How to Model a Competitive Strategy with Porter's 5 ...

But it would likely be worthwhile to explore ways in which Apple could erode the bargaining power of its customers. Grab a Porter's 5 Forces Template. If you ... HowitworksIntegrationsMeetingTemplatesResultsPricingGetademoGetHugofreeLoginLoginGetademoGetHugofree🚨 Guesswhat?We'vebeenhuntedonProductHuntandarecompetinguntilmidnighttonight.Haveafewsecondstosupportushere? 👉XManagementTeamworkPersonalizedMeetingHealthAssessmentSeehowyoucomparewithsimilarcompanies.Getapersonalizedreportonhowtoimprove.FREEDOWNLOADForanorganizationtoplanandexecuteitscompetitivestrategy,itneedstounderstanditsmarketandcompetitors.  Simpleenough,buthowdoyou“understand”yourmarketandcompetitors?Porter’s5ForcesFrameworkprovidesamethodologyfordoingso. AndwhileMichaelPorterpublishedhismethodologyin1979,theprinciplesitwasbuiltonareasrelevantasevertoday.  Inthispost,I’lldefinethemodel,explainitsuse,andillustrate(withexamples)whatPorter’sFiveForceslooklikeinpractice. Porter’s5ForcesDefinedPorter’sFiveForcesFrameworkisamethodforanalyzinganindustrytounderstandabusiness’scompetitivepositionwithinthatindustry. Thisframeworkiscomprisedofthefollowingfiveforces:ThreatofnewentrantsThreatofsubstitutesBargainingpowerofcustomersBargainingpowerofsuppliersCompetitiverivalryThethreatsofnewentrantsorsubstitutesarehorizontalcompetitiveforces,meaningtheycomefromoutsidetheindustrytoincreasecompetitionforcustomers. Forexample,theairlineindustrycedescustomerstothecompetitiveforceofsubstituteslikecars,trains,andcruiseships.Similarly,newentrantstotheairlineindustryreduceprofitabilitybyincreasingcompetitionforcustomers.Thebargainingpowerofcustomersandsuppliersareverticalcompetitiveforces,meaningtheyimpactthevaluechainthatflowsfromsuppliertoconsumer. Supplierswillalwayswanttochargemoreandsupplylessandconsumerswillalwayswanttopaylessandgetmore.Understandingthebargainingpowerofsuppliersandconsumers,then,helpsstrategistsfindopportunitiesandthreats.Thefinalforceiscompetitiverivalry,whichreferstocompetitiveforceswithintheindustry. ThefollowingimageillustrateseachofPorter’s5Forces:https://commons.wikimedia.org/wiki/File:Porter%27s_Five_Forces.pngPorter’s5Forces:UsageinStrategicManagementPorter’smodelisatool.Likeanytool,itworksbestwhenit’sappliedcorrectly.Tothatend,theframeworkismeanttobeusedtoanalyzeanindustry,notanentiresector.Norisitmeantforanalyzingsmallersubmarkets.Forexample,imagineyouleadstrategyforSouthwestAirlines. Inthiscase,you’dusePorter’s5Forcestoanalyzetheairlineindustry,nottheentiretransportationsector,northeprivatejetchartersubmarket.ThetransportationsectoristoobroadandthejetchartermarkettoonarrowforPorter’smodeltogenerateusefulinsights.AccordingtoLumenLearning,atahigh-level,Porter’sframeworkisusedto:Narrowthestrategybuilder’sfocusonspecificcriticalissueswithinagivenindustry.Demonstratetheperceivedopportunitieswithinanindustrylandscape.Makeaqualitativeanalysisofagivencompany’sstrategicposition.Evaluatedecisionsinthecontextoftheorganization’senvironment.Ofcourse,Porter’s5Forcesisnotinfallible.Attheveryleast,though,it’sausefulfirststepformanagersbuildingoradaptingastrategy.Forexample,thismodelcouldprovidetheunderlyinganalysisstrategistsneedtosetusefulobjectivesandkeyresults.{{vital="/blog-inserts"}}ExamplesofPorter’s5ForcesUseinaCaseStudyToillustratehowyoucanapplythismodel,thissectionwillparaphrasethePanmoreInstitute’scasestudyofAppleusingaFiveForcesanalysis.ThisanalysisfocusesonApple’spositionwithinthesmartphoneindustry.Notethat,whilesomeanalystsuseascaleofonetofiveforeachforce,thisanalysiswillcategorizeforcesasstrong,moderate,orweak.CompetitiveRivalry:StrongForceApplefacesstiffcompetitionbecauseofthehighaggressionofrivalfirms,lowdifferentiationbetweenproducts,andthelowcostofswitching.Inotherwords,firmslikeLGandSamsungmarkettheirproductsaggressively.AndtheirphonescandomanyofthesamethingsApple’scan.It’salsorelativelyeasyforcustomerstoswitchfromAppletoanotherbrand,whichmakescompetitiverivalryastrongerforce.BargainingPowerofCustomers:StrongForceThebargainingpowerofApple’scustomersisastrongforcebecauseofthelowcostofswitchingandcustomers’accesstoinformation. TheonethingthatworksinApple’sfavorasitrelatestothisforceisthefactthatcustomersareindividuals.Ifcustomershadcollectivebargainingpower,thisforcewouldbeevenstronger.BargainingPowerofSuppliers:WeakForceApplehasaccesstomanydifferentsuppliersandtheoverallsupplyofApple’sinputsisalsoquitelarge.Addtothatthefactthattherearemanysuppliersandrelativelyfewsmartphonesellers,andsuppliers’bargainingpowerisaweakforce. ThreatofSubstitutes:WeakForceInApple’scase,thethreatofsubstitutesislowbecause,althoughtherearesomesubstitutes,theytypicallyhaveinferiorperformance.Forexample,consumerscouldbuyacameratotakepictures,butthey’dlosetheconvenienceofhavingthesmartphone’sotherfeatures.ThreatofNewEntrants:ModerateForceThecapitalrequirementsneededtobuildabrandthatcompeteswithApplehelpsweakenthisforce.However,otherlargefirmslikeGooglehaveshowntheycanenterthesmartphoneindustry.Inotherwords,manylargecompaniescouldbecomenewentrants,makingthisamoderateforce.Porter’sFiveForcesSummarizedAnalysisThiscasestudyofAppleusingPorter’smodelfocusestheanalyst'sattentiononspecificthreatsforApple.Inthiscase,thestrongestforces—andbyextensionthemostimportantones—are competitiverivalry,thebargainingpowerofcustomers,andthethreatofnewentrants.Inthisway,Porter’sFiveForcesFrameworkindicateswheremanagersneedtoprioritizetheirefforts. Forexample,duetotheweakforceofsubstitutes,itwouldn’tmakesensetospendmarketingresourcesonpositioningApple’sproductsassuperiortoitssubstitutes.ButitwouldlikelybeworthwhiletoexplorewaysinwhichApplecoulderodethebargainingpowerofitscustomers. GrabaPorter’s5ForcesTemplateIfyouwanttoputPorter’s5ForcesFrameworktouse,it’llhelptohaveatemplate.Createlyprovidesseveraltemplateswhichyoucanplaywithforfree.OryoucanusethesetemplatesfromPresentationGOinGoogleSlidesorPowerPoint. AfinaloptioncomesfromTopExcelTemplateswhichofferstemplatesorganizedinanExcelspreadsheet.{{go-further-with-hugo="/blog-inserts"}}YoumightalsolikeOKRDefinition(WhatareOKRs,exactly?)2MINOKRsstandsfor"ObjectivesandKeyResults."Butwhatdoesthatreallymean?TeamLeaders:10TipsonHowtoHostEffectiveMeetings2MINTorunagreatmeeting,keeptheteamaligned,andtheagendashort,specific,andaction-oriented.The4-HourMeetingWeek📅(Howtospendwaylesstimeinmeetings)MINMyfirstdayatworkwasabreezeuntilmybossJoshtoldmeaboutour10%rule.TryallfeaturesforFREEwithunlimitedusersfor21DaysTryallfeaturesforFREEwithunlimitedusersfor21DaysAfteryourfreetrial,youcanupgradetokeepyourProfeatures,orusetheBasicplanforfree.Freeforeverupto10users.GetstartedSeepricingforteamsof11+