This website uses cookies to ensure you have the best experience. Learn more

Porter's Five Forces A Model For Industry Analysis

4042 words - 17 pages


Porter's Five Forces

 QuickMBA / Strategy / Porter's 5 Forces

Porter's Five Forces

The model of pure competition implies that risk­adjusted rates of return should be constant across firms and industries. However, numerous economic studies have affirmed that different industries can sustain different levels of profitability; part of this difference is explained by industry structure. Michael Porter provided a framework that models an industry as being influenced by five forces. The strategic business manager seeking to develop an edge over rival firms can use this model to better understand the industry context in which the firm operates. ...view middle of the document...

 Rivalry In the traditional economic model, competition among rival firms drives profits to zero. But competition is not perfect and firms are not unsophisticated passive price takers. Rather, firms strive for a competitive advantage over their rivals. The intensity of rivalry among firms varies across industries, and strategic analysts are interested in these differences. Economists measure rivalry by indicators of  industry concentration. The Concentration Ratio (CR) is one such measure. The Bureau of Census periodically reports the CR for major Standard Industrial Classifications (SIC's). The CR indicates the percent of market share held by the four largest firms (CR's for the largest 8, 25, and 50 firms in an industry also are available). A high concentration ratio indicates that a high concentration of market share is held by the largest firms ­ the industry is concentrated. With only a few firms holding a large market share, the competitive landscape is less competitive (closer to a monopoly). A low concentration ratio indicates that the industry is characterized by many rivals, none of which has a significant market share. These fragmented markets are said to be competitive. The concentration ratio is not the only available measure; the trend is to define industries in terms that convey more information than distribution of market share. If rivalry among firms in an industry is low, the industry is considered to be disciplined. This discipline may result from the industry's history of competition, the role of a leading firm, or informal compliance with a generally understood code of conduct. Explicit collusion generally is illegal and not an option; in low­rivalry industries competitive moves must be constrained informally. However, a maverick firm seeking a competitive advantage can displace the otherwise disciplined market. When a rival acts in a way that elicits a counter­response by other firms, rivalry intensifies. The intensity of rivalry commonly is referred to as being cutthroat, intense, moderate, or weak, based on the firms' aggressiveness in attempting to gain an advantage. In pursuing an advantage over its rivals, a firm can choose from several competitive moves: Changing prices ­ raising or lowering prices to gain a temporary advantage. Improving product differentiation ­ improving features, implementing innovations in the manufacturing process and in the product itself. Creatively using channels of distribution ­ using vertical integration or using a distribution channel that is novel to the industry. For example, with high­end jewelry stores reluctant to carry its watches, Timex moved into drugstores and 2/11


Porter's Five Forces

other non­traditional outlets and cornered the low to mid­price watch market. Exploiting relationships with suppliers ­ for example, from the 1950's to the 1970's Sears, Roebuck and Co. dominated the retail household appliance...

Other Essays Like Porter's Five Forces a Model for Industry Analysis

Porter's 5 Forces Analysis of the Bottled Water Industry

599 words - 3 pages switching costs for consumers; the price difference between Aquafina and Dasani, for example, are so minute that the buyer can easily switch. Thirdly, although it is growing, brand loyalty it currently not very strong in this industry. Many consumers are not particular about brand, and as a result, they tend to choose the product with the lowest price. High buyer power places pressure on bottled water companies to decrease their prices

Porter Five Forces Model Essay

1570 words - 7 pages industry is involved in design, development, manufacture, marketing, and sale of motor vehicles. There are a number of global automotive giants that are upbeat about the expansion plans and collaboration with domestic companies to produce automobiles in India. Porter's five forces model on Automobile Industry * Barriers to Entry – Automobile Industry is a capital extensive and labor extensive industry. The emergence of foreign competitors with the

Q1. Comprehensive Analysis Of Coles Myer's Resource Profile (PERTH) Q2. Porter's 5 Forces Model For Analyzing CML 's Operating Environment

1428 words - 6 pages the high investment cost.Economic Value Added was dramatically decreased during 2001 due to the decline in OPAT. Continuous improvement in EVA since 1997 shows increment of various stakeholders' wealth.Q2. Porter's 5 Forces Model for analyzing Operating EnvironmentCML mainly operates in the F&LG and the GM&A industry. In 2001 the F&LG performed strongly with 9% increase of retail margin where GM&A achieved a disappointed sales

Porter's Five Forces Sports Good Store

465 words - 2 pages porter's five forces that it is not a very attractive industry to enter. The competion is high and survival rate is low. In Boston, there are more that 50 stores, making it harder for a new one to enter this field. The suppliers have a strong hold over the market with customers having their own brand preferences and loyalty.

Porter's Model Global Hotel Industry

2726 words - 11 pages Global Hotel Industry I. Porter’s Five Forces analysis Threat of rivalry is high because: • The most part of the market is controlled by few companies with the same or similar strategy, size and capacity. Big companies around the world such as Hilton Hotels, Four Seasons, etc. have absorbed the little companies and few have remained. (For ex. Multibrand Strategy has been adopted by most of the companies, and this has strengthen the companies

Global Forces and Western European Brewing Industry Five Forces

823 words - 4 pages Western European Brewing Industry Case Study Question: 2. For the breweries outlined above explain: (a) How these trends will impact differently on these different companies; and (b) The relative strengths and weaknesses of each company. (A) Impact of these trends. 1. InBev (Belgium/brazil) • INBev is a merger of two companies Anheuser and Busch and hold the top spot in the world’s top 10 breweries. • INBev is known for being the

Assess by Applying the Porter’s Five Forces Model, the Level of Competitiveness of Mtml

2082 words - 9 pages reinforce demand. A few authors have also criticized Five Forces model because it does not account for the role of a government. Besanko et al. (2007) mention that the government as a regulator could affect profitability of an industry, and therefore it should be introduced as the sixth force. Furthermore, from the perspective of the Five Forces approach, it is assumed that companies are free to access the required assets in order to compete in the

Walmart Five Forces Analysis

1015 words - 5 pages 1. Threat of Entry: The ease at which new entrants can enter the market. a. New entrants: firms that have either recently started operating in an industry or that threaten to begin operations in an industry soon. i. Why would new entrants be interested in entering the market? 1. They are motivated to enter into the industry by the superior profits that Wal-Mart is earning. Q: “Is there a high threat

Spur Steak Ranches Pestle and Porters Five Forces Analysis

1976 words - 8 pages Introduction This paper shall involve and include a discussion and analysis of the macro environment of business using the extended PESTLE tool and an analysis of the micro environment in which the business operates by use of the Porters Five Forces Model as a tool. From the analysis of the micro environment of the business, one trend and one crisis will be identified and there will include a short strategy in which the business can address

The Merger of Best Productivity and Marketing Practice: a Strategic Model for Shoe Manufacturing Industry

1394 words - 6 pages Draft August 9, 2013 Draft August 9, 2013 PHILIPPINE SCHOOL OF BUSINESS ADMINISTRATION Quezon City The Merger of Best Productivity and Marketing Practice: A Strategic Model for Shoe Manufacturing Industry A Research Proposal Presented to the Graduate School of Business Philippine School of Business Administration In Partial Fulfillment of the Requirement for the Doctor of Business Administration Program By: Ayuson

The Video Game Industry - a Case Analysis

751 words - 4 pages and expensive hardware and games. This might be a little more of a weakness than it is for Microstoft’s Xbox 360 because of Sony’s integrated blu-ray player into each system. The blu-ray player is thought to be the future of the HD-DVD format. Not to mention each blu-ray disc has about five-times the capacity of a normal DVD. Nintendo is one of the oldest and most successful players in the video game industry dating all the way back from the

Related Papers

Porter's Five Forces Model Essay

1265 words - 6 pages for profits. In conclusion, Porter’s Five Forces Model holistic approach takes a look at industries structure underlying drivers of profitability. Porter’s Five Forces assist on identifying what causes profitability industry, provides trends, analyze what causes profitability, and identifies constrains. His competitive framework analysis filters the challenge of competition taking in consideration a broader set of competitors. Porter’s

Auto Mobile Industry Analysis By Five Forces Model

839 words - 4 pages [pic] Auto mobile industry analysis by five forces model Group:B PREPARED FOR : Rezaul karim Shamim Department of business administration PREPARED BY : 1. Golam Sorwar Id: 082-001-131 2. Ahsanul karim Id: 081-001-131 3. Md. Rubel Id: 081-005-131 4. Sadaqur Rahaman Id: 081-010-131 Contents 1. Overview of Automotive Industry Analysis 2. Demographics 3

Porter's Five Forces Essay

2197 words - 9 pages 2013-14 the value stands at $24.49billion. Porter’s Five Forces Analysis for RMG Industry The RMG industry is the only multi-billion-dollar manufacturing and export industry in Bangladesh. The Ready-Made Garments (RMG) industry contributes to the Bangladesh economy in a distinctive manner. The last 20 years have witnessed unparalleled growth in this sector, which is also the largest exporting industry in Bangladesh. In this part the

Costco Five Forces Model Analysis

1215 words - 5 pages MEMORANDUM TO: Strategic Business Planning Committee FROM: Raquel Hansen DATE: March 16, 2014 SUBJECT: Five Forces Model Analysis As we begin to strategically plan for our business, it is important for us to take a deep dive into our competitive environment to understand where we are strong competitively and where we are weak competitively. An analysis of the forces driving industry competition using M.E. Porter’s Five Forces Model