Porters 5 forces

• Who analyzed competitive environments in the 1980s?

  Michael Porter
• What did Michael Porter find about profitability in industries?

  It varies significantly between industries
• In which industry did Porter find high profitability?

  Soft drinks industry
• In which industries did Porter find low profitability?

  Hotels and airlines industries
• What are Porter's five forces?

  Threat of entry, supplier power, buyer power, substitutes, rivalry
• Why are Porter's five forces important for managers?

  • Define business strategy
  • Identify value proposition
  • Align employees towards common goals
  • Assess industry profitability for new entrants
• What does the threat of entry refer to?

  How easy it is for new businesses to enter
• Why is a high threat of entry problematic for existing firms?

  It erodes competitive advantage and profits
• What do barriers to entry do for existing businesses?

  Make it difficult for new firms to enter
• How can economies of scale help a business?

  Reduce average cost per unit
• What role does brand loyalty play in market entry?

  It makes it hard for new players to compete
• How can exclusivity rights affect market entry?

  They can limit competition from new entrants
• What is buyer bargaining power?

  Ability of buyers to negotiate prices
• When do buyers have high bargaining power?

  When there are few buyers and many sellers
• What happens when buyers can easily switch products?

  It increases competition and lowers prices
• How can a business differentiate its product?

  By positioning it uniquely in the market
• What is supplier bargaining power?

  Ability of suppliers to influence prices
• Why is having few suppliers a problem for businesses?

  It increases costs and reduces competitive advantage
• What strategy can help mitigate supplier power?

  Locking in longer contracts with suppliers
• What are substitutes in an industry?

  Alternative products that fulfill similar needs
• How do substitutes affect demand for a product?

  They can lower demand and prices
• What is a strategy to reduce the threat of substitutes?

  Enhancing brand loyalty through marketing
• What does rivalry among competitors refer to?

  Competition level within an industry
• What strategy can help a business deal with intense rivalry?

  Implementing effective marketing campaigns
• What are the strategies to overcome Porter's five forces?

  1. Create barriers to entry
  2. Differentiate products
  3. Lock in suppliers with contracts
  4. Enhance brand loyalty
  5. Implement effective marketing