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Understanding the Porter Framework: A Tool for Competitive Analysis

The Porter Framework, developed by Michael Porter, is a strategic technique used to evaluate a company's competitive position in the market. It focuses on five key forces: the threat of new entrants, supplier power, industry rivalry, buyer power, and the threat of substitutes. By analyzing these forces, businesses can identify both overt and subtle competitors, understand pricing dynamics, and develop strategies for improvement. This comprehensive analysis is essential for navigating competitive landscapes and achieving sustainable growth.

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Understanding the Porter Framework: A Tool for Competitive Analysis

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  1. The Porter Framework McIntire Investment Institute Presented by Michael Rosete

  2. What is the Porter Framework? • Technique developed by Michael Porter • Used to assess the competitive position of a company • Reveals how customers, suppliers, potential entrants, and substitute products are less obvious competitors

  3. Threat of New Entrants Supplier Power Industry Competition Buyer Power Threat of Substitutes

  4. Threat of New Entrants Supplier Power Industry Competition Buyer Power Threat of Substitutes

  5. Also known as Barriers to Entry Economies of scale Product differentiation Capital intensity Government policy Threat of New Entrants May I Play?

  6. Threat of New Entrants Supplier Power Industry Competition Buyer Power Threat of Substitutes

  7. Determine pricing and quality Switching costs Number of available suppliers Forward integration Supplier Power Bargaining Power

  8. Threat of New Entrants Supplier Power Industry Competition Buyer Power Threat of Substitutes

  9. Buyer concentration Product differentiation Switching costs Value added Backward integration Buyer Power The Other Side

  10. Threat of New Entrants Supplier Power Industry Competition Buyer Power Threat of Substitutes

  11. Price/Performance tradeoff Current and future Switching costs Substitute improvement Threat of Substitutes Alternatives

  12. Threat of New Entrants Supplier Power Industry Competition Buyer Power Threat of Substitutes

  13. Number of competitors Industry growth Product differentiation Competitor diversity Exit barriers Industry Competition Rivalry

  14. Threat of New Entrants Supplier Power Industry Competition Buyer Power Threat of Substitutes

  15. Recap • Systematic industry and competitive analysis • Customers and suppliers are friends and foes • Always worry about new entrants and substitutes • NEVER think that competitors do not exist

  16. Any Questions? Thank you.

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