PORTER’s FIVE FORCEs MODEL

PREPARED BY:
KIRT RAJ PHAGNA RAHUL KUMAR CHANDAN JHA MANISH JHA

.) of an industry structure. • Michael Porter developed Five Forces model to know about different forces that impact on a company’s ability to compete • It captures the key elements of industry competition...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.

PORTER’S FIVE FORCE MODEL .

Threat of New Entrants Barriers to Entry Product Differentiation Capital Requirements Access to Distribution Channels Government Policy Technology .

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 .

Bargaining Power of Buyers 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 Buyers compete with the supplying industry by: * Bargaining down prices * Forcing higher quality * Playing firms off of each other .

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

Rivalry Among Existing Competitors Intense rivalry often plays out in the following ways: Using price competition Staging advertising battles Increasing consumer warranties or service Making new product introductions 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 .

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.

Airline Industry 8 .

RIVARLY AMONG EXISTING FIRMS WITHIN AN INDUSTRY •High competition •Cutthroat competition •Low Profitability .THREAT OF NEW ENTRANTS •Saturated Market •Brand Name& Recognition THREAT OF SUBSTITUTES •Time.Money •Personal References & convenience POWER OF SUPPLIERS •Dominated–Boeing&Airbus •Not much of difference. POWER OF BUYERS •Low bargaining •Consider Service of airline too.

Competitive Analysis of TATA Nano using Porter Five forces .

Low Experience Other Cost advantages Low . TATA spent Rs 17oo* crore as initial investment + 4 years on research HIGH because of its parent experience(TATA Motor) Yes** Low Medium because of reverse engineering process and availability of resources. Threat of new entrants Low  Overall Rating: LOW Retaliation by TATA in case of competition High Entry Costs Yes. Yes . The Price is Rs 130.000. because of large resources.Threat of new entrants is influenced by Factors Entry Deterring Price Tata NANO Advantages Yes.

Bargaining Power of Buyers is influenced by Factors Differentiation Tata NANO Advantages Price . Durability . Test of emission. Brand equity Buyer Power Low  Overall Rating: LOW Concentration Large number of consumers Easy Availability of loans •Car has passed the full frontal crash and side impact crash •Passed Govt.noise and vibration Low Profitability Quality Low Low .

Bargaining Power of Suppliers is influenced by - Factors Concentration High Supplier Power Low  Overall Rating: LOW Switching Costs Low Low Organization/cartel Diversification of supplier products No No Low Low .

Threat of Substitute product is influenced by Factors Availability Other Category substitutes Same category NO Yes. minimal extent e. Low Low in short term .g. but.Alto Threat of substitute low Medium  Overall Rating: LOW Time Lag in High availability of same category product Quality of substitute Quality influences the customer. High end bikes and other car models like Reva.

of Competitos Size of payoff Switching costs Origin of competitors Diverse High .Rivalry among Existing competitors is influenced by Factors Rivalry among existing competitors Brand equity influences the customer Negligible in short term Depends on Volume Medium as customers can switch to other products Low among same category low Low Medium Brand Image  Overall Rating: Medium No.

THANK YOU 14 .

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