case in instances where a supplier holds a patent or have proprietary knowledge. Because of a lack of
alternates, they may be able to withhold quantities or increase prices without losing sales.
Objective porter's five forces in industry analysis:

1.To identify what factors shape the character of competition within an industry.

2To assess and manage the long term attractiveness of an industry.

3To assess the structural attractiveness of the analyzed industry.

4. TO explain the relationship between the five dynamic forces that affects an industrys performance.

(A) Five Forces Analysis of the Banking Industry:


The market-oriented economies and the global market place have enhanced the competition for funds and
market share thereby cutting down the spreads of the banks, a part from declining spread, banks are also
witnessing a faster growth in their expenses when compared to their revenues predominant in these
expenses are the raising salary expenses and loan-loss expenses. Banks are responding by introducing
new product lines and developing the existing services into more sophisticated ones, in order to offset the
rising expenses. Let us examine the influence of the competitive forces using Michael Porter's model for
banking industry.

1. Rivalry among Existing Firms: Competition among banks has increased drastically since the
Commencement of liberalization. New products, free pricing and market forces are collectively acting
upon the spread of the bank.

2. Potential Entrants: With the liberalization of the financial sector, the influence of these forces on the
banking industry is being felt to a larger extent, with the DFI's diversifying into universal banking
activities and with the entry of new banks in the private sector, the threat from the new entrants is
gradually increasing.

3. Threat from Substitutes: In addition to the threat from the new entrants, banks are also exposed to
competition from the other financial intermediaries offering substitute product. These include the non-
banking finance companies.etc the new entrants and the substitute products are adding on to the already
existing competition from the present players.

4. Bargaining Power of Buyers: With the level of competition, both from within and outside the
industry. Increasing, the borrower is naturally placed with greater bargaining power with the opening of
other financial market .the money market and the overseas capital market, the avenues for raising funds
have widened for the borrower.

5. Bargaining Power of Suppliers: The introduction of new financial products and greater access to
other financial markets have enhanced the investment opportunities of the depositors who from the major
sources of funds for the banking sector. Thus, it can be observed that the competitive forces on the
banking industry have been influencing the prices, cost and size of the banks.
(B) Five Forces Analysis of the pharmaceutical Industry:
Competitive Rivalry (High):

Most competitive industries in the country with as many as 10,000 different players.

Top player in the country has only 6% market share and top five have 18%.

High growth prospects.

Very low entry barriers.

Fixed cost requirement is low and need for working capital is high.

Bargaining Power of Buyers:

End user of the product is different from the influencer (read Doctor).

Consumer has no choice but to buy what doctor says.

Buyers are scattered and they as such does not wield much power in the pricing of the products.

Bargaining Power of Suppliers:

Pharma industry depends upon several organic chemicals.

Very competitive and fragmented industry.

Chemicals are largely a commodity.

Suppliers have very low bargaining power.

Pharma industry can switch from their suppliers without incurring a very high cost.

Barriers to Entry:

Most easily accessible industries for an entrepreneur in India.

Capital requirement for the industry is very low, creating a regional distribution network is easy.

Point of sales is restricted in this industry in India.

Creating brand awareness and franchisee amongst doctors is the key for long-term survival.

Quality regulations by the government may put some hindrance for establishing new
manufacturing operations.

Impending new patent regime will raise the barriers to entry.


Threat of Substitutes:

One of the great advantages of the pharma industry.

Demand for pharma products continues and the industry thrives.

Key reasons for high competitiveness in the industry is that as an ongoing concern.

Key reasons for high competitiveness in the industry is that as an ongoing concern.

(C) Five Forces Analysis of the Fashion Retail Industry:

Competitive Rivalry:

The fashion industry is an interesting one when it comes to analyzing through the intensity of competitive
rivalry. There are large numbers of retailers who sell very similar products, but theres also the concept of
brands, which allow some companies to sell apparel for ridiculous rates. Nowadays there is little
innovation in this space, so the market is quickly becoming saturated with very similar products [2]. In
this sense, the fashion industry is a very difficult one to get into, and is almost becoming a race to the
bottom not good news for retailers!

Buyer Power:

The first important force is the bargaining ability of buyers, who can choose to push down prices, not buy
products, or switch retailers. In the case of the fashion industry, buyer power is a relatively large force.
While clothes shoppers are typically individuals with little to none direct bargaining power (as compared
to huge companies, buying in bulk, who might be the main clients in other industries), they have many
alternative locations to shop for apparel and little incentive to stay with one particular company, giving
them plenty of indirect bargaining power.

Supplier Power:

In the fashion retail industry, supplier power is a relatively small and insignificant force. Most apparel
companies source their products from third world manufacturers who receive just fractions of the profit.
Suppliers have little control over the fashion industry as, unfortunately, they are dispensable and can
always be swapped out. As a result, input prices for this industry are relatively low and will stay there
until the global development gap closes up significantly.

Threat of New Entries:

As mentioned previously, there is little that is unique to bring to the table in this industry, so this force is
also somewhat small. However, new entries might find unique ways to popularize their own products
(which might not even be particularly special), and as such build novel brands perhaps through clever
use of social media. The fashion industry in its current state is high risk, high reward for new entrants
its not too difficult to get a foot in the door and copy others, but will the markets care for those products?
Threat of Substitution:

Fortunately for those in the fashion retail industry, there is little to substitute clothes with. This force is
almost negligible all substitution in the fashion industry is really just competition. To sum up, the
fashion industry seems difficult to successfully dive into, and bleak for companies already within this
space. This Five Forces analysis has shown that while there are few threats and little supplier bargaining
power, it is not good that the market is effectively nearing saturation. Buyers have large amounts of
indirect power to bargain with i.e. plenty of choice and lots of competitors make it hard to sustain a
place in the market.

(D) Five Forces Analysis of the Mobile Industry:


1) Threat of new entrants (low):

The mobile phone industry is already a well-established market and the threat of a new entrant is quite
low because

i) Capital requirement is very high to compete in the market like huge manufacturing costs, high
Research and development costs etc.

ii) Barriers like patents make it difficult for new competitors, because the best methods are patented.

iii) Costumers loyalty towards existing brands.

iv) Advanced technologies make it difficult for new competitors to enter the market because they have to
develop those technologies before effectively competing.

2) Threat of substitute products or services-moderate

Presence and availability of substituted products is a great threat for the successful survival of the
organization since it can enforce the organization to cut the price of its product.

i) The power of substitute products is moderate and it depends on the impact of the substitute products.

iv)Regarding so, major threat is from substitutes like apples iphone and other android devices.

v) When the economy is low the substitute for the smart phone is what we call the dumb phone which is
very cheap and can only be used for calling and messaging.

3) Bargaining power of customers buyers (high):

Bargaining power of buyer is high so product differentiation is an ideal way to add value to the buyer.

i) The power that customers have is rising because of the increasing number of choices in the mobile
telecommunication industry and very little differentiation of products.

ii) Less asymmetric information which means buyers have all the required information so they can
bargain effectively.
iii) With a lot of the blackberry competitors all offering similar packages the industry is very price
sensitive with customers seeking out the best value for money.

iv) Low switching costs make it easy for customers to change the products they normally purchase.

v) Demand is highly sensitive to economy; buyers can delay buying new models until the prices come
down favorable to them.

4) Bargaining power of suppliers-moderate:

There are two main suppliers in this industry: the hard ware manufacturers and the software developers

i) Although blackberry rely on its suppliers to supply equipment for their advanced mobile phones there
are actually a number of large equipment makers, which blackberry could switch to.

ii) As the leading mobile phone company in the industry they are in a very strong position when
bargaining with their suppliers.

iii) Regarding software suppliers there are so many open source mobile operating system providers,
options are plenty and hence the bargaining power of software provider is low.

vi)The other important factor is low bargaining power of supplier is that there is intense competition
among suppliers acts to reduce prices to producers.

5) Intensity of Existing Rivalry (high):

Competition is intense among existing companies. Although there is no much difference in their products,
companies try to differentiate their products in terms of applications and services offered.

i) The competitive environment of the Blackberry is intense due to the launch of new products from
already well-known and established brands. For example Samsung galaxy S4, Nokia Lumia 720.

ii) BB competes well with its feature of BlackBerry messenger, which no other smart phone has. Its
other important feature is its QWERTY keypad because of which it became famous for.

iii) The primary competitors of blackberry are smart phones running on Android and the Apple phone.

iv) Despite market share loss, on a global basis, the number of active BlackBerry users has increased
substantially through the years.

v) Competitors like Samsung and nokia have smart phones price starts from as low as 5k where as
blackberrys initial price starts from 13k so the common people show interest towards them than
blackberry making the competition more intense.
vi) When it comes to applications, blackberry is facing a huge competition majorly from android market
where unlimited apps can be downloaded

(E) Five Forces Analysis of the Fast-food industry:


To understand the impact of Porters Five Forces model, let us now look at each of the forces as though it
is acting on a particular industry, say the fast-food industry of burgers, pizzas, and sandwiches.

1) Bargaining power of buyers:

The buyers have high bargaining power in a place where there are many fast-food joints, as they can
choose any one of them.

For example, if the queue is too long at one outlet, the buyer can probably go to another outlet just across
the road. The determinant of the high buyers bargaining power, in this case, is the high number of sellers
to cater to the buyers. But the high bargaining power of the buyer is a disadvantage to a fast-food
restaurant operating at the place.

2) Bargaining power of suppliers

The main suppliers in the fast-food industry are dough, dairy produce, and meat vendors. Their bargaining
power is low since there would be a number of suppliers of these items.

The determinant of the low suppliers bargaining power here is the lack of differentiation among the
suppliers products (the existence of a number of reliable suppliers). So, this is an advantage for a fast-
food outlet or chain.

3) Competitive rivalry among competitors:

The industry is chock-a-bloc with competitorsthere are big brands such as McDonalds and KFC, and
medium and smaller brands, including local restaurants and bakeries, selling a variety of snacks and
quick-eats.

The determinant of the high competition is the high number of eateries selling quality products. This
situation is a disadvantage to a fast-food eatery.

4) The threat of substitute products:

Restaurants and other eateries are quite capable of selling the types of products sold by a fast-food joint,
such as a burger or a sandwich. So, the threat of substitute products is quite high for a fast-food restaurant.

The determinant of the high threat of substitutes is the lack of differentiation among the products
available (except perhaps in the case of McDonalds or KFC, whose products are seen as unique)
obviously a disadvantage for a fast-food outlet.
5) The threat of new entrants, or barriers to entry:

An entrepreneur requires a complex set of permissions to open a restaurant. In addition, good


infrastructure needs to be built up. Then there is the task of creating unique products to set apart the
restaurant from its competitors, which may include multinational chains.

Any businessperson would baulk at the prospect of entering this business. The determinant of the low
threat of new entrants is the requirement of a number of permissions (tough barriers to entry) and the
established products. Therefore, this is an advantage for a fast-food joint.

Methodology:
The procedure of collecting information from various resources is known as methodology.
There are two sources from where we had collected information which are

a) Primary Data

Face to face conversation with the Officers

b) Secondary sources:

Official Website
Different Articles
Management profile
News articles
Investopedia

Findings and Analysis:


The research found out that the buyers in the industry had an eye for the brand and this enhanced their
loyalty to particular products. Secondly, the buyers of the industry were sensitive to prices paid for design
products and services. From the survey, buyers were also keen on the quality of the product and this
enhanced differentiation of products in the industry. The research also established that the industry did not
have large-scale buyers and therefore the buyers lacked bargaining power. The research also proved that
the industry lacked corporate buyers and this contributed to the low bargaining power of buyers. The low
bargaining power in the industry makes it an attractive industry for new ventures li.From the research,
buyers in the industry have moderate influence and hence moderate power in the industry.
Availability of substitutes was the next important force that the new business needed to consider before
entering into the new market. From the research results, the industry had high threat from substitute and
therefore it was an unattractive industry. The industry has cheap products that are of relatively low price,
which makes it difficult to launch new products. The research also verified that the Fashion industry
offered clothing as its main products and therefore substitute could only come in as a variety to the
products offered in the market.

Recommendation:

Recommendation for Banking Industry:


1 There is a need to computerize all branches of banks dealing with government transactions.

2. Each bank should chalk out a time-bound programme, synchronizing with the level of computerization
being planned by it,

3. The training establishments of the banks should be strengthened with adequate personnel

Recommendation for Pharmaceuticals Industry:

1As a way of addressing the significant increase in drug failures in the past 20 years, pharma companies
should develop better risk evaluation and management measures.

2. Develop better reward system It would be better for drug companies to use a measurement system that
combines financial and non-financial metrics (like motivation and commitment), the report notes.

Recommendation for Fashion Retail Industry:

1All parties, particularly workers, should be adequately informed about codes of conduct so that the codes
can fully serve their purpose.

2All actors in the apparel industry, including manufacturers, retailers, buying agents and merchandisers,
should consider the adoption of a code of conduct.

3All parties should consider whether there would be any additional benefits to adopting more
standardized codes of conduct.

Recommendation for Mobile phone Industry:

1Better quality product

2Better customer service

3Eye catching Advertisement and promotional activities


Recommendation for Fast Food Industry:

1Levels of fortification should be evaluated and adjusted according to bioavailability of the


nutrient(s) in the diets of target populations.

2. It is important to evaluate the potential of local food industries to become involved in the
production of high quality fortified food products, including those destined for use in food aid
programmes, in areas where problems of micronutrient deficiency are likely to occur.

3. Food control systems based on HACCP principles, risk-based inspection procedures and
internationally accepted analytical methods should be developed in support of fortification
programmes.

4. The impact of food fortification on the nutritional status of target populations should be
monitored so that appropriate corrective action can take place as required.

Conclusion:
The intensity of Porters five competitive forces: threat of entrants, bargaining power of buyers,
bargaining power of suppliers, threat of substitution and rivalry among existing competitors
determine the long-run profitability of the industry. Each of these forces can differently affect the
profitability in different industries. For instance, the power of buyers can be higher in one
industry than another. There are different factors that affect each of these forces. For example,
low level of switching costs increases the bargaining power of buyers and suppliers vis--vis
incumbents, high capital requirements restrict the entries barriers etc.

Factors such as high industry growth rate, government policy, technology and innovation,
complementary products are thought to be additional forces as they also seem to affect the
industry profitability. However, when we deeply analyze the effects we find that these are
usually momentary and short run.

The strategists should be aware that over time with the contribution of external factors such as
the advance of technology the competitive forces may shift. For example, an industry with a low
threat of entry or substitution can become an industry with a high threat of entry or substitution.
Depending on the direction of the shift in competitive forces, the changes can positively or
negatively affect the overall industry profitability.