Porter of Hul

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4/9/13

Porter’s Five Forces Model | TNMG: The Next Marketing Guru

Porter’s Five Forces Model is one of the most popular frameworks in management. This framework is widely used across management disciplines specially so in case of Strategy and Marketing. . This is one model that has brought strategic management in the heart of management agenda. Porter’s Five Forces Model helps analyze competitive scenario in an industry. This framework helps determine industry profitability and can be used as one of the inputs while deciding to enter an industry. This famous framework was contributed by Michael E. Porter. The basic framework is as shown in the diagram below.

So, the five forces that determine the industry profitability as per this framework are: Threat of New Entry, Buyer Power, Supplier Power, Threat of Substitution and Competitive Rivalry. There are various parameters which can be used to determine the nature of these forces. Each of the force is classified as low, medium or high depending on the nature of those parameters. The parameters used to measure nature of the forces are described in below diagram.

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4/9/13

Porter’s Five Forces Model | TNMG: The Next Marketing Guru

Ideal scenario to enter an industry is: Entry Barrier=High, Buyer Power=Low, Supplier Power=Low, Threat of Substitution=Low and Competitive Rivalry=Low to medium. Current players try to build high entry barriers to prohibit new comers from entering. Examples of high entry barrier – strong distribution channel of ITC in the Cigarette industry. Example of low Supplier Power – HUL getting long credit periods from suppliers. The best way to understand any theory is to use an example. So, we have done a basic analysis of Indian Cigarette Industry using Porter’s Five Forces Model. Please find the analysis in presentation format below.…...

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...PORTER’S FIVE FORCES MODEL Porter identified five competitive forces that shape every single industry and market. These forces help us to analyze everything from the intensity of competition to the profitability and attractiveness of an industry. It has become a frequently used tool for analyzing a company's industry structure and its corporate strategy. Factors associated with industry structure have been found to play a dominant role in the performance of many companies, with the exception of those that are its notable leaders or failures. As such, one needs to understand these factors at the outset before delving into the characteristics of a specific firm. Michael Porter, a leading authority on industry analysis, proposed a systematic means of analyzing the potential profitability of firms in an industry known as Porter’s “five forces” model. According to Porter, an industry’s overall profitability, which is the combined profits of all competitors, depends on five basic competitive forces. • Intensity of rivalry among incumbent firms • Threat of new competitors entering the industry • Threat of substitute products or services • Bargaining power of buyers • Bargaining power of suppliers Figure here shows the relationship between the different competitive forces. THREAT OF NEW ENTRANTS The easier it is for new companies to enter the industry, the more cutthroat competition there will be. Factors that can limit the threat of new......

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