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7/31/2019 Porter 5 Forces- SWOT -Analyzing the Business Environment
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Porter 5 Forces, SWOT
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External Environment Political Environment
Political constraints Fair trade decisions, Tax programs, Pollution and pricing
policies, Administrative activities
Business Support Political Activities Patent laws, Government subsidies, Product research grants
Economic Environment
Factors affecting strategies planning GNP, Prime interest rates, inflation, trends in growth, credit
structure, disposable income etc.
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External Environment Social Environment
Values, beliefs, attitudes, opinions and lifestylesaffect the strategies
Cultural, demographics, religious, educationalfactors also affect
Technological Environment
Cost of technology Change of technology
Technology innovations
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Industry Level AnalysisPorters Industry Analysis: Five Forces Model
Industry
Competitors
Rivalry among
Existing firms
Substitutes
Buyers
Potential
Entrants
Suppliers
Threat of New
Entrants
Bargaining Power
of Buyers
Threat of Substitute
Products or Services
Bargaining Power
of Suppliers
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Porters Industry Analysis: Five Forces
Model Threat of new entrants
New entrants to an industry
Brings new capacity
Capture market share from existing players
More competition
Price wars
Falling returns - decline in profitability
Acquisition - the preferred way to enter into a newmarket
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Five Forces Model - Threat of New
Entrants Barriers of entry into new market
Product differentiation
Capital requirements Economies of scale
Access to distribution channels
Government policy Cost disadvantages independent of size
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Five Forces Model Intensity of rivalry among existing competitors
Lead to Price wars, Advertising battles, Launch of new
products and increased services and Warranties.
Intensity of rivalry depends on
Number of competitors
Slowdown in industrial growth
Lack of differentiation among products
Under-pricing to avoid spoilage of goods Perishable
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Five Forces Model The Bargaining Power of Buyers
Buyers are powerful when
The suppliers are many and the buyers are a few and large
The buyers purchase in large quantities The suppliers industry depends on the buyers for a large
percentage of its total orders (Indl Pd)
The buyers can switch orders between supply companies at a lowcost
Its is economically feasible for the buyers to purchase the inputfrom several companies at a time
The buyers can use the threat to provide for their own needsthrough vertical integration as a device for forcing down price
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Five Forces Model The Bargaining Power of Suppliers
Suppliers are powerful when
The product has few substitute and is important to the purchasing
company
No single industry is a major customer
Products are too much differentiated and switching cost is higher
for a buyer
Supplier can use the threat ofvertically integrating forward into
the industry and competing directly with the buying company
Buyers cannot use the threat of vertically integrating backward
and supplying their own needs
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Five Forces Model
Threat of Substitute Products
Substitute products can match the needs of the
customer in the same way as the original product A close substitute is a potential threat to the
companys product
It limits the price charged by a company
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SWOT Analysis
The process of analyzing the company and the environment inwhich it is operating
SWOT stands for strengths, weaknesses, opportunities andthreats.
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SWOT ANALYSIS
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SWOT Analysis
Internal Environment
Strengths
Infrastructure, Employees, Marketing team, Latest product innovation,
International quality standards, or even its closeness to the market The strength can be anything that adds value to its business
Weaknesses
Incompetent management, Untrained employees, Unevenly trained salesforce, Poor marketing strategies, Low quality products, or Lack ofproper financial capabilities
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SWOT Analysis
External Environment
Opportunity A new potential market with ample scope for growth, A
collaborative advantage (advantages through strategic alliancesand partnerships), or opportunities to fulfill the demand of alatent market
Any such activity in the environment that helps the organizationto grow, is an opportunity for it
Threats A new competitor in the market, Price reduction in the
competitors product or A new product introduced in the marketthat will eat into the companys market share