5-FORCES

MichaelPorter'sFiveForcesGroupPresentationShiwenZHAOXizhiWANGQianqiJIANGJianxiangWANGYuanweiJIANGDanningLUO2014.11.20MichaelPorter'sFiveForcesBargainingPowerofSuppliersBargainingPowerofBuyersRivalryAmongExistingCompetitorsThreatofSubstituteProductsorServicesThreatofNewEntrantsNIKEStudyCaseConclusion2014.11.20MichaelPorter'sFiveForcesThefiveforcesofcompetitionconceptisoneofthemostinfluentialinmodernbusiness.ItwasdevelopedbyMichaelPorteroftheHarvardBusinessSchool.BargainingPowerofSuppliersDescribedasthemarketofinputs.Strongbargainingpowerallowssupplierstosellhigherpricedorlowqualityrawmaterialstotheirbuyers.MichaelPorter'sFiveForcesBargainingPowerofSuppliersSuppliersarelikelytobepowerfulif:TherearefewsuppliersbutmanybuyersSuppliers’productshavefewsubstitutesSuppliers’productisanimportantinputtobuyers’productSuppliers’productaredifferentiatedSuppliers’producthavehighswitchingcostMichaelPorter'sFiveForcesBargainingPowerofBuyersDefinitionPressureconsumerscanexertonbusinessesHigherqualityproductsBettercustomerservicelowerprices.Buyerpowerisoneoftheforcesthatshapethecompetitivestructureofanindustry.MichaelPorter'sFiveForcesBargainingPowerofBuyersDeterminingFactorsConcentratednumberbetweensellersandbuyersBuyersswitchingcostsBuyerbackwardintegrateVolumesofstandardizedproductsPricesensitivityofconsumerSubstituteproductsMichaelPorter'sFiveForcesBargainingPowerofBuyersMichaelPorter'sFiveForcesConcentratednumberbetweensellersandbuyersBuyersswitchingcostsBuyerbackwardintegrateVolumesofstandardizedproductsPricesensitivityofconsumerSubstituteproductsMichaelPorter'sFiveForcesBargainingPowerofBuyersRivalryAmongExistingCompetitorsMichaelPorter'sFiveForcesThecompetitor:CompetitoristhecompanythatinthesamestrategicgroupThecompetition:AnIndustryisagroupoffirmsproducingproductsthatareclosesubstitutes,thesefirmsinfluenceeachother,thereforerepresentscompetitionRivalryAmongExistingCompetitorsMichaelPorter'sFiveForcesThetypeofcompetition:PricecompetitionAdvertisingbattlesProductintroductionsRivalryAmongExistingCompetitorsMichaelPorter'sFiveForcesTheintensityofthecompetition:HighintensecompetitionmayleadtolowprofitabilityFormostindustriestheintensityofcompetitiverivalryisthemajordeterminantofthecompetitivenessoftheindustryRivalryAmongExistingCompetitorsMichaelPorter'sFiveForcesForcesthataffectcompetitiverivalry:competitorareinbalancehighfixedcosttheacquisitionofweakercompaniesNodifferentiationextracapacityinlargeincrementshighexitbarriersThreatofSubstituteProductsorServicesAsubstituteisaproductorservicethatperformsthesameorsimilarfunctionasanotherproduct.Thethreatofsubstitutioninfluencesthecompanytoachieveprofitabilitybecauseconsumerscanchoosetopurchasethesubstituteinsteadofthecompany’sproduct.Themoresubstitutesthatareonofferinthemarket,themoresensitiveor‘elastic’consumerswillbetochangesinyourproduct’sprice,andthehigherthethreatofsubstitutewillbe.MichaelPorter'sFiveForcesThreatofSubstituteProductsorServicesFactorsthatinfluencesthethreatofsubstitutesare:MichaelPorter'sFiveForcesPriceofsubstitutesHighlowThreatofSubstituteProductsorServicesMichaelPorter'sFiveForcesQualityofsubstitutesSwitchingcoststoconsumersMonetarycostsLifestyleswitchingcosts:Example:Public-transportation→drivingacar→E-mail→writinglettersThreatofSubstituteProductsorServicesMichaelPorter'sFiveForcesLuxurygoods:WeakThreatofsubstitutesBuyingdirectlyfrommanufacturers,especiallywiththegrowthofonlinesales.HomemadeandcoutureclothingCounterfeitproductsZara:LowtoMediumThreatofsubstitutes0therapparelretailers,designerclothesandtailorhouses.Rivalriesdoexit:H&M,Topshop,Gap,etcThreatofNewEntrantsWhatisthreatofnewentrants?InPortersfiveforces,threatofnewentrantsreferstothethreatnewcompetitorsposetoexistingcompetitorsinanindustry.Itisafunctionofbothbarrierstoentryandthereactionfromexistingcompetitors.Itisoneoftheforcesthatshapethecompetitivestructureofanindustry.Itsdefinitionrevolutionizedthewaypeoplelookatcompetitioninanindustry.MichaelPorter'sFiveForcesThreatofNewEntrantsBarrierstoentryEconomiesofscaleProductdifferentiationCapitalrequirementsCostadvantagesindependentofscaleSwitchingcostsAccesstodistributionchannelsGovernmentalandlegalbarriersMichaelPorter'sFiveForcesThreatofNewEntrantsMichaelPorter'sFiveForces•Patentedorproprietaryknow-how•Difficultinbrandswitching•Restricteddistributionchannels•Highscalethreshold•Specializedassets•Highexitcosts•Interrelatedbusinesses•Salableassets•Lowexitcosts•IndependentbusinessDifficulttoentryifthereis:•Commontechnology•Littlebrandfranchise•Accesstodistributionchannels•LowscalethresholdNIKEStudyCaseNikeistheworld’sleadingathleticfootwear,apparelandequipmentcompany.ProductsoldinNEARLYALLcountriesaroundtheworldMichaelPorter'sFiveForcesNIKEBargainingPowerofSuppliersNikearemanufacturedbythird-partycontractmanufacturers,includingVietnam,China,Indonesia,Brazil,IndiaandMexico.