R E ATE

W TOC
HO R F I VE
E
PORT CES
FOR Y) NURUL JE
M A R SSY JALIL
LAH
(SUM
2 6 02 1 8 67 9
4

N C EPT
I .S CO
LC80
 Michael E. Porter
First published in 1979, “How Competitive Forces Shape Strategy” by Michael E. Porter,
revolutionized the field of strategy. Popularly known as “Porter’s Five Forces”.

What is Porter Five Forces?

Porter Five Forces is one of analytical tools that use by company to analyze the environment of
the company, it’s to know company position in the market.
 5 Component Porter Five Forces
Model
01 Buyer Power
Threat of New
04 Entrants
02 Supplier Power
Rivalry Among
Threat of Subtitute 05 Existing Firm
03 Product
1. BUYER
POWER
HIGH : When there are a lot of choices
for buyer low switching cost.
Buyer Power in high position, is like
buyer can move to another company easily LOW : When high switching cost
or another product easily. Example : When we buy the luxury
Example : Today we go to the product it’s ready for us to easy move to
restaurant A and tomorrow we can easily other product because of the price.
move to restaurant B because of the new
product, fresh product, many promotion in
there.
 2. SUPPLIER POWER
HIGH
Depedence a company to the supplier.
Example : If we only have several
certain supplier like one or two specific
supplier for machine, equipment, so on we
have depedence with the supplier, in this
condition we can say supplier power is
high.
LOW
When there are a lot of choices for
supplier.
Example : If common product like
egg, flour (make bread) we don’t have
strong depedence with supplier, maybe
we can choose 5 supplier/change to
another supplier because this a common
raw material that many supplier can
provide.
 3. THREAT OF SUBTITUTE
PRODUCT
HIGH
Threat of Subtitute Product high when
there a lot of choices for Substitute
Product.
Example : When we can replace rice
with potato/bread/noodle.
LOW
If low, it’s not easy for us as a people to move to
another subtitute product.
Example : Transportation -> if we go to
overseas with airplane it’s quite difficult, we can
use train “But it’s very difficult to choose
right?” This mean the threat of subtitute product
in this case is low.
 4. THREAT OF NEW ENTRANTS
LOW

Threat of New Entrant low, when New

HIGH Entrants difficult to enter the industry.
Example : Airplane -> If you a
High when New Entrants are easy to enter
newcomer you have to gain trust from
the industry.
the customer first as a passenger then
Example : When we have new online you can complete in the market.
shop retail clothing company, is very easy
for us to enter the market as long as we
have a good promotion. Costumer will buy
our product.
 HIGH
5. RIVALRY High when there a lot of competitors in the
industry and we complete each other tightly.
AMONG Example : Retail Industry (Food and
Beverage, Clothing).
EXISTING
LOW
FIRM Low if only one or two competitors and the
competition is not really tight.
Example : Luxury Products.
Jewelry Industry
ment : 5 F o rc es to the Jewelry
Assign
Industry.
JEWELRY
INDUSTRY
1. Threat of New Entrants : High.
Moderate in the sense that anyone can make
‘jewelry’. You can order beads online.
There are more wholesalers, meaning the
threat of entry is high - we don’t need
special qualifications or certifications or
permission to start selling jewelry.
2. Threat of Subtitutes : High. With so
many options and stones for jewelry, there is a
lots of substitutes for both the metals being
used, and also the synthetic market with
synthetic and artificial stones being very
common. These are substitutes for the jewelry
grade stones. And there are many substitutes
for jewelry and stones within the industry,
making this a high threat.

3. Buyer Power : High. With smaller
incumbents available, the range has now
increased, making it a lot easier for people to
find access to jewelry. Especially if they’re
not looking for fine jewelry. With
independent jewellers and smaller companies,
customers may actually be able to bargain the
price down, if these businesses need cash
flow and are looking for a sale.
4. Supplier Power : High. We don’t be
able to ask a supplier where they get their
stock from beause they won’t tell you. It’s all
about connections in this industry and they
guard their network fiercely.
5. Industry Rivalry : High. Lots of
retailers, small businesses, and independent
retailers and sellers are already in the space
and there isn’t much room for innovation or
product differentiation. The large companies
and brands command a high price for their
product due to their brand loyalty and equity,
making it an extremely competitive
landscape.
THANK YOU