porter's five forces
DESCRIPTION
Developed by Michael Porter, Porter's Five Forces is a classic business framework for evaluating the attractiveness of a particular industry by analyzing 5 forces. It is useful to utilize Porter's 5 Forces in conjunction with a SWOT analysis of the industry. This is a partial preview of the document. View and download the full PowerPoint here: http://learnppt.com/powerpoint/24_Porter%27s-Five-Forces.phpTRANSCRIPT
learnppt.com
PowerPoint Diagram Pack
Porter’s Five Forces
Check out our site for all your PowerPoint needs!
• http://learnppt.com – Find our ebook on creating effective and professional presentations. Covers basic to advanced concepts, including storyboarding, diagramming, and the Consulting Presentation Framework.
• http://learnppt.com/powerpoint -- Shop our catalog of Diagram Packs. We try to add more Packs monthly. All of our diagrams are professionally designed by ex-management consultants from top firms.
Developed by Michael Porter, Porter’s Five Forces is a classic business framework for evaluating the attractiveness of a particular industry by analyzing 5 forces. It is useful to utilize Porter’s Five Forces in conjunction with a SWOT analysis of the industry.
4. Suppliers
Suppliers negotiation power
2. Competitors in the industry
Rivalry among existing
companies
1. Potential new competitors
Threat by new competitors
3. Substitution products
Threat by substitution
products
5. Customers
Buyers’ negotiation power
2Questions & feedback? Email me – [email protected] diagrams in this pack are to be used by the original buyer only.
learnppt.com
Porter’s five forces constitutes a framework for analysing a company’s environment (or industry structure):– Porter first structured the framework in his 1980
book Competitive Strategy. Porter assumes that competition in an industry
depends on five basic forces:
The collective strength of these forces determines the ultimate profit potential and allocation in the industry.
Porter’s Five Forces – Introduction
What It Is Why We Use It
Strengths & Limitations
Industry Competitors
Substitutes
Potential Entrants
BuyersSuppliers
Rivalry Among Existing Firms
Bargaining power of buyers
Bargaining power of suppliers
Threat of substitute products or services
Threat of new entrants
Source: M.E. Porter, Competitive Strategy, 1980, p. 4 Free Press.
Strengths:
– Quite comprehensive framework.
– Good starting point to understand key drivers and trends.
Limitations:
– Very often used strictly qualitatively.
Assess attractiveness on the basis of competition in an industry.
Highlight areas in which industry trends may pose opportunities or threats.
Analyze where the company stands vis-a-vis the underlying causes of each competitive force.
To understand/diagnose levels of return.
THIS IS A PARTIAL PREVIEW
You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
3Questions & feedback? Email me – [email protected] diagrams in this pack are to be used by the original buyer only.
learnppt.com
Porter’s Five Forces – Framework Diagram
4. Suppliers
Suppliers negotiation power
2. Competitors in the industry
Rivalry among existing companies
1. Potential new competitors
Threat by new competitors
3. Substitution products
Threat by substitution
products
5. Customers
Buyers’ negotiation power
THIS IS A PARTIAL PREVIEW
You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
4Questions & feedback? Email me – [email protected] diagrams in this pack are to be used by the original buyer only.
learnppt.com
Porter’s Five Forces – Potential Insight & Output
Pressure from Substitute Products
Bargaining Power of BuyersBargaining Power of Suppliers
Threat of New Entrants
Intensity of Rivalry
Low, stable returns
Low, risky returns
High, stable returns
High, risky returns
Exit Barriers
Entry Barriers
L
H
L H
CostLeadership Differentiation
CostFocus
DifferentiationFocus
Competitive Advantage
CompetitiveScope
Broad
Narrow
Lower Cost Differentiation
• Several important economic and technical characteristics of an industry are critical to the strengths of each competitive force:
A supplier group is powerful when: It is dominated by a few companies and is more
concentrated than the industry it sells to. There are no substitute products. The industry is not an important customer. Its products are important to the industry. Products are differentiated or suppliers have built
up switching costs. It poses a credible threat of forward integration.
Barriers to entry: Economies of scale (including shared resources) Product differentiation (proprietary) Capital requirements Switching costs Access to distribution channels Cost disadvantages independent of scale Government policy Expected reaction of incumbent
Intense rivalry results from: Numerous or equally balanced competitors Slow industry growth High fixed or storage costs Lack of differentiation or switching costs Capacity augmented in large increments Diverse competitors High strategic stakes High exit barriers
A buyer group is powerful when: It is concentrated or purchases large volumes relative
to seller sales. The products represent a significant fraction of the
buyers’ costs or purchases. The products are standard or undifferentiated. It faces few switching costs. It earns low profits. It poses a credible threat of backward integration. The bought product is unimportant. It has full information.
Search for products that can perform the same function.
Assess buyers’ propensity to substitute.
Focus on those that: Are improving their price performance trade-off
compared with the industries products. Require low switching costs. Are produced by industries earning high profits.
Take offensive or defensive actions to create a defensible position against the forces:
Positioning the firm so its capabilities provide the best defense
Influencing the balance of forces through strategic moves
Anticipating shifts in the factors underlying the forces and responding to them
THIS IS A PARTIAL PREVIEW
You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
5Questions & feedback? Email me – [email protected] diagrams in this pack are to be used by the original buyer only.
learnppt.com
Total U.S. printed media revenues, 1989-1999Includes both consumer and advertising spending
The publishing industry has seen only modest increases in sales in recent years
Source:Veronis, Suhler & Associates; S&P Industry SurveyNote:Magazine and newspaper spending includes both advertising and consumer spending
The internet provides an innovative new distribution medium that magazines and newspapers can use to recover readers and lure advertisers.The internet provides an innovative new distribution medium that magazines and newspapers can use to recover readers and lure advertisers.
0
20
40
60
80
100
120
140
99E98E97E96E
– $ Billions
95E949392919089
EXAMPLE
Total revenues CAGR
Newspapers
Books
Magazines
• Newspaper and magazine revenue growth has been driven by price increases, as circulation has been flat to falling
• Newspapers and magazines share of total advertisers’ spending has also fallen from 32% to 28% over the last five years
• Book publishers have seen growth in book unit volumes, with stable prices:
– Books remain a popular source for access to fiction and non-fiction despite a growing number of substitutes
– Recent growth of discount stores has helped increase sales
1989-19944.6%
1994-1999E5.7%
THIS IS A PARTIAL PREVIEW
You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
6Questions & feedback? Email me – [email protected] diagrams in this pack are to be used by the original buyer only.
learnppt.com
The stock market, unsure of publishing’s future role, is not rewarding print-focused players
Value of $100 invested in March 1985
Source:CompustatNote:All dividends reinvested. Indices track independent, “pure play” print media companies in each print segment
Publishing companies must to transition to full media companies, expanding beyond print to distribute their products to be seen as long-term competitors.Publishing companies must to transition to full media companies, expanding beyond print to distribute their products to be seen as long-term competitors.
The Wall Street appeal of online involvement could help publishers who proactively use the new distribution medium
0
50
100
150
200
250
300
350
400
450S&P 500NewspapersBooksMagazines
ma
a-8
5
ma
a-8
6
ma
a-8
7
ma
a-8
8
ma
a-8
9
ma
a-9
0
ma
a-9
1
ma
a-9
2
ma
a-9
3
ma
a-9
4
ma
a-9
5
EXAMPLE
THIS IS A PARTIAL PREVIEW
You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
7Questions & feedback? Email me – [email protected] diagrams in this pack are to be used by the original buyer only.
learnppt.com
Leaders in the PC business have changed as quickly as the need for computing power
New entrants and industry consolidation are forcing competitors to continually redefine their business strategies.New entrants and industry consolidation are forcing competitors to continually redefine their business strategies.
U.S. Unit Market Share of top 10 competitors(quarterly changes in market share)
40%
30%
20%
10%
0%
U.S. UnitMarket Share
70%
60%
50%
2Q 1994 4Q 19944Q 1993
CompanyX
1Q 19943Q 19932Q 19931Q 1993 3Q 1994
EXAMPLE
CompanyX
CompanyX
CompanyX
CompanyX
CompanyX
CompanyX
CompanyX
CompanyX
CompanyX
THIS IS A PARTIAL PREVIEW
You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
8Questions & feedback? Email me – [email protected] diagrams in this pack are to be used by the original buyer only.
learnppt.com
Average PC makers’ revenue spending Top PC makers’ gross margin, 1989-1994
Gross margins have declined as the PC becomes a commodity product
Taiwanese hardware manufacturers, such as Acer, have experienced 25% compound annual revenue growth since 1986 by being the lowest cost suppliers to the top PC makers worldwide.Taiwanese hardware manufacturers, such as Acer, have experienced 25% compound annual revenue growth since 1986 by being the lowest cost suppliers to the top PC makers worldwide.
$1.00
Revenue
$0.76
Cost of goods
$0.04
R&D
$0.13
Mktg. & distribution
$0.02
SG&A
$0.05
Operating profit
0
10
20
30
40
50
60
70
1989 1990 1991 1992 1993 1994
% Gross margin
EXAMPLE
THIS IS A PARTIAL PREVIEW
You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
9Questions & feedback? Email me – [email protected] diagrams in this pack are to be used by the original buyer only.
learnppt.com
Several factors determine the bargaining power of buyers
A buyer group is powerful when:
• It is concentrated or purchases large volumes relative to seller sales
• Its purchases from the industry represent a significant fraction of the buyers’ costs or purchases
• It purchases standard or undifferentiated products
• Brand identification is low
• Its switching costs are low
• Its profits are low
• It poses a credible threat of backward integration
• Its purchases from the industry is unimportant for the quality of its products or services
• It possesses full information
These factors may change over time and alter buyer power.These factors may change over time and alter buyer power.
THIS IS A PARTIAL PREVIEW
You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
10Questions & feedback? Email me – [email protected] diagrams in this pack are to be used by the original buyer only.
learnppt.com
Bookstores are the only channel with the ability to exert pressure on publishers
Limited bandwidth will slow book publishers’ ability to distribute products on-line, but could bypass bookstores through Internet-based mail-order services and other creative services.Limited bandwidth will slow book publishers’ ability to distribute products on-line, but could bypass bookstores through Internet-based mail-order services and other creative services.
Publishers
• These large national stores played a central role in boosting book sales to record levels in 1994, but put pricing pressure on publishers
• For newspapers and magazines the customer-base is more fragmented
Convenience Stores &
Newsstands
Direct Distribution
(subscription)
Other retail outlets
Schools & Universities
BookstoresU.S. Retail Market Share, 1994
1. Barnes & Nobles
17.3%2. Borders-Walden
16.1%3. Crown Books
3.2%4. Books-a-Million
1.8%Total retail market of $9.4 billion
38.4%
Primarily newspapers and magazines Primarily books
EXAMPLE
THIS IS A PARTIAL PREVIEW
You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
11Questions & feedback? Email me – [email protected] diagrams in this pack are to be used by the original buyer only.
learnppt.com
Business
Distinct distribution channels serve the two major different end-user segments
Massive increase of home PC usage has increased the strength of the mainstream channel, especially retailers.Massive increase of home PC usage has increased the strength of the mainstream channel, especially retailers.
Source:IDC and Merrin Information Services, Inc.
Channels
Direct Sales
System Integrators (SI)
Value-Added Resellers (VAR)
Dealers
Computer Superstores
Mass Merchants
Consumer Electronic Stores
Office Stores
Mail Order
Direct Response
Value-added channels
Mainstream channels
Definitions
Those sales made by a manufacturers’ sales force, agent, or representative
Provide customized value-added solutions for clients
Offer unique, tangible solutions “off-the-shelf” to targeted customers
The “traditional” computer dealer channel. Do not add unique value to the system but do offer some value in the form of support, training, or other services
Large, well-merchandized store fronts , with most revenue generated by computer-related sales
Typically offer a wide range of products, including computer-related equipment
Offer a wide range of electronic merchandise, including computer-related items
Retailers and resellers focusing on office supplies
Third-party computer sales that use telephone to perform all levels of sale
Direct telephone sales from manufacturers not using third parties
Typical buyer
Home users
EXAMPLE
THIS IS A PARTIAL PREVIEW
You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
12Questions & feedback? Email me – [email protected] diagrams in this pack are to be used by the original buyer only.
learnppt.com
Porter’s Five Forces – Framework Diagram TemplatePorter’s Five Forces – Template
Suppliers Internal Rivalry
New Entrants
Substitutes
Buyers
• Bullet point 1• Bullet point 2• Bullet point 3• Bullet point 4
• Bullet point 1• Bullet point 2• Bullet point 3• Bullet point 4
• Bullet point 1• Bullet point 2• Bullet point 3• Bullet point 4
• Bullet point 1• Bullet point 2• Bullet point 3• Bullet point 4
• Bullet point 1• Bullet point 2• Bullet point 3• Bullet point 4
Competitive Advantage
Lower Cost Differentiation
CostLeadership Differentiation
CostFocus
DifferentiationFocus
Co
mp
etit
ive
Sco
pe
Broad
Narrow
INDUSTRY COMPETITIVE ASSESSMENT COMPETITIVE STRATEGY
THIS IS A PARTIAL PREVIEW
You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
13Questions & feedback? Email me – [email protected] diagrams in this pack are to be used by the original buyer only.
learnppt.com
END OF PARTIAL PREVIEW
You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
14Questions & feedback? Email me – [email protected] diagrams in this pack are to be used by the original buyer only.
learnppt.com
Browse our catalog of PowerPoint Diagram Packshttp://learnppt.com/powerpoint
Join our mailing list and receive the Basic Toolkit for free!http://learnppt.com/mailinglist
Read our eBook – How to Become a PowerPoint Guruhttp://learnppt.com/