RTERS FIVE FORCES MOD

Presented By:
Rahul Wasnik
Mohit Khushlani
Swapnil R Bhosle
Jay Auoti
Aditya Shihorkar

Michael E. Porter
Born in 1947.
Professor of Harvard Business

School.
Introduced Porter's 5 Forces Model.
Written 18 books & over 125

Articles.

Porter's Five Forces model, named after Michael E.

Porter, identifies and analyzes five competitive forces
that shape every business/industry, and helps determine
the weaknesses and strengths.
These forces are:
1. Competition in the industry;
2. Threat of new entrants into the industry;
3. Bargaining power of suppliers;
4. Bargaining power of customers;
5. Threat of substitute products.

Threats of New Entrants

The easier it is for new companies to enter the industry, the

more cutthroat competition there will be. Factors that can
limit the threat of new entrants are:
1.
2.
3.
4.
5.
6.

How loyal are the end users in this industry?

How troublesome or hard is it for the end users to switch
and use another product?
Does it require a large seed capital to enter this industry?
Do entries to this industry regulated by government?
How hard is it to gain access to the distribution channels?
How long does it take for new staff to acquire the
necessary skills to do the work?

Threats of Substitutes
Threats of Substitute in the Porters theory actually means
goods and services that does similar functions
How many close substitutes are available?
How pricy are the substitutes?
What is the perceived quality of the substitutes?

Competitive Rivalry

1.
2.
3.
4.
5.
6.

Each competitors aim to serve different needs and market

segment with different mixes of
Price
Products
Service
Features
What are the sizes of your close competitors?
What is the industry structure? Is it a fragmented, consolidated,
oligopoly or monopoly industry?
What is the current industry growth rate?
How high are the exit barriers? Do your competitors have a high
committed fixed cost thus they have to operate even at a loss?
How diversified are your competitors?
How extensively do your direct competitors advertise?

Bargaining power of Customers

Bargaining power can be determined by:
1.
2.
3.
4.
5.
6.

How many companies are there for the buyer to choose from?
Are the buyers buying a huge volume?
Do you depend only on a few buyers to sustain your sales?
How hard is it for the buyers to switch and use a competing
product?
Are the buyers purchasing from you as well as your competitors?
Do the buyers have the capacity to enter your business and
produce the goods themselves?

Bargaining power of Suppliers

Bargaining power of suppliers can be determined by:

Are there substitutes for your suppliers products?

Do your suppliers serve multiple industries? Does the total
industry revenue accounting for only a mall portion of the
suppliers total revenue?
Do you have high switching cost to use another supplier?
Do suppliers have the capacity to enter your business?
Does your company capable to enter the suppliers
business?

EXAMPLES

Suppliers Power

Michael Porters Five Forces Model

Under Armour
Bargaining power
of suppliers

Threat of new
entrants
Large capital costs
are required for
branding,
advertising and
creating product
demand, and hence
this limits the entry
of newer players in
the sports apparel
market.
Competitive
rivalry

Bargaining power of
customers
Wholesale customers, like
Dick's Sporting Goods and
the Sports Authority, hold
a certain degree of
bargaining leverage, as
they could substitute
Under Armour's products
with other competitors' to
gain higher margins.

In 2012, Under
Armour's products
were produced by
27 manufacturers
located across 14
countries. Of these,
the top 10
Bargaining power of end
Under Armour
accounted for 49
faces intense
customers is lower as
percent of the
competition from
Under Armour enjoys
products
Nike, Adidas and
strong brand recognition.
Threat of substitute
manufactured.
newerproducts
players.
The demand for performance apparel, sports footwear
and accessories is expected to continue, and hence we
think this force does not threaten Under Armour in
theforeseeablefuture.

Porters Five Force Analysis

Supplier Power (Moderate)
Suppliers are small. However, the high quality inputs provided by
suppliers dilute the bargaining power of players
The quality and availability of these inputs is highly important to the
quality of the end products in the aerospace and defense industry,
increasing the power of the suppliers
Too many suppliers
Buyer Power (Moderate)
Large size of competitors due to merger activity
Players are limited as Airbus and Boeing have a virtual duopoly
Buyers typically government organizations which flex their financial
muscles to dilute the bargaining power of players

Threat of New Entrants (Low)

High capital outlay and expertise
The arms industry has become highly concentrated, nationally and
internationally
Threat of Substitutes (Low)
No real threat of substitutes in defense and aircrafts, however air freight
section might be affected with increase in concerns of carbon emissions as
companies are seeking eco-friendly reputation
Degree of Rivalry (Strong)
Due to duopoly, Airbus and Boeing are the sole rivals and they are quite
evenly matched
Competition is intense in terms of winning defense contracts and
companies use innovation and new technology to differentiate their service

New Entrants
Measures the ability of companies
to enter your market

Customers
This measures the factors effecting how easy it is for
buyers to drive prices down

Many consulting firms to choose from.

TCS must develop sufficient expertise thus making
outsourcing a compelling value proposition.
However, buyers require special customization.
A need to move the purchase decision away from price.
Huge decline in IT expenditure.

Substitutes

Substitute products are produced in a

different industry but crucially satisfy the same
customer
need. stategic development depar
Internal

Suppliers
This assesses how easy it is for suppliers
to drive up prices.

Maincost
Higher
Require
Supply
Suppliers
Low
raw
the
of
consultants
of
have
material
highly-skilled
number
switching
highof
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bargaining
TCS
consulting
suppliers.
high
consultants
isexcellence
their
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falls
to below
maintain
= the
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consultants.
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theirthe
demand.
reputation
suppliersfor
powe
qua

Competition
This measures the number and capacity of your
competitors. If your company has high competitive
advantage then you will have high rivalry power.

Competitive

Conclusion
The Porter's Five Forces tool is a simple but
powerful tool for understanding where power
lies in a business situation. This is useful,
because it helps you understand both the
strength of your current competitive position,
and the strength of a position you're considering
moving into.

THANK YOU