Chapter 1: The Five competitive forces that shape

strategy

“ In Essence , The job of the

strategist is to understand and
cope with competition. Not too
narrow for only competitor, but
goes beyond rivals to 4 other
competitive forces.”

Industry Analysis in Practice

 Economic Cycle

 Competition & Strategy

 The Treat of New Entrants
Barrier to entry
 Supply side economies of scale
 Demand side benefits of scale
 Customer Switching cost
 Capital requirements
 Incumbency advantages independent of size
 Unequal access to distribution channels
 Restrictive government policy
 The Power of Suppliers
A supplier group is powerful if :

 It is more concentrated than the industry its sell to EX. Microsoft.

 Suppliers group does not depend heavily on industry for its revenue.
 Industry participants face high switching costs in changing supplier.
 Suppliers offer products that are differentiated.
 There is no substitute for what the supplier group provides.
 The supplier group can credibly threaten to integrate forward into industry.
 The Power of Buyers
A Customer group has negotiating leverage if :
 There are few buyers or each one purchase in high volumes.
 The industry’s product are standardized or undifferentiated
 Buyers face few switching cost In changing vendor.
 Buyers can credibly integrate backward and produce the product by themselves.

A Customer group is price sensitive if :

 The product it purchases from the industry represents a significant fraction of
its cost structure.
 The buyer group earns low profits or under pressure to trim its purchasing
costs.
 The quality of buyers’ product is little affected by industry’s product.
 The Treat of Substitutes
A Threat of substitute is high if :

 It offers an attractive price performance trade-off to the industry’s product.

 The buyer’s cost of switching pantent to the substitute is low.
 Rivalry among existing competitors
The intensity of rivalry is greatest if :
 Competitors are numerous.
 Industry growth is slow.
 Exit barriers are high.
 Rivals are highly committed to the business and have aspirations for leadership.

The Price competition is most liable to occur if :

 Product of rivals are nearly identical & few switching cost for buyers.
 Fixed costs are high & marginal costs are low.
 Capacity must be expanded in large increments to be efficient.
 The product is perishable. (ex. Computer, Hotel)
 Common Pitfalls
 Defining the industry too broadly or too narrowly
 Paying equal attention to all of the forces rather than digging deeply into one force
 Framework
 Industry growth rate Mistake
 Technology & innovation Mistake
 Government
 Complementary products & services
 Changes in industry structure
Shifting in Five Forces

 New Entry : Ex patent expired , Strategy change

 Supplier or buyer : Ex Change of power , integration
 Substitute : Ex Advance Technology
 Rivalry : New base level from intensive competition.
 Implication for strategy
 Defining the relevant industry
 Geographic that industry take place
 Overlook Scope:
Too Narrow (Common or Linkage)
Too Broadly (Differentiate or Positioning)
 Boundaries of Product/Service and Location
 5 Force analys which is competes
 Positioning for company
 Exploiting industry change
 Shaping industry structure
 Re-dividing profitability
 Expanding profit pools
 Competition & value
 Key Driver of Performance
 Industry understand is equally for
Investor as of manager
 5 Force competitive reveal truly
Attractive to investor take advantage
Q&A
Member
No. Name ID
1 พิมพ์ประภา เอี่ยมกระสิ นธู 5620224036
2 ทยพร จันทรสงค์ 5620224053
3 ลลิตวดี มุ่งสมัคร 5620224060
4 นัทธมน วงศ์สวัสดิ์กลุ 5620224073
5 จิรโชติ ธรรมจินดาพงษ์ 5620224074
6 ภัทร์ แผนสมบูรณ์ 5620224097
7 ศรายุ แซ่ฉวั่ 5620224099
8 กิจจา แต่งสถิตย์ 5620224100
9 วีรยา ทนุพงษ์ 5620224102
10 กฤษพร หิรัญญโชค 5620224104
11 ศิริพร เจริ ญผล 5620224105
12 สุ ภาวดี ชนะโชติ 5620224112
13 นภัสสร สวนมาลา 5620224113
14 สุ ภวัช นวพักตร์พิไล 5620224176
15 จอมขวัญ สุ วรรณเครื อ 5620224188