Task
Competitive Strategy: according to Porter (1980/1985)
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Get Help Now!- Aim: to understand the overall attractiveness of the market or ‘industry’
- Do so in order to help the individual business identify and establish a profitable and sustainable position relative to rivals and based on the forces that determine industry competition
- Remember that markets are dynamic: the competitive forces (the ‘rules of the game’) change over time.
Threat of entry dependent on barriers to entry:
• Size and sunkness of capital requirements
• Economies of scale
• Experience curve effects
• Product differentiation
• Brand performance/customer loyalty
• Access to distribution channels
• Expected retaliation
• Legislation/government action
Threat of substitution is high when potential substitutes:
• Satisfy same need for buyer
• Have high perceived or actual performance
• Switching costs to the buyer are low
• Propensity of buyer to switch is high
• The market is in an early phase of its life cycle
Intensity of of competitive rivalry is likely to be high when:
• Competitors equal in size and capability
• Slow market growth
• Price is primary basis for competition
• High fixed (and sunk) costs
• High exit barriers
• Undifferentiated products
Five Forces analysis: Key questions
Which are the dominant forces in the industry?
• What are the underlying forces which are driving these five forces?
• How may the five forces change?
• What is the impact on you; and on your key competitors?
• What can be done to influence the impact of the five forces on your business?
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