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What is in this Guide?
What is Porter’s Model? Porter’s Five Forces Model of Competition How to use the Porter’s model? • Table to Calculate the Degree of Power • Competitive Rivalry • Threat of New Entrants • Bargaining Power of Suppliers • Bargaining Power of Buyers • Threat of Substitute
Case Study: Apple Inc. Bibliography Contact at ReportLinker.com
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Four main Objectives of Porter’s Model
To identify what factors shape the character of competition within an
industry
To assess and manage the
long-term attractiveness of an industry
To assess the structural attractiveness of the analysed
industry
To explain the relationship between the five dynamic forces
that affect an industry’s performance
Four Objectives
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Model of Competition
Industry Competitors
Potential Entrants
Buyer Power
Substitutes
Supplier Power
source: Porter, « Competitive Strategy », 1980
The threat of new entrants
The bargaining power of buyers
The bargaining power of suppliers
The threat of substitute products
The power of industry competitors
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How to use Porter’s Model?
Guide: Answer the following questions and you will get a detailed and in-depth analysis of the competition and industry
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Calculated Degree of Power
Power + -
Competitive Rivalry
Supplier power
Substitute power
Buyers power
Power of new entrants
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Guidelines: Fill in the table with crosses by answering the questions from the following sections to measure the degree of power available in the industry. The analysis depends on the number of crosses in each of the boxes. For example: If the competitive rivalry has many crosses in the ‘+’ box, the power of competitors are low, etc.
What is the Rivalry among existing
Competitors?
Competitors
• How many direct or indirect competitors are there?
• What are the size of my competitors?
• How diverse are my competitors?
Industry
• What is the industry growth rate?
• What are the strategic stakes?
Products
• How different is my product?
• What are the buyers’ switching costs?
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What are New Entrants Threats?
Production costs
• Are there any economies of scale?
• What are the capital requirements?
• What is the absolute cost advantage?
Brand
• How different is the product?
• How strong is the brand identity?
• How high are the switching costs?
Distribution
• Is it easy to access distribution channels?
• What are the government policies?
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What is the Bargaining power of
Suppliers?
Substitution
• What are the switching costs of suppliers and firms in the industry?
• Is there any presence of substitute inputs?
Players
• What is the suppliers’ concentration?
• How high is the concentration of suppliers?
Integration
• What is the suppliers’ threat of forward integration?
• What is the buyers’ threat of backward integration?
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What is the Bargaining Power of
Buyers?
Buyer‘s type
• How strong is the difference between buyer concentration vs. firm concentration?
• What is the buyer volume?
• What are the buyer switching costs relative to the firm’s switching costs?
• Is the buyer capable of backward integration?
Information
• How much information does the buyer have?
• Are they attracted by substitutes?
• How much does product differences effect the buyer?
Brand awareness
• How does the buyer judge the brand identity?
• How high is the impact of quality/performance?
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What is the Threat of Substitute
Products?
What is the relative price performance of substitutes?
• What are the prices of my products comparatively?
• Are the substitute prices stable? (increase or decrease)
How high are the switching costs?
• What are the differences relative to my products?
• What would the costs incurred be to change my products?
What is the buyer propensity to substitute?
• What are the buyers preferences on the product category?
• What are the differences regarding my products? (quality, prices)
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The Government Marketing and Advertising
regulations, Electronic device regulaions and
consumer laws
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Industry
Apple is strictly focused on design
and marketing
Potential Entrants
Concentration of power in the middle and proximity to the
customer
Buyer
Vertically orientated towards the customer-side, Apple does most
of its business in its retail-locations and
online stores
Substitutes
(as far as they exist)
Apple is better equipped to compete with
horizontal players vs. HP or Sony, not as vertically integrated towards the
consumer
Suppliers
Apple has more power over its suppliers, able
to make strong demands
Threats
Threats
Power
Power
Five Forces
Model applied
to Apple Inc.
Source: http://foodandretail.blogspot.com/2007/10/porter-5-forces-how-they-work-3.html
Case Study: Apple Inc.
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Power + -
Competitive Rivalry X
Supplier power X, X
Substitute power X
Buyers power X, X
Power of new entrants X
Ranking of Power and Threats facing Apple Inc.
Bibliography
Porter's Five Forces - Problem Solving Techniques , from MindTools.com
Porter 5 Forces How they work
What is Porter’s 5 Forces Analysis? , from Papers4You.com
Michael Porter’s website on Harvard Business School: Faculty and Research
Company Profile Apple Inc. , from ReportLinker.com
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Contact
Do you need more info about this guide? Or about a market you are analysing?
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• + 33 4 37 37 16 37
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