Porter's 5 Forces - Institute for Manufacturing (IfM)

Porter's 5 Forces. A framework for diagnosing industry structure, built around five competitive forces that erode long-term industry average profitability. IfMHome>Research>DecisionSupportTools>Porter's5Forces DecisionSupportToolsOverviewAffinityChartingAnalyticalHierarchyProcessBalancedScorecardBenchmarkingBostonPlotBrainstormingCapabilitiesandCompetencesCapabilityandMaturityCause&EffectCheckSheetsandCheckListsClusteringConflictAnalysisControlChartsCorporateStrategyCost/Benefit/RiskAnalysisCriteriaRatingFormCriticalPathAnalysisCustomerSurveysandInterviewsDataSourcesDecisionTreesDemingCycleDeming's14pointsDrawingPackagesFiniteCapacitySchedulingFlexibilityFrameworkFlowChartsForcefieldAnalysisFrom/toChartGapAnalysisGraphs,Gantt,Histograms&BarChartsHewlett-PackardReturnMapImportance/PerformanceMatrixInnovationFunnelJITJust-in-TimemanufacturingKanbansManufacturingDecisionAreasManufacturingResourcePlanningMarketing,4PsofMaterialsRequirementsPlanningMatricesMatrix2x2Mintzberg's5PsforStrategyPolarcharts,RadarchartsPorter's5ForcesPorter'sGenericCompetitiveStrategiesPorter'sValueChainProductLifeCycleProgrammeEvaluationandReviewTechnique(PERT)QualityFrameworkQualityFunctionDeployment(QFD)QualityAwardsandOrganisationsQuality,Time,Cost&FlexibilityQuantitativeDecisionMakingRobustnessAnalysisSensitivityAnalysisStrategicOptionsDevelopmentandAnalysis(SODA)SoftSystemsMethodologySpreadsheetsanddatabasesStatisticalSoftwareStrategicAssessmentModelStrategicAssumptionsSurfacingandTestingStrategicChoiceApproachSWOT(Strengths,Weaknesses,Opportunities,Threats)TimeFrameworkTQMToolsTrade-offModelsValueChain(Porter's)Vroom'sexpectancytheoryPorter's5Forces    Aframeworkfordiagnosingindustrystructure,builtaroundfivecompetitiveforcesthaterodelong-termindustryaverageprofitability.Theindustrystructureframeworkcanbeappliedattheleveloftheindustry,thestrategicgroup(orgroupoffirmswithsimilarstrategies)oreventheindividualfirm.Itsultimatefunctionistoexplainthesustainabilityofprofitsagainstbargainingandagainstdirectandindirectcompetition. Porter'sfiveforces,orfactorsthatshapebusinessstrategyare: Threatofentrytothemarketfromotherorganisations Supplierpower Buyerpower Availabilityofsubstituteproducts Existingcompetitors Theelementsinvolvedwitheachforceareshowninthelistsbelow   EntryBarriers Economiesofscale Proprietaryproductdifferences Brandidentity Switchingcosts capitalrequirements Accesstodistribution Absolutecostadvantages Proprietarylearningcurve Accesstonecessaryinputs Proprietarylow-costproductdesign Governmentpolicy Expectedretaliation DeterminantsofSupplierPower Differentiationofinputs Switchingcostsofsuppliersandfirmsintheindustry Presenceofsubstituteinputs Supplierconcentration Importanceofvolumetosupplier Costrelativetototalpurchasesintheindustry Impactofinputsoncostordifferentiation Threatofforwardintegrationrelativetothreatofbackwardintegrationbyfirmsintheindustry DeterminantsofBuyerPower BargainingLeverage Buyerconcentrationversusfirmconcentration Buyervolume Buyerswitchingcostsrelativetofirmswitchingcosts Buyerinformation Abilitytobackwardintegrate Substituteproducts Pull-through      PriceSensitivity Price/totalpurchases Productdifferences Brandidentity Impactonquality/performance Buyersprofits Decisionmakers'incentives RivalryDeterminants Industrygrowth Fixed(orstorage)costs/valueadded Intermittentovercapacity Productdifferences Brandidentity Switchingcosts Concentrationandbalance Informationalovercomplexity Diversityofcompetitors Corporatestakes Exitbarriers DeterminantsofSubstitutionThreats Relativepriceperformanceofsubstitutes Switchingcosts Buyerpropensitytosubstitute References PorterME,1979Mar/Apr,'Howcompetitiveforcesshapestrategy',HarvardBusinessReview. PorterME,1980,"CompetitiveStrategy:TechniquesforAnalysingIndustriesandCompetitors".TheFreePress. PorterME,"TowardsaDynamicTheoryofStrategy",StrategicManagementJournal1991,vol.12,95-117.     Finduson       ShareThis InstituteforManufacturing 17CharlesBabbageRoad CambridgeCB30FS +44(0)1223766141 [email protected] SiteMap|FreedomofInfo|Privacy Stayintouch: Research ArtificialIntelligenceAssetManagementBusinessModelInnovationComplexAdditiveMaterialsDesignManagementDigitalManufacturingDistributedInformation&AutomationLaboratoryFluidsinAdvancedManufacturingHealthcareIndustrialPhotonicsIndustrialResilienceIndustrialSustainabilityInkjetResearchInnovationandIntellectualPropertyInternationalManufacturingManufacturingIndustryEducationResearchNanoManufacturingScience,Technology&InnovationPolicyStrategyandPerformanceTechnologyEnterpriseTechnologyManagementServiceAllianceUniversityCommercialisationandInnovationPolicyEvidenceUnit Services AboutIfMECSConsultancyProfessionaldevelopmentForbusinessForgovernmentForuniversitiesOpencoursesNews DepartmentofEngineering