LESSON 3. STRATEGY ANALYSIS D A P 2 3 7 : S T R A T E G I C A N D C O N T I N G E N C Y M A N A G E M E N T Porter’s Five Forces Model of Competition Strategic groups within Industries O R T E Z A , C H R I S T O P H E R J O H N V .
D A P 2 3 7 : S t r a t e g i c a n d C o n t i n g e n c y M a n a g e m e n t I. Porter's Five forces Model of Competition II. Alternatives to Porter's Five forces Model of Competition III. Strategic groups within Industries OUTLINE OF TOPICS WHAT WE'LL DISCUSS
I. MICHAEL E. PORTER'S FIVE FORCES MODEL
Porter's Five Forces was originally developed by Harvard Business School's Michael E. Porter in 1979. The model was published in Michael E. Porter's book, "Competitive Strategy: Techniques for Analyzing Industries and Competitors" in 1980. Since its publication in 1979, it has become one of the most popular and highly regarded business strategy tools. Porter recognized that organizations likely keep a close watch on their rivals, but he encouraged them to look beyond the actions of their competitors and examine what other factors could impact the business environment. MICHAEL E. PORTER PORTER'S FIVE FORCES MODEL D A P 2 3 7 : S t r a t e g i c a n d C o n t i n g e n c y M a n a g e m e n t
MICHAEL E. PORTER "Understanding the competitive forces, and their underlying causes reveals the roots of an industry's current profitability while providing a framework for anticipating and influencing competition (and profitability) over time,"
Porter's Five Forcesis a simple but powerful tool for understanding the competitiveness of your business environment, and for identifying your strategy's potential profitability. The five forces model looks at five specific factors that determine whether or not a business can be profitable in relation to other businesses in the industry. buyer power supplier power threat of new entry threat of substitution competitive rivalry D A P 2 3 7 : S t r a t e g i c a n d C o n t i n g e n c y M a n a g e m e n t
LOOKS AT THE INDUSTRY'S ECONOMY AS WHOLE MACRO TOOL IN BUSINESS ANALYTICS In order to understand where your company or business fits in the industry landscape, Porter's Five Forces should be used in conjunction with a SWOT analysis. IN RELATION TO SWOT ANALYSIS FOCUS ON A SPECIFIC COMPANY'S DATA AND ANALYSIS MICRO ANALYTICAL TOOL
PORTER'S FIVE FORCES MODEL Competitive Rivalry Threat of new entry Buyer Power Supplier Power Threat of substitution D A P 2 3 7 : S t r a t e g i c a n d C o n t i n g e n c y M a n a g e m e n t buyer power supplier power threat of new entry threat of substitution competitive rivalry Porter's Five Forces is a business analysis model that identifies and analyzes five competitive forces that shape every industry and helps determine an industry's weaknesses and strengths. This model helps in explaining why various industries are able to sustain different levels of profitability. Porter's model can be applied to any segment of the economy to understand the level of competition within the industry and enhance a company's long-term profitability
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