cafe 7 michael porter model
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8/4/2019 Cafe 7 Michael Porter Model
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International BUSINESS
MANAGEMENT
MODULE
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Michael Porters five forces model
Developed by Michael E. Porter in hisbook Competitive Strategy: Techniquesfor analyzing Industries and Competitors
in 1980.
Porter has identified five competitiveforces that shape every industry and every
market. These forces determine the intensity of
competition and hence the profitability and
attractiveness of an industry. 2
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Porters five forces model
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Bargaining Power of Suppliers
Suppliers bargaining power is likely to behigh when-
Dominance of few suppliers.
No substitute available.
suppliers customers are fragmented.
switching costs from one supplier toanother are high.
Integration of suppliers.
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Bargaining Power of CustomersCustomers bargaining power is likely to be high when-
concentration of buyers.
The supplying industry comprises a large number of
small operators. High fixed costs of supplying industry.
Availability of substitutes.
Customers are price sensitive. Customers could produce the product themselves.
The customer knows about the production costs of theproduct.
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Threat of New EntrantsThe threat of new entries will depend on-
High initial investments.
Cost advantages of experienced players.
Brand loyalty of customers.
Protected intellectual property.
Scarcity of important resources.
Existing players have close customer relations.
Legislation and government action.
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Threat of Substitutes
Threat of substitutes is determined byfactors like-
Brand loyalty of customers.
Close customer relationships.
Switching costs for customers.
The relative price for performance ofsubstitutes.
Current trends.
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Competitive Rivalry between Existing
PlayersCompetition between existing players is
likely to be high when-
many players of about the same size.
Players have similar strategies.
not much differentiation.
Low market growth rates.
Barriers for exit are high.
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Michael Porters model of
National competitiveAdvantage
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Why does nation achieve internationalsuccess in a particular industry?
The answer lies in four broad attributes ofa nation that shape the environment, in
which local firms compete and create thecompetitive advantage.
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Factor Conditions Demand Conditions
Related and supporting industries
Firm Strategy, structure and rivalryChance
Government
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Factor conditions
Availability of factor endowments.
Human resource
Physical resource.
Knowledge resource.
Capital resource.
Infrastructure.
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Demand conditions
Home demand composition.
Size and pattern of growth of homedemand.
Internationalization of home demand.
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Related and Supporting industrie
Competitive advantage in suppliers
industry. Competitive advantage in related
industry.
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Firm strategy structure andrivalry
Domestic rivalry creates pressure
on firms to innovate.
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Role of Chance.
Role of government.
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