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TOOLS FOR IDENTIFYING INVESTMENT OPPORTUNITIES There are several useful tools that are helpful in identifying promising investment opportunities: 1. Life Cycle Approach 3. The Experience Curve . Porter Model: Profit Potential of Industries 2.

Bargaining power of sellers .Threat of new entrants 2.Pressure from substitute products 4. PORTER 5 FORCES MODEL 1.Bargaining power of buyers 5.Rivalry among existing firms 3.

Investment must be such that reduces costs. EXPERIENCE CURVE Experience curve analyzes how cost per unit changes with respect to accumulated volume of production. .

2. 3. . LIFE CYCLE APPROACH There are four stages a product goes through during its life cycle. there is high competition and very few entrants survive this stage. Decline Stage – Due to introduction of new products and changes in customer preference. each stage represents different investment and net profit value. Pioneering Stage – In this stage. the industry incurs a decline in market share and profits. 1. Maturity Stage. the technology and product is new.It marks developed industries with mature product and steady growth rate 4. Rapid Growth Stage – This stage witnesses a significant expansion in sales and profit.