How does the Porters 5 force model help a strategist to achieve his goal?

Porters 5 Forces model Strategists Goal is to position the firm in such a way that it is not vulnerable to attack from any of these 5 forces. Hence the company must find a best position in the industry where it can defend itself against competitive forces.

Force I - Threat of New Entrants New entrants bring new capacity and share the same markets affecting ROI of the existing players. Strategies for you Creates high entry barriers Ways: Economies of Scale, Product Differentiation, High Capital Requirement, Switching Costs, No access to your Distribution Channels, Government Policies

Force II - Rivalry Among Existing Competitors

 Created by price competition, Advertising battles, Continuous product innovations, Increased customer service, Warranty. If anyone implements a strategy, the other retaliates with counter-move making all firms to suffer.

Force III - Bargaining Power of Buyers If the buyers are small in nos. but buying in large quantum, they can switch orders between suppliers (playing off against each others) Strategies for you To create new buyers High cost of switch-over ( Cell Phone)

Force IV - Bargaining Power of Suppliers When the products have few substitutes, the suppliers may form Cartel System / Industry Association.

Force V - Threat of Substitute Products When the products have similar type of match as per their needs.

e.g. If Coffee prices are hiked, the customers may switch over to Tea & Soft Drink.

How to create defendable positions against 5 competitive forces, possible approachesA) Positioning the Firm If the competitive forces are too strong in particular area, then better avoid that market. Influencing the balance Innovation in marketing can raise brand identification or differentiation of products. Exploiting Change Anticipate shift in the factors underlying the forces. Respond to them. Choose strategy to the next competitive balance before rivals recognize it.

B)

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