Understanding the

Marketplace
MM 5003 Marketing Management
January 2021
Ira Fachira, PhD
Porter’s 5 Forces
Forces Driving Industry Competition
High Threat of Entry / Threat of New
Entrants
More likely when Important issues
• Economies of scale are possible • What barriers exist?
• Capital requirements of entry are low • What is our position?
• Easy access to distribution channels
• No dominant “player”
• Little expected retaliation
• Little government/legislative
intervention
• Low levels of differentiation
Strong Buyer Power
More likely when
• High concentration of buyers
• Large number of small suppliers
• Little risk/low cost of switching
• Alternative sources of supply
• Low differentiation
• High levels of competition
• High risk of backward integration
Strong Supplier Power
More likely when
• High concentration of suppliers
• Cost of switching suppliers is high
• Risk of switching suppliers is high
• Supplier has powerful brand
• Supplier dominates market
• High risk of forward integration
Threats of Substitute
• Product for Product
• Post replaced by fax replaced by email
• Substitution of need
• Better quality castings reduces need for machine tools
• Generic substitution
• Holiday or a new TV?
• Do without!
Competitive Rivalry (1)
• Rivalry between competing organisations
• Issues:
• What is it based on?
• Increasing or decreasing?
• How is it affecting us?
• What can we do about it?
Competitive Rivalry (2)
• Balance of rivalry • High cost of extra capacity
• Lots of small, balanced competitors? • Level of differentiation
• Market domination?
• High exit barriers
• Market growth rates
• Product life cycle? • Easy acquisition
• Global markets?
• High fixed costs
THANK
YOU
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