Marketing Planning and Practice
aman_2910
Week3WebinarPortersFiveForces.pptxMarketing Planning and Practice UMKDQD-15-2 Week 3 Webinar
Presented by
Michelle Jackson/Mike Healey
w/c 22 February 2021
Plan for Today’s Webinar
Questions arising from week 2
How to apply a micro-environmental model – Porter’s Five Forces
Opportunity for any questions arising from the webinar or general questions around the module
The Micro-environment
PESTEL analysis should not be considered in isolation
Needs to be combined with other techniques, such as SWOT and micro-environmental analysis
The micro-environment refers to the immediate context of an organisation’s operations over which it can exert some influence. Includes elements such as:
Suppliers
Buyers/Resellers
Customers
Competition
Public
Finding Information
Finding information requires wide research…this is deliberate!
Some information is up-to-date but some is dated
Encourages the use of researching different sources (not just market reports) to learn about the category
It won’t be perfect…in the real world it rarely is!
You really need to develop this skill for year 3
Michael Porter
According to Michael Porter, in one of his landmark books, titled Competitive Strategy,
“In any industry, whether it is domestic or international or produces a product or a service, the rules of competition are embodied in five competitive forces: the entry of new competitors, the threat of substitutes, the bargaining power of buyers, the bargaining power of suppliers, and the rivalry among the existing competitors.”
Porter’s Five Forces Analysis
Porter (1980) clear basis for strategic thinking:
Cost leadership, Differentiation, Focus
Understand the ‘forces’ at work in a given segment
Porter (1980) suggested that an organisation should adopt a clear and meaningful basis for strategic thinking and his three generic strategies are: cost leadership, differentiation and focus. In other words an organisation should understand its competitive stance and be clear what the organisation means to the customer. An organisation then needs to select the strategic approach which allows it to maximise its strengths recognising the competition. Porter then went on to suggest this could be done by taking into account five key factors (five forces).
When we evaluate Porter’s Five Forces model (Porter, 1980) we will see the importance of understanding the competition, but equally when we analyse and understand the competition we can build mechanisms to effectively compete against them, not just on price, but on a range of dimensions where a competitive advantage is held.
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Porter’s Five Forces Example
Needs to have sources added in to be a better example.
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Porter’s Five Forces
Analytical tool that considers the ‘power’ in a market
Identifies the attractiveness of a market/sector
Competitive rivalry
Bargaining power of buyers
Bargaining power of suppliers
Threat of new entrants
Threat of substitute products
Porter’s Five Forces Analysis
Activity: Draft your Porter’s Five Forces
I am going to identify each of the key forces.
Make your own notes as we go through so that you can apply this micro-environmental model.
Competitive Rivalry
Level of competition (number of competitors)
High intensity affects all players
Can be defensive or offensive
Depends on entry/exit barriers
Quality differences
The industry lifecycle
Can limit profits dependent upon intensity
The strongest of the five forces?
Threat of Substitute Products
Number and availability of substitute products or services
Perform same/similar function
Can depend on the switching costs
Will/how easy for buyers substitute
How close (differentiated) are the substitutes? Price?
Intensity of competition in the industry
Can reduce profitability
Bargaining Power of Buyers
Arguably the strongest of the five forces impacting industry competition
Needs and expectations of customers and consumers
More bargaining power for business to consumer (B2C)
Social media reviews and feedback
Access to/convenience of substitute products
Lead to increased industry competitiveness
Number of customers affects power
Ability to substitute
Threat of New Entrants
New competitors in an industry/category
Not just traditional industry competitors
Digital is changing the nature of competition
Leveraging social, mobile, analytics
Lowers barriers to entry
Access to distribution channels
Retaliation from existing organisations
Can affect profitability
Bargaining Power of Suppliers
Control that suppliers put on organisations
Affect profitability
Suppliers can impact through:
Raising prices
Reducing product quality
Affecting product availability
Number of suppliers
Uniqueness of supplier products, ability to substitute others
Compiling a Five Forces Analysis
Need to identify whether the factor is Low / Medium / High
Must be underpinned with quality sources to support your points
Next Week
We will consider the next section of the marketing plan - objectives
In the meantime, continue working on your insight section
It will take you time to complete
Include wider industry/sector information in the analysis
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Any Questions?
You can stay with the webinar session if you have questions (audio is preferred but you can use the chat box too).
If not please feel free to leave the session. There will be opportunities to ask questions at the end of every webinar session.
