LESSON 3. STRATEGY ANALYSIS D A P2 3 7:S T R A T E G I CA N D C O N T I N G E N C YM A N A G E M E N T Porter’sFiveForcesModelof Competition StrategicgroupswithinIndustries O R T E Z A,C H R I S T O P H E RJ O H NV.
D A P2 3 7:S t r a t e g i ca n dC o n t i n g e n c yM a n a g e m e n t I.Porter'sFiveforcesModelofCompetition II.AlternativestoPorter'sFiveforcesModelofCompetition III.StrategicgroupswithinIndustries OUTLINE OF TOPICS WHAT WE'LL DISCUSS
I.MICHAEL E. PORTER'S FIVE FORCES MODEL
Porter'sFiveForceswasoriginallydevelopedbyHarvard BusinessSchool'sMichaelE.Porterin1979. ThemodelwaspublishedinMichaelE.Porter'sbook, "CompetitiveStrategy:TechniquesforAnalyzingIndustries andCompetitors"in1980. Sinceitspublicationin1979,ithasbecomeoneofthe mostpopularandhighlyregardedbusinessstrategytools. Porterrecognizedthatorganizationslikelykeepaclose watchontheirrivals,butheencouragedthemtolook beyondtheactionsoftheircompetitorsandexaminewhat otherfactorscouldimpactthebusinessenvironment. MICHAEL E. PORTER PORTER'S FIVE FORCES MODEL D A P2 3 7:S t r a t e g i ca n dC o n t i n g e n c yM a n a g e m e n t
M I C H A E LE.P O R T E R "Understandingthecompetitive forces,andtheirunderlying causesrevealstherootsofan industry'scurrentprofitability whileprovidingaframeworkfor anticipatingandinfluencing competition(andprofitability) overtime,"
Porter's Five Forcesisasimplebut powerfultoolforunderstandingthe competitivenessofyourbusiness environment,andforidentifyingyour strategy'spotentialprofitability. Thefiveforcesmodellooksatfivespecific factorsthatdeterminewhetherornota businesscanbeprofitableinrelationto otherbusinessesintheindustry. buyer power supplier power threat of new entry threat of substitution competitive rivalry D A P2 3 7:S t r a t e g i ca n dC o n t i n g e n c yM a n a g e m e n t
L O O K SA TT H E I N D U S T R Y'SE C O N O M Y A SW H O L E MACRO TOOL IN BUSINESS ANALYTICS Inordertounderstandwhereyourcompanyorbusinessfitsintheindustry landscape,Porter'sFiveForcesshouldbeusedinconjunctionwithaSWOT analysis. IN RELATION TO SWOT ANALYSIS F O C U SO NAS P E C I F I C C O M P A N Y'SD A T A A N DA N A L Y S I S MICRO ANALYTICAL TOOL
PORTER'S FIVE FORCES MODEL CompetitiveRivalry Threatofnewentry BuyerPower SupplierPower Threatofsubstitution D A P2 3 7:S t r a t e g i ca n dC o n t i n g e n c yM a n a g e m e n t buyer power supplier power threat of new entry threat of substitution competitive rivalry Porter'sFiveForcesisabusinessanalysis modelthatidentifiesandanalyzesfive competitiveforcesthatshapeeveryindustry andhelpsdetermineanindustry'sweaknesses andstrengths. Thismodelhelpsinexplainingwhyvarious industriesareabletosustaindifferentlevels ofprofitability. Porter'smodelcanbeappliedto anysegmentoftheeconomytounderstand thelevelofcompetitionwithintheindustry andenhanceacompany'slong-term profitability
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