Knowing who your competition is, how their actions will affect you and in what ways is critical to your bottom line and future planning. Whether you are a Fortune company or a small, local business, competition has a direct influence on your success. Porter inthe five forces model looks at five specific factors that determine whether or not a business can be profitable, based on other businesses in the industry.
Understanding Porter's Five Forces The tool was created by Harvard Business School professor Michael Porter, to analyze an industry's attractiveness and likely profitability. Since its publication init has become one of the most popular and highly regarded business strategy tools.
Porter recognized that organizations likely keep a close watch on their rivals, but he encouraged them to look beyond the actions of their competitors and examine what other factors could impact the business environment.
He identified five forces that make up the competitive environment, and which can erode your profitability. This looks at the number and strength of your competitors. How many rivals do you have? Who are they, and how does the quality of their products and services compare with yours?
Where rivalry is intense, companies can attract customers with aggressive price cuts and high-impact marketing campaigns. Also, in markets with lots of rivals, your suppliers and buyers can go elsewhere if they feel that they're not getting a good deal from you. On the other hand, where competitive rivalry is minimal, and no one else is doing what you do, then you'll likely have tremendous strength and healthy profits.
This is determined by how easy it is for your suppliers to increase their prices. How many potential suppliers do you have?
How unique is the product or service that they provide, and how expensive would it be to switch from one supplier to another?
The more you have to choose from, the easier it will be to switch to a cheaper alternative. But the fewer suppliers there are, and the more you need their help, the stronger their position and their ability to charge you more. That can impact your profit. Here, you ask yourself how easy it is for buyers to drive your prices down.
How many buyers are there, and how big are their orders? How much would it cost them to switch from your products and services to those of a rival?
Are your buyers strong enough to dictate terms to you? When you deal with only a few savvy customers, they have more power, but your power increases if you have many customers. This refers to the likelihood of your customers finding a different way of doing what you do.
For example, if you supply a unique software product that automates an important process, people may substitute it by doing the process manually or by outsourcing it. A substitution that is easy and cheap to make can weaken your position and threaten your profitability.
Threat of New Entry. Your position can be affected by people's ability to enter your market. So, think about how easily this could be done. How easy is it to get a foothold in your industry or market? How much would it cost, and how tightly is your sector regulated?
If it takes little money and effort to enter your market and compete effectively, or if you have little protection for your key technologies, then rivals can quickly enter your market and weaken your position.The Five Forces analysis of the fashion industry shows that while there are few threats, it is not good that the market is effectively nearing saturation.
Porters five forces — courtesy of ‘Grahams Child’ buyer power is a relatively large force. While clothes shoppers are typically individuals with little to none direct bargaining. Porter’s five forces model is an analysis tool that uses five industry forces to determine the intensity of competition in an industry and its profitability level.
. This is a research report on Shoppers Stop Analysis by Balajiv Ganesh in Marketing category. Search and Upload all types of Shoppers Stop Analysis projects for MBA's on timberdesignmag.com In Porter's five factor model, each of the three competitive forces concerns the danger of customers taking their business elsewhere The two strength factors that relate to all competitive forces are and customer loyalty.
Understanding the buyer behavior model for Shoppers' Stop Group (SSG)industry. Identifying the market share drivers relevant to Shoppers' Stop Group (SSG) market. Segment Attractiveness Analysis – Our analysis will work out which are the most attractive segments and which are the one the firm should go ahead and target.
Published: Mon, 5 Dec This paper looks at Marks and Spencer (MandS), one of the UK leading retailers and a very successful brand. It examines the environment in which MandS is operating with the help of the PESTEL analysis and then goes on to scrutinise the attractiveness and competitiveness of the retailing industry in the United Kingdom (Porter’s Five Forces analysis).