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Flashcards in Porters 5 forces Deck (21):
1

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)

2

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

Porter, 2008

3

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

4

When is the threat of new entry high?

When the industry is profitable

5

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

6

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

7

When is the threat of substitutes high?

When the value of the substitute is better

8

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

9

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

10

What is a strategic group?

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

11

Outline Porters generic competitive strategies

Cost Leadership

Cost Focus

Differentiation Leadership

Differentiation Focus

12

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

13

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

In a very narrow market

14

What is the aim of the "cost leadership" strategy

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

15

Describe the "cost focus" strategy

Seeks low cost in jusr a few market segments

16

What is the "differentiation focus" strategy?

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

17

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

18

What 3 steps should a company take in competitor analysis?

1. Identify competitors

2. Determine competitor objectives

3. Select which to attack / avoid

19

What are the 4 competitive positions in the market?

Market Leader

Market Challenger

Market Follower

Market Nicher

20

Define competitive advantage?

Gained by satisfying customer needs better than competitors

21

What is competitor analysis?

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