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Choosing most attractive Target markets
BySanchit Aggarwal
Bits Pilani K.K Birla Goa Campus
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Porter’s five forces analysis
Analysis scheme developed by Harvard Business School professor: Michael E. Porter
•It allows business managers to gauge the intrinsic long-run attractiveness of a market segment and thus assess current and potential lines of business.•3 out of 5 forces relate to industry participants•The other 2 relate to the vertical participants: SUPPLIER and CONSUMER
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• PORTER’S FIVE FORCES ANAYLSIS
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Threat of new entrants
• Analyses the ease of entry for new participants in the market place
• If it is easy- Level of competition is HIGH
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Threat of intense segment rivalry
• It evaluates the number and activity of a company's rivals
• Numerous, strong and aggressive competitors: Segment unattractive
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Threat of substitute product
• A new good or service coming to the market erodes sales of established products.
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Bargaining power of suppliers• Scarcity of supplier
resources can increase competition among manufacturers, thus increasing costs
• Segment is unattractive is bargaining power of suppliers is high
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Bargaining power of Buyer• If consumer has
good bargaining position then it can reduce finished good prices and hence reduce profitability
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Combining the 2 factorsSegment's
attractiveness
measured using
porter’s analysis
Company’s
objectives and
resources
Most attractive
target market
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