Michael Porter Competitive Strategy TECHNIQUES FOR ANALYZING INDUSTRIES AND COMPETITORS The Porter Model • The Model Bargaining Power of Suppliers Potential Entrants Industry Competitor Threat of Substitute Bargaining Power of Buyers Industry Competitor • Competition Drives Down the Rate of Return • Consolidated Industries, Little Room for Mistake Among Rivals • Lack of Differentiation or Less Switching Cost • Merger and Acquisition Increases Competition • High Strategic Stake in Achieving Success for Each Company • Economies of Scale is Crucial • Strategic Alliances and More Threat of Entry • Economies of Scale by Businesses • Product Proliferation • High Capital Requirement for Investment • High Switching Cost for Customers • Cost Advantage by the Established Businesses/ Price as a Barrier • Access to Viable Distribution Channels • Government Regulations Threat of Substitute • Lack of Differentiation Among Various Existing Products • Low Switching Cost for Customers • Innovation in the Industry and less Innovated Products • Brand Names and Quality of Products • Weak Distribution and Customer Service • Fragmented Industries More Prone to Differentiated Products Bargaining Power of Buyers • Price a Fraction of Buyers Cost, Buyers less Price Sensitive • The Switching Cost is Low

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Michael Porter Competitive Strategy TECHNIQUES FOR ANALYZING INDUSTRIES AND COMPETITORS The Porter Model • The Model Bargaining Power of Suppliers Potential Entrants Industry Competitor Threat of Substitute Bargaining Power of Buyers Industry Competitor • Competition Drives Down the Rate of Return • Consolidated Industries, Little Room for Mistake Among Rivals • Lack of Differentiation or Less Switching Cost • Merger and Acquisition Increases Competition • High Strategic Stake in Achieving Success for Each Company • Economies of Scale is Crucial • Strategic Alliances and More Threat of Entry • Economies of Scale by Businesses • Product Proliferation • High Capital Requirement for Investment • High Switching Cost for Customers • Cost Advantage by the Established Businesses/ Price as a Barrier • Access to Viable Distribution Channels • Government Regulations Threat of Substitute • Lack of Differentiation Among Various Existing Products • Low Switching Cost for Customers • Innovation in the Industry and less Innovated Products • Brand Names and Quality of Products • Weak Distribution and Customer Service • Fragmented Industries More Prone to Differentiated Products Bargaining Power of Buyers • Price a Fraction of Buyers Cost, Buyers less Price Sensitive • The Switching Cost is Low. Availability of Similar Products in the Market • Forward and Backward Integration Lessens the Bargaining Power of Buyer. Self Manufacturing and Self Distribution by Car Industry • The Information of Buyer on the Market, Demand, Competition and Market • Wholesalers as Buyers can Impose Bargaining Power Over Suppliers • When Customers decision on Buying can be influenced by Retailers Bargaining Power of Suppliers • When the Industry is Dominated by a Few Suppliers • When the Supplier Competes with Alternative Supply and Suppliers • When the Supplier Sells not to one Industry but More • The Supplier's Product is Crucial to Producer's Product • The Suppliers Product is Well Differentiated • The Supplier Threat of Forward Integration Exists • Government Influence in the Industry for Substitute Product Strategic Group Within an Industry • Strategic Groups are Leading Companies in an Industry. They Have Reached Economies of Scale and Occasionally Scope • Entry Barriers are Imposed mostly by Strategic Group in an Industry • Mobility Barriers Are determined by Skills, Resources, Strategies and Cost • Strategic Groups Have Different Amount of Power vis-à-vis Buyers and Suppliers • Strategic Groups are Exposed to Substitute Products for Product Line, Differentiation, Demographic Change, Customers…… Consolidating a Fragmented Industry • Creation of Economies of Scale • Standardization by Innovation • Rectify the Problem of a Fragmented Industry by Looking at the Causes. For Example Diseconomies of Scale • Initiate Acquisition and Merger • Explore and Investigate the Industry Trends in terms of Customer Needs and Innovation • Firms that Cannot help Consolidating an Industry are the Ones with Lack of Skills, Myopic, not Aware of the External Environment, and Organizationally not Ready