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Flashcards in Porters 5 forces Deck (21):

Outline Porter's 5 Forces

1. Bargaining power of suppliers
2. Bargaining power of customers
3. Threat of new entrants
4. Threat of substitutes
5. Rivalry amongst competitors (all contribute to this)


What paper can you refer to when discussing Porters 5 forces?

Porter, 2008


What is are the uses of Porters 5 forces (3 points)?

Provides "a framework for anticipating and influencing competition (and profitability) over time"

Important for "positioning" in STP

Crucial for defining the relevant industry(ies) in which a company competes


When is the threat of new entry high?

When the industry is profitable


When is the bargaining power of suppliers high (2 circumstances)?

When "it is more concentrated than the industry it sells to"

When switching costs are high


When is the bargaining power of customers high (3 things)?

When there are few customers buying a large volume

When there are many similar products in the market that they could easily switch to

When switching costs are low


When is the threat of substitutes high?

When the value of the substitute is better


What does the degree of rivalry depend on?

When is it high (3 things)?

Depends on the intensity and basis on which companies compete

High when...
- Competing firms are a similar size/power
- Exit barriers are high
- Rivals are committed to the business


What difficulties are faced by industry analysis?

Industry structure always changing

If an industry is defined too broadly/narrowly then the company risks choosing the wrong strategy and failing


What is a strategic group?

A group of firms that have similar strategies in a target market


Outline Porters generic competitive strategies

Cost Leadership

Cost Focus

Differentiation Leadership

Differentiation Focus


In what case would "cost leadership" and "differentiation leadership" be appropriate strategies for a company to adopt?

In a broad range of market or industry segments


In what case would "cost focus" and "differentiation focus" be appropriate strategies?

In a very narrow market


What is the aim of the "cost leadership" strategy

To be the lowest-cost producer. Typically involves mass production for economies of scale


Describe the "cost focus" strategy

Seeks low cost in jusr a few market segments


What is the "differentiation focus" strategy?

Niche market strategy. Differentiation (uniqueness) in a very small number of segments.


Describe the "differentiation leadership" strategy

Aims to achieve competitive advantage through selecting a unique position in the market in order to gain competitive advantage.

Difficult strategy


What 3 steps should a company take in competitor analysis?

1. Identify competitors

2. Determine competitor objectives

3. Select which to attack / avoid


What are the 4 competitive positions in the market?

Market Leader

Market Challenger

Market Follower

Market Nicher


Define competitive advantage?

Gained by satisfying customer needs better than competitors


What is competitor analysis?

A systematic approach to competition by understanding competitors strategies to find a way to gain competitive advantage