...2.3 Porter’s 5 forces Model 2.3.1 Threat of new entrants The apparel industry has very low entry barriers. Entering the market does not require huge amount of capital. The setup can be as simple as a person selling his own designed apparel online which only required relatively low skills level. In fact, the fashion retailing is a diversified market with numerous single shop retailers, local chain stores, international fashion chain stores, online shop… etc. However, if we focus on the fashion retail chain with economy of scale in production and distribution, that would create significant barrier for entry. Moreover, brand identification and production differentiation also set a barrier for entrance. 2.3.2 Threat of substitute products or services The threat of substitute products in the fashion retailing is very high. Customer can buy another piece of garment in turn satisfying the same need. The competitors can even copy the “hit of the season” easily, customer can find similar products in the market with different price positions. The switching cost on the substitute apparel is also very low. What’s more, many female considered shopping as leisure activities. Retailers also lower the switching cost by providing online platform for shopping which in turn provide price information to customer as well. To retain their customers, fashion brand has put a lot of resource on building their brand and establish the perceived value on their product (i.e. level of quality...
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...wiley.com) DOI: 10.1002/jsc.764 Strategic Change Rethinking and reinventing Michael Porter’s five forces model Tony Grundy Cranfield School of Management, UK Michael Porter’s five competitive forces model has been a most influential model within business schools but has perhaps had less appeal to the practising manager outside of an MBA and certain short business school courses. In this article it is argued that whilst there are a number of reasons why the model has not achieved greater currency, most importantly it can be developed a lot further. The paper looks at a number of important opportunities for using Porter’s model in an even more practical way, including: mapping the competitive forces, which can vary significantly over market and competitive terrain and within the same industry; understanding its dynamics; prioritizing the forces; doing macro analysis of the sub-drivers of each of the five forces; exploring key interdependencies, both between and within each force. Copyright © 2006 John Wiley & Sons, Ltd. Introduction When Michael Porter conceived the five competitive forces model, it propelled strategic management to the very heart of the management agenda. The framework became a centrepiece of texts on business strategy and strategic management, and essential examination material on MBA and similar courses globally. But what has become of his original five competitive forces? It would appear to be the case that not a great deal has occurred to develop this thinking...
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...Competitive Forces ITM 524 - Foundations of Information Technology Management Module 2 – Case 1 Trident University International January 4, 2016 Value Chain and Competitive Forces The value that an organization creates and acquires is referred to as the profit margin. This means that the more value the organization creates the more profitable the it has a chance of becoming. In order for an organization to remain profitable, they must develop a competitive strategy. Michael Porter developed the concept of the “value chain,” which is a “set of activities that an organization carries out to create value for its customers (Porter's Value Chain, 2015).” The Five Forces The five forces model was developed by Michael E. Porter to help organizations evaluate the quality of a particular industry’s competitiveness and develop business strategies accordingly. The five forces are supplier power, buyer power, competitive rivalry, threat of substitution, and threat of new entry (Porter, 2008). Supplier Power With supplier power an organization determines how easy it is for suppliers to drive up prices. This is determined by the number of suppliers of each key input, the exclusivity of their product or service, their strength and control over the business, the cost of transferring from one to another, and etc. The scarcer the supplier choices an organization has, and the more the need for suppliers' help, the more powerful the suppliers become (Porter’s Five Forces, 2015)...
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...Poters 5 Forces Application on Automobile Industry Topic: Apply the Porter's five forces model on Automobile Industry and analyse the attractiveness of the Industry for Investment purpose Evolution of Porter's Five Forces Model Five forces is a framework for the industry analysis and business strategy development developed by Michael E. Porter of Harvard Business School in 1979. Michael Porter is a professor at Harvard Business School andis a leading authority on competitive strategy and international competitiveness. Michael Porter was born in Ann Arbor, Michigan. Five forces uses concepts developing, Industrial Organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the industry profitability. An "unattractive" industry is one where the combination of forces acts to drive down overall profitability. A very unattractive industry would be one approaching "pure competition". Introduction Five Forces Model by Michael Porter Five Forces model of Michael Porter is a very elaborate concept for evaluating company's competitive position. Michael Porter provided a framework that models an industry and therefore implicitly alsobusinesses asbeing influenced by five forces.Michael Porter's Five Forces model is often used in strategic planning. Porter's competitive fiveforces model is probably one of the mostcommonly used business strategy tools and has proven...
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...Introduction The porter forces model was first developed in 1979 by Michael .F. Porter of the Harvard as structure for assessing and evaluating the competitive position and power of an organization, the model is grounded on the concept that there are five forces which ascertain the competitive intensity of the market (Porter, 2008). Figure 1.1 shows a diagram of the five forces model, (Flesicher, 2007) Porter’s five forces model is quite useful and it provides a number of benefits , its most contribution is that it's a relevant tool to help organizations find the fundamental structuring components of their given business operation. It is the map showing where the company is and where they hope or want to be (Flesicher, 2007).Further more Schmidt (p.82, 2010) adds that “The model help to identify where the power is in the present business situation, This is important both in understanding the might of a company’s current competitive situation and the power of a position that the company wants to move to.”By understanding where the intensity is, the model can be used to identify the areas of strength, to improve failings and prevent mistakes; also strategic analysts often use the theory to know if new products or services are potentially profitable (Roy, 2011). The five forces model is a tool for analysising the competitive environment as Henry (p.70, 2008) states that “It allows an organization to determine the attractiveness or profit potential of a given market by...
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...Management Information System 03/02/2016 Table of Contents 1.Introduction…………………………………………………………………………….3 2. How does Apple apps give them competitive advantage?……….……………………3 3. Why are data, information, business intelligence, and knowledge important to Apple?………………………………………………………………………..…………..5 4. Apple’s use of Porter’s Five Force Model………….……….……………….…………6 5. Conclusion…………………………………………………………………………….8 6. References…………………………………………………………………………….9 Introduction This paper aims to answer the following questions: Do you agree or disagree that Apple’s iTunes, iPhone applications, and iPad applications give the company a competitive advantage? Be sure to justify your answer? Why are data, information, business intelligence, and knowledge important to Apple? Give an example of each type in relation to the iPad. Analyze Apple using Porter’s Five Force Model. Which of the three generic strategies is Apple following? Which of Porter’s Five Forces did Apple address through its introduction of the iPhone? Which of Porter’s Five Forces did Apple address through its customer-developed applications? How does Apple apps give them competitive advantage? There are various factors that brought Apple back from near extinction. One of which, was its ability to produce, market and sell IT products such as the iPhone, iPod, iPad, iTunes, and customer developed applications. If the...
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...Porter’s Five Forces Strategy Skills Team FME www.free-management-ebooks.com ISBN 978-1-62620-999-2 Copyright Notice © www.free-management-ebooks.com 2013. All Rights Reserved ISBN 978-1-62620-999-2 The material contained within this electronic publication is protected under International and Federal Copyright Laws and treaties, and as such any unauthorized reprint or use of this material is strictly prohibited. You may not copy, forward, or transfer this publication or any part of it, whether in electronic or printed form, to another person, or entity. Reproduction or translation of any part of this work without the permission of the copyright holder is against the law. Your downloading and use of this eBook requires, and is an indication of, your complete acceptance of these ‘Terms of Use.’ You do not have any right to resell or give away part, or the whole, of this eBook. Porter’s Five Forces Table of Contents Preface 2 Visit Our Website 3 Introduction 4 Porter’s Five Forces Analysis 6 Competitive Rivalry 11 Threat of New Entrants 18 Threat of Substitutes 20 Bargaining Power of Suppliers 23 Bargaining Power of Customers 25 Summary 28 Other Free Resources 30 References 31 ISBN 978-1-62620-999-2 © www.free-management-ebooks.com 1 Porter’s Five Forces Preface This eBook describes Porter’s Five Forces Framework, a technique that provides a model for industry...
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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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...involving a different set of activities. Strategic position emerges from three distinct sources which are serving few needs of many customers, serving broad needs of few customers and serving broad needs of many customers in a narrow market. After positioning itself, an organisation must ensure that its strategic efforts results in creating “fit” among a company’s activities. Fit has to do with the ways a company’s activities interact and reinforce one another. In his endeavour to build strategic intent within organisations, Michael Porter is well known for the following contributions in the field of corporate strategy: 1. Generic Strategies 2. Value Chain 3. Competitive Advantage 4. Porter’s Diamond 5. Five Forces Model 1. Porter’s Generic Strategies Porter’s generic strategies is a frameworks used to outline the three major strategic options open to organizations that wish to achieve a sustainable competitive advantage. Each of the three options need to be considered within the context of two aspects of the competitive...
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...Henry: Understanding Strategic Management The General & Competitive Environment (Slides based on Chapters 2 and 3) Key concepts we will cover: • Analysing the General Environment – PEST analysis – Risk & Scenario Planning • Analysing the Competitive Environment – Porter’s 5 Forces model – Porter’s Strategic Group Analysis – Hypercompetition The General Environment • The external environment facing the organization consists of: • General environment • Competitive environment • The changes that occur in the general environment transcend organizations and industries • The competitive environment consists of the industry and markets in which an organization competes Some Interactions Between Businesses & Their Environment Customers Shareholders & Creditors National & Local Governments Media Suppliers Competitors Business Support Groups Wholesalers Public Opinion The Organisation Foreign Governments Social Activist Groups Local Communities Employees Adapted from K Davis & W C Frederick “Business and Society: Management, Public Policy, Ethics”, 5th Edition, McGraw-Hill, 1984 The General Environment • The figure shows the relationship between the organization and its external environment • Other things being equal, it is the competitive environment that has the greatest impact on the organization Figure 2.1 The General Environment • PEST analysis is useful for scanning the general environment • PEST is political, economic, social,...
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...Business Models for Strategic Marketing This report is designed to show entrepreneurs and small business owners the importance of utilizing and applying business models into the business plan and strategy to better understand a market, the industries and firms that make up the market. This guide will cover the following business models: Porters 5 Forces of Competition, Breakeven Analysis, Product Life Cycle and SWOT Analysis. Porter’s 5 Forces of Competition Figure 1: Porter's Five Forces Figure 1: Porter's Five Forces Porter’s model identifies and analyzes five competitive forces that shape every industry. This model also helps determine the weaknesses and strengths present in an industry. This is particularly helpful for a firm because it paints a clear image about where the power lies within the business to take advantage of the strengths and improve the weaknesses. By doing so, the business can compete efficiently and effectively. Additionally, this business strategy tool helps analyze the attractiveness in an industry structure. In other words, the model measures the profitability potential in a business situation. Figure 1 is a graphical representation of Porter’s Five Forces. The five competitive forces identified by Michael porter are: Threat of Substitute Products, Threat of New Entrants, Intense Rivalry Among Existing Players, Bargaining Power of Suppliers and Bargaining Power of Buyers. Threat of Substitute Products means how easily your customer can switch...
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... 1. BERTHA MARERE 2. CELESTA KAGWI 3. ERASTO NZOTA 4. MARIA KALUSE 5. AZIZA ABDULRALMAN 6. AGNESS KILINDO 7. JOHN SIULAPWA 8. HENRY MFUMU 9. PAUL HUMBI 10. WAKIBARA NGETA DATE OF SUBMISSION: FRIDAY 16/11/2013. TABLE OF CONTENTS 1.0. INTRODUCTION. 1 1.1. The Mobile phone Industry of Tanzania 1 2.0 .PORTER’S FIVE FORCES FRAMEWORK MODEL, PFFF 1 2.1. Degree of rivalry among existing firms. 2 2.2. Threat of substitute Products or Service. 3 2.3. Threats of new entrants 4 2.4 Bargaining power of buyers/Customers. 5 2.5. Bargaining power of Suppliers 5 2.6. Mapping the Porter’s Five Forces Model in the Mobile Industry in TANZANIA. 5 3.0. CONCLUSION. 7 4.0.REFERENCE 8 ABSTRACT The Mobile Phone industry of Tanzania has been growing very slowly in terms of the number of firms in the industry during the last two decades. The growth rate in terms of the number of customers has been very fast. Number of things ishappening within the industry after its liberalization. The aspect of competition is now crucial for the operators who are within the Mobile Phone industry. Porter’s Five Forces Framework is one of the strategic models used to assess the attractiveness of the industry (being service or manufacturing). This model is defined by the five key forces which are; Rivalry among the existing firms, Threat of new entrants,Threat of substitutes, Bargaining power of suppliers and...
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...available to help to find competitive advantages, including Michael Porter’s five force model. Porter’s Five Forces Model analyzes the competitive forces within the environment in which a company operates to assess the potential for profitability in an industry. Its purpose is to combat these competitive forces by identifying opportunities, competitive advantages, and competitive intelligence. If the forces are strong, they increase competition; if the forces are weak, they decrease competition. The five forces in Porter’s model are buyer power, supplier power, threat of substitute products or services, threat of new entrants, rivalry among existing competitors. • Buyer Power is the ability of buyers to affect the price they must pay for an item. • Supplier Power is the suppliers’ ability to influence the prices they charge for supplies, including materials, labor, and services they provide. • Threat of substitute products or services is high when there are many alternatives to a product or service and low when there are few alternatives from which to choose. • Threat of new entrants is high when it is easy for new competitors to enter a market and low when there are significant entry barriers to entering a market. • Rivalry among existing competitors is high when competition is fierce in a market and low when competition is more complacent. Putting desktop computer business into Porter’s Five Forces Model 1 Buyer power is high because customers are having many choices...
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...Porter’s 5 Forces Analysis = Suppliers, Customers, New Entrants, Substitute Products, Competitors What is Porter’s 5 Forces Analysis? Porter’s 5 forces analysis represents the competitive environment of the firm. It is a strategic foresight to avoid putting the competitive edge at risk and ensure the profitability of products on a long term. For the company this vision is quite important because the firm is able to direct its innovations in terms of choice of strategies and investments. The profitability of businesses within the industrial structure depends on the following forces: Competitive rivalry within the industry; Threats of new entrants; Threats of substitutes products; Bargaining power of customers; Bargaining power of suppliers. Golden Rules 6th force = Often the model is adjusted with a 6th force, the public authorities. This is important because the law and the norms can influence each of Porter’s 5 forces. Key factors for success = The key success factors of the environment have to be identified. To have a competitive advantage some strategic elements should be controlled. Threats of new entrants Public Authorities Bargaining power of suppliers Competitive rivalry within the industry Bargaining power of customers Threats of substitute products © Copyright 2008 LUXINNOVATION G.I.E., The National Agency for Innovation and Research in Luxembourg 1/2 Porter’s 5 Forces Analysis = Suppliers, Customers, New Entrants, Substitute Products...
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...Dear Charbel, Class, Thyrlby (1998) discusses how Porter’s model (2008/1979) ignores time and is a bit static, also Slater and Olson (2002) discuss that porter’s model does not represent the market forces and their influence over the business performance quite well. Assuming we wanted to apply porter’s model on the Media industry, which I work in, where companies produce programs or movies, and sell to networks, I believe that Porter’s model needs to be developed more, to cover some other sectors that would help such industries to analyze the environment around them. Nowadays the great gap that appears between content producers and viewership needs or networks, (because of direct access of networks to the TV market exhibitions) have caused “intermediaries” to enter in the setup between networks (buyers) and Production companies (sellers) (Wynne & Berthon 2001, p. 18). Although, we can always consider that the intermediaries are part of the “bargaining power” force of Porter, based on the crucial role they have in the media value chain, I believe they are a very specific and distinctive element of porter’s power of buyer force. Next to that, there should be a place for the IT and the impact of government. Which leads me to believe that, in order for the model to fit my needs in my industry, it needs to have at least 2 extra more forces to be considered. A quick preliminary application to Porter’s model in the Media industry will show the following; ...
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