...dynamics of competitors within an industry is critical for several reasons. First, it can help to assess the potential opportunities for your venture, particularly important if you are entering this industry as a new player. It can also be a critical step to better differentiate yourself from others that offer similar products and services. One of the most respected models to assist with this analysis is Porter’s Five Forces Model. This model, created by Michael E. Porter and described in the book “Competitive Strategy: Techniques for Analyzing Industries and Competitors,” has proven to be a useful tool for both business and marketing-based planning. Background The pure competition model does not present a viable tool to assess an industry. Porter’s Five Forces attempts to realistically assess potential levels of profitability, opportunity and risk based on five key factors within an industry. This model may be used as a tool to better develop a strategic advantage over competing firms within an industry in a competitive and healthy environment. It identifies five forces that determine the long-run profitability of a market or market segment. * Suppliers * Buyers * Entry/Exit Barriers * Substitutes * Rivalry Supplier power * Supplier concentration * Importance of volume to supplier * Differentiation of inputs * Impact of inputs on cost or differentiation * Switching costs of firms in the industry * Presence of substitute inputs ...
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...for HBR, "How Competitive Forces Shape Strategy." In the years that followed, Michael Porter's explication of the five forces that determine the long-run profitability of any industry has shaped a generation of academic research and business practice. In this article, Porter undertakes a thorough reaffirmation and extension of his classic work of strategy formulation, which includes substantial new sections showing how to put the five forces analysis into practice. The five forces govern the profit structure of an industry by determining how the economic value it creates is apportioned. That value may be drained away through the rivalry among existing competitors, of course, but it can also be bargained away through the power of suppliers or the power of customers or be constrained by the threat of new entrants or the threat of substitutes. Strategy can be viewed as building defenses against the competitive forces or as finding a position in an industry where the forces are weaker. Changes in the strength of the forces signal changes in the competitive landscape critical to ongoing strategy formulation. In exploring the implications of the five forces framework, Porter explains why a fast-growing industry is not always a profitable one, how eliminating today's competitors through mergers and acquisitions can reduce an industry's profit potential, how government policies play a role by changing the relative strength of the forces, and how to use the forces to understand complements...
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...Five Forces of the Singing Valley Market 1.) Bargaining power of the customer - Singing Valley Resort prides itself on superior quality and offering only the best services and experience quality. The bargaining power of the customer is low, because quality is superior. 2.) Threat of substitution- Singing Valley Resort is not in danger of being replaced. Its location and quality have given it a lead on any competition. The occupancy is always full and the goal is to increase revenue in other means besides increased occupancy. 3.) Bargaining power of the suppliers- The suppliers could increase their cost because of the type of clientele that stay at Singing Valley Resort. The organic food prices and wine prices could increase. Singing Valley Resort could give current suppliers a counter by showing cheaper prices from other suppliers that are available, and then bargain results. 4.) Threat of new intrants- If a new resort or hotel moves into the same area as Singing Valley Resort, they can still boast superior quality and superior services, to include extracurricular activities. 5.)Rivalry- Once again Singing Valley Resort will stress superior quality to any competitors. The superior accommodations, tip-top service, delicious meals, and recreational activities will exceed the competitors regardless of price. Statement of Competitive Strategy Singing Valley Resort should continue to provide superior services and quality accommodations to maintain current revenue. In order to...
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...Understanding the Five Forces Porter regarded understanding both the competitive forces and the overall industry structure as crucial for effective strategic decision-making. In Porter's model, the five forces that shape industry competition are: Competitive rivalry. This force examines how intense the competition currently is in the marketplace, which is determined by the number of existing competitors and what each is capable of doing. Rivalry competition is high when there are just a few businesses equally selling a product or service, when the industry is growing and when consumers can easily switch to a competitors offering for little cost. When rivalry competition is high, advertising and price wars can ensue, which can hurt a business's bottom line. Rivalry is quantitatively measured by the Concentration Ratio (CR), which is the percentage of market share owned by the four largest firms in an industry. Bargaining power of suppliers. This force analyzes how much power a business's supplier has and how much control it has over the potential to raise its prices, which, in turn, would lower a business's profitability. In addition, it looks at the number of suppliers available: The fewer there are, the more power they have. Businesses are in a better position when there are a multitude of suppliers. Sources of supplier power also include the switching costs of firms in the industry, the presence of available substitutes, and the supply purchase cost relative to substitutes...
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...* In determining the industry's competition; Michael Porter's five forces of the outside- in business unit strategic model elucidates an analytical part in deciding Blackberry's competitive structure of the industry. It helps them see that their Bargaining Power of Suppliers could increase, due to their eroding market share, which makes them a company with great credible threats if they decide on forward continuity. This problem was evident when BlackBerry hassled to get a fundamental application for the launch of the Z10. Their Rivalry Among Competitors had begun to soar as Apple and Samsung had secured more than half of the Smartphone market (Bernstein, 2012), all because of their low product differentiation there posing a threat to their ability to make a profit. Their Bargaining Powers of Buyers however, has proven that the large numbers of competitors with other simpler products helps them demand for a better quality and service thus helping them remain in the market only with a threat of losing buyers if their product quality does not increase. Decreasing their Threat of Substitute in the mobile industry where developing a wristwatch that will perform the same functions as a Smartphone, are potentially replacing handheld smart phones out of the market- thus giving them a greater chance to raise their product prices and earn greater profits and having the ability of satisfying customers needs effectively. Wherefore, a market flooded with substitutes, will narrow profit...
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...What is it? Framework/theory Porter's Five Forces of Competitive Position Analysis were developed in 1979 by Michael E Porter of Harvard Business School as a simple framework for assessing and evaluating the competitive strength and position of a business organisation. This theory is based on the concept that there are five forces that determine the competitive intensity and attractiveness of a market. Porter’s five forces help to identify where power lies in a business situation. This is useful both in understanding the strength of an organisation’s current competitive position, and the strength of a position that an organisation may look to move into. Strategic analysts often use Porter’s five forces to understand whether new products or services are potentially profitable. By understanding where power lies, the theory can also be used to identify areas of strength, to improve weaknesses and to avoid mistakes. Porter’s five forces of competitive position analysis: The five forces are: 1. Supplier power. An assessment of how easy it is for suppliers to drive up prices. This is driven by the: number of suppliers of each essential input; uniqueness of their product or service; relative size and strength of the supplier; and cost of switching from one supplier to another. 2. Buyer power. An assessment of how easy it is for buyers to drive prices down. This is driven by the: number of buyers in the market; importance of each individual buyer to the organisation; and cost...
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...Porter’s Five forces and SWOT analysis on Breadtalk in Singapore Introduction BreadTalk Group Limited is a bakery in Singapore and was founded in the year 2000, like any other business Breadtalk is in regular pressure to improve their levels of performance and efficiency, with this in mind, this essay shall give a comprehensive study of diverse aspects that have made it possible for Breadtalk to stay gainful despite the critical business environment. This shall be achieved by performing a comprehensive Strength, weakness, Opportunity and Threat (SWOT) analysis and Porters Five forces analysis. SWOT analysis Strength The concept of Breadtalk is exclusive and inventive and this differentiates the brand from usual bakeries in the market. Breadtalk has standardized the design across all branches and is widely recognized for its attractive and eye-catching layout. Breadtalk vends a large range of buns, bread, pastries and cakes which is a very unique concept from the traditional bakeries in the market; every retail channel of Breadtalk presents about 40 to 60 special items day by day. (Ball, 2012) The Breadtalk group has a chain of approx 40 retail outlets island-wide in Singapore, it has existence in countries like Kuwait, Oman, Jordan, Saudi Arabia, India and Bahrain and thus it has captured strong market interest, which has helped in increasing its brand awareness. Weakness Breadtalk products are priced slightly higher than the products of other bakers, which might...
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...Porter's Five Forces Model Applied to the Movie Rental Industry Tarleton State University Porter’s Five Forces Model Applied to the Movie Rental Industry Alex Boogren CIS-450 Holland Reviewed by: Kelsey Stone 2/18/2013 Porter’s Five Forces Model Applied to the Movie Rental Industry The movie rental industry has undergone a massive overhaul throughout the past decade in the way that they do business. Consumers now have the freedom to choose multiple different ways to rent their movies, whether it is from an online streaming service such as Amazon Prime, a movie rental kiosk like Redbox, or an old fashioned brick and mortar store. Because of this, I believe that the movie rental industry would be interesting to evaluate using the Porter’s Five Forces Model. Buyer power in the movie rental industry is extremely high right now. This means that consumers have many choices when deciding on where to rent movies from. Buyer power in this industry was relatively low until technology allowed for online streaming and automated kiosks to rent movies from. Since buyer power is high, competition is fierce in this industry at the moment. High buyer power lowers the attractiveness of entering the movie rental industry. The next force that will be evaluated is supplier power. Supplier power in the movie rental industry is considered high. High supplier power means that there are only a few places for a movie rental business to acquire their movies from. It...
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...The five Forces Competing for profits The term competence is not about to beat your enemy with a profit. But compete for a profit is more complicated than it seems. Is not just compete with your enemy but with other participants involved as customers, who jostle for good quality products at a good price. Compete with suppliers who prefer to be paid better and deliver fewer products and compete with producers who could replace at any time. The Porter's Five Forces tool is a simple but powerful tool for understanding where power lies in a business situation. This is useful, because it helps you understand both the strength of your current competitive position, and the strength of a position you're considering moving into. With a clear understanding of where power lies, you can take fair advantage of a situation of strength, improve a situation of weakness, and avoid taking wrong steps. This makes it an important part of your planning toolkit. Conventionally, the tool is used to identify whether new products, services or businesses have the potential to be profitable. However it can be very illuminating when used to understand the balance of power in other situations. These five forcers, the intensity of rivalry among existing competitors, the bargaining power of buyers (the industry’s customers), the bargaining power of suppliers, the threat of substitutes, and the threat of new entrants determine the industry’s structure. Before Porter, the prevailing framework for sizing...
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...Introduction: In 1979, Harvard Business Review published “How Competitive Forces Shape Strategy” by a young economist and associate professor, Michael E. Porter. It was his first HBR article, and it started a revolution in the strategy field. In subsequent decades, Porter has brought his signature economic rigor to the study of competitive strategy for corporations, regions, nations, and, more recently, health care and philanthropy. “Porter’s five forces” have shaped a generation of academic research and business practice. With prodding and assistance from Harvard Business School Professor Jan ‘ Rivkin and longtime colleague Joan Magretta, Porter here reaffirms, up-dates, and extends the classic work. He also ad-dresses common misunderstandings, provides practical guidance for users of the framework, and offers a deeper view of its implications for strategy today. In essence, the job of the strategist is to understand and cope with competition. Often, however, managers define competition too narrowly, as if it occurred only among today’s direct competitors. Yet competition for profits goes beyond established industry rivals to include four other competitive forces as well customers, suppliers, potential entrants, and substitute products. The extended rivalry that results from all five forces defines an industry’s structure and shapes the nature of competitive interaction within an industry. As different from one another as industries might appear on the surface, the underlying...
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...Business Policy & Competitive Strategy Vivek Khanna TATA Motors This project is a part of the internal assessment for the subject Business Policy & Competitive Strategy. I have developed a Porter’s Five Forces analysis for the organization. I identified strategic strengths and weaknesses and identified core competencies of the organization . The company that I have taken into account to analysis the Porter’s Five Forces is the Tata Motors. The Specific product that I will be taking into analysis is the NANO CAR. This segment has a great growth potential in developing countries , especially in a country like India. 1. Potential Entrants – Threat of new entrants 2. Buyers – Bargaining power of buyers 3. Substitutes – a. Threat of substitute products or services b. Rivalry among existing firms 4. Suppliers - Bargaining Power of Suppliers 5. Other Stakeholders – Relative Power of Union, Governments etc. A brief Information about the product : The Tata Nano is a rear-engine, four-passenger city car built by Tata Motors, aimed primarily at the Indian market. The car is very fuel efficient, achieving around 78mpg on the highway and around 92 in the city. It was first presented at the 9th annual Auto Expo on 10 January 2008, at Pragati Maidan in New Delhi, India. Nano had a commercial launch on March 23, 2009 and, a booking period from April 9 to April 25, generating more than 200,000 bookings for the car. The sales of the car will begin in...
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...Porter’s Five Forces Model Porter’s Five Forces is an economic model used to characterise industries and markets, and combine to make up the business environment. Porter explains that by studying the structure and underlying dynamics between these forces, Nokia can discover opportunities for improving their marketing strategies, along with determining the industry attractiveness, competitiveness and long-run industry profitability. These five forces are also known as "competitive forces". Michael Porter has identified five forces that are widely used to assess the structure of any industry, along with evaluating what drives competition. Porter’s five forces are: 1. Existing Competitive Rivalry 2. Potential New Entrants 3. Threat of Substitutes 4. Bargaining Power of Suppliers 5. Bargaining Power of Customers Existing Competitive Rivalry The most common and direct threat to a business or organisation is through their rivals and competitors. This usually occurs in a market that sells the same product or offers similar facilities and services, to a population of the same customer base. Overall, general markets are known and seen to be more competitive. The more firms that will operate in the markets the easier it will be for the customers to shop around. Even a minority of firms can dominate a market, for example, supermarkets; even they can cause intense competition. For example, “some forms of competition, such as price competition, are highly unstable...
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...Porter's Five Forces Porter's Five Forces allowed us to analyse the influences on the industry in which Tesco operates. It highlights where Tesco has developed a competitive edge over its rivals. Potential entrants: Throughout the recession Tesco has continued to invest into expanding the company and developing efficiencies, making it as competitive as ever to defend against the threat of new entrants (Datamonitor, 2010, p. 19). The threat of a new competitor entering this sector is relatively low, due to the huge capital investment required to be competitive and establish a brand identity that stands out. One of Tesco's main advantages is their ability to buy in vast quantities, making them highly price competitive. Along with being the cost leader in many areas, they are also one of the few retailers to offer convenience services, like on-line shopping, home delivery and self-service checkouts. All of which helps to protect them from the threat of new competitors. Subsitutes: There are many substitute options in the food retail sector and there are no switching costs to the consumer. Whereas, the switching costs for Tesco's financial services can be high and therefore a significant deciding factor for the customer. To reduce the risk of customers turning to substitute major food retailers, Tesco expanded into many non-food areas including clothes, telecommunications, electronics and financial products, this provides customers the convenience of satisfying many of their...
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...Poter’s Five Forces- Haidilao Hotpot Poter’s five forces 1, the bargaining power of suppliers Haidilao Pot has its own four large modern logistics center and a raw material production base, it uses Backward Integration Strategy on its raw material, the company is a large enterprise with national chains in China, the need for raw materials is large, enhance their ability to bargain, recently some vegetables (cabbage, etc. ) oversupply, causing prices to fall, this is good for the company’s business; Shuanghui clenbuterol issue regulations require companies to make safety requirements for food, meat supply is under attack, but also good for the company’s business. It means suppliers has low influence on the company. 2, the bargaining power of buyers Haidilao’s guiding strategy is service differentiation, maximum to meet customers’rationalize requirements. In Haidilao, even waiting for seats can be enjoyable. There are different drinks and kinds of chess on the desk, newest play cards aside and services like nail care for women and shoe care for men available all the time. During dining, you are provided frequently with warm hand towels, a pinafore with ethnic feature, hair string for girls, glass cloth in case that the drop splits to your glasses and a small plastic bag to put your big screen cell phone in. Every waiter and waitress has the right to give you a free meal in particular situation. These uncommon attributes attract more and more interest. ...
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...INDUSTRY COMPETITION: Amazon exists in a highly competitive e-commerce industry with tough competitors like Apple, Barnes and Noble, E-Bay. However Amazon has competitive advantage in the following aspects: i) Pioneer Advantage: Amazon established its niche as the first online book seller in the year 1997. Today Amazon is the nation’s biggest book seller and world’s largest online retailer (New York Times, 2012). Amazon has managed to keep up with technology by investing in cloud computing and bringing to market mobile devices like Kindle e-reader. The recently announced Kindle Fire is another strategic differentiator in Amazon product portfolio. Kindle Fire facilitates delivery of Amazon’s services and content to customers, and provides them the mobile-device experience. It has established itself as the leading Android tablet with a 54.4 percent market share (comScore, 2012). ii) Amazon’s main focus on customer satisfaction has ensured their position in the on-line retail market. Amazon is highly invested in providing customers convenience, selection, prices and personalized services (Mirow, 2005). Amazon’s e-commerce platforms with highly granular array of choices and mobile shopping apps, have vastly improved the shopping experience for the customers. According to a recent online retail customer satisfaction survey, Amazon topped the list, outdoing competitors like Apple, eBay, Netflix, Best Buy, Walmart (techcrunch, 2012). iii) Amazon has been experiencing marked...
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