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Porter's Five Forces and Generic Strategies

This document summarizes Porter's Five Forces model and generic strategies. Porter's Five Forces model identifies five competitive forces that shape an industry: 1) bargaining power of suppliers, 2) bargaining power of customers, 3) threat of new entrants, 4) threat of substitutes, and 5) competitive rivalry. The document also outlines three generic strategies: cost leadership, differentiation, and focus strategy. It provides brief descriptions of each force and strategy.

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450 views16 pages

Porter's Five Forces and Generic Strategies

This document summarizes Porter's Five Forces model and generic strategies. Porter's Five Forces model identifies five competitive forces that shape an industry: 1) bargaining power of suppliers, 2) bargaining power of customers, 3) threat of new entrants, 4) threat of substitutes, and 5) competitive rivalry. The document also outlines three generic strategies: cost leadership, differentiation, and focus strategy. It provides brief descriptions of each force and strategy.

Uploaded by

rohitpatel203
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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PORTER’S FIVE FORCES

AND GENERIC
STRATEGIES
-Prepared by:
Rohit Dobaria
Vikas Surani
Viral Jani
Tina Mittal
Jigar Modi
Janak Nayak
Porter’s Five Forces
Introduction
 Developed by Michael E. Porter, 1980.

 Identified five competitive forces that shape every


industry and market.
 These forces determine the intensity of competition
and hence profitability and attractiveness of
industry.
1. Bargaining power of Suppliers

 Suppliers : All sources needed to provide goods or


services.

 When is the Bargaining power high?


2. Bargaining power of Customers

 It determines how much customers can impose


pressure on margins and volumes.

 When is the bargaining power high?


3. Threat of New Entrants
 Higher the competition, easier for other companies
to enter.
 New entries depend on the barriers to entry.
4. Threat of Substitutes
 Substitutes : Alternative products with lower
prices of better performance parameters for the
same purpose.
 Can reduce potential sales volume for existing
players.
 What are the factors determining the Threat of
Substitutes?
5. Competitive Rivalry
 Describes the intensity of competition between
existing players.
 High competitiveness -> Pressure on prices,
margins -> reduced profitability for every company

 When is the competition high?


Limitations
 The model assumes a classic perfect market.

 Best applicable for analysis of simple market


structures.

 The model assumes relatively static market


structures.
GENERIC STRATEGY

1. COST LEADERSHIP
2. DIFFERENTIATION
3. FOCUS STRATEGY
1.Cost leadership
The low cost leader in any market gains competitive
advantage from being able to many to produce at the
lowest cost.
2. Differentiation
 Allows companies to desensitize prices and focus on

value that generates a comparatively higher price and


a better margin.
 The differentiating organization will incur
additional costs in creating their competitive
advantage.
3. Focus Strategy
Also known as Niche Strategy

 Stuck in the middle


 If you select one or more approaches, and then fail
to achieve them, that your organization gets stuck
in the middle without a competitive advantage
 Thank You

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