PRESENTED TO: SIR SHAKEEL BAIG

PRESENTED BY: SANA BUKHARI ABDUL WAHID M.ADEEL MUZAMMIL EJAZ

Michael Porter Five FactorsMichael Porter Five Factors

PEST AnalysisPEST Analysis

CPM MatrixCPM Matrix

PORTER’S FIVE FORCESPORTER’S FIVE FORCES

Rivalry Among Existing CompetitorsRivalry Among Existing Competitors

Intense rivalry often plays out in the following ways:Intense rivalry often plays out in the following ways:

Jockeying for strategic positionJockeying for strategic positionUsing price competitionUsing price competitionStaging advertising battlesStaging advertising battles

Making new product introductionsMaking new product introductionsIncreasing consumer warranties or serviceIncreasing consumer warranties or service

Occurs when a firm is pressured or sees an opportunityOccurs when a firm is pressured or sees an opportunityPrice competition often leaves the entire industry worse offPrice competition often leaves the entire industry worse off

Advertising battles may increase total industry demand, but Advertising battles may increase total industry demand, but may be costly to smaller competitorsmay be costly to smaller competitors

Threat of New EntrantsThreat of New Entrants

Barriers to Barriers to EntryEntry

Government PolicyGovernment Policy

Economies of ScaleEconomies of Scale

Product DifferentiationProduct Differentiation

Capital RequirementsCapital Requirements

Switching CostsSwitching Costs

Access to Distribution ChannelsAccess to Distribution Channels

Cost Disadvantages Independent Cost Disadvantages Independent of Scaleof Scale

Bargaining Power of SuppliersBargaining Power of Suppliers

Suppliers exert power Suppliers exert power in the industry by:in the industry by:

* * Threatening to raiseThreatening to raiseprices or to reduce qualityprices or to reduce quality

Powerful suppliers Powerful suppliers can squeeze industry can squeeze industry profitability if firms profitability if firms

are unable to recover are unable to recover cost increasescost increases

Suppliers are likely to be powerful if:Suppliers are likely to be powerful if:

Supplier industry is dominated by a Supplier industry is dominated by a few firmsfew firms

Suppliers’ products have few substitutesSuppliers’ products have few substitutes

Buyer is not an important customer to Buyer is not an important customer to suppliersupplier

Suppliers’ product is an important Suppliers’ product is an important input to buyers’ productinput to buyers’ product

Suppliers’ products are differentiatedSuppliers’ products are differentiated

Suppliers’ products have high Suppliers’ products have high switching costsswitching costs

Supplier poses credible threat of Supplier poses credible threat of forward integrationforward integration

Bargaining Power of BuyersBargaining Power of Buyers

Buyers compete Buyers compete with the supplying with the supplying

industry by:industry by:

* * Bargaining down pricesBargaining down prices

* Forcing higher quality* Forcing higher quality

* Playing firms off of* Playing firms off ofeach othereach other

Buyer groups are likely to be powerful if:Buyer groups are likely to be powerful if:

Buyers are concentrated or purchases Buyers are concentrated or purchases are large relative to seller’s salesare large relative to seller’s sales

Purchase accounts for a significant Purchase accounts for a significant fraction of supplier’s salesfraction of supplier’s sales

Products are undifferentiatedProducts are undifferentiated

Buyers face few switching costsBuyers face few switching costs

Buyers’ industry earns low profitsBuyers’ industry earns low profits

Buyer presents a credible threat of Buyer presents a credible threat of backward integrationbackward integration

Product unimportant to qualityProduct unimportant to quality

Buyer has full informationBuyer has full information

Threat of Substitute ProductsThreat of Substitute Products

Products Products with similar with similar

function function limit the limit the

prices firms prices firms can chargecan charge

Keys to evaluate substitute products:Keys to evaluate substitute products:

Products with improving Products with improving price/performance tradeoffs price/performance tradeoffs relative to present industry relative to present industry

productsproducts

Example:Example:

Electronic security systems in Electronic security systems in place of security guardsplace of security guards

Fax machines in place of Fax machines in place of overnight mail deliveryovernight mail delivery

ForceForce Profitability will Profitability will be higher if:be higher if:

Profitability will Profitability will be lower if:be lower if:

Bargaining power Bargaining power of suppliersof suppliers

Weak suppliersWeak suppliers Strong suppliersStrong suppliers

Bargaining power Bargaining power of buyersof buyers

Weak buyersWeak buyers Strong buyersStrong buyers

Threat of new Threat of new entrantsentrants

High entry barriersHigh entry barriers Low entry barriersLow entry barriers

Threat of Threat of substitutessubstitutes

Few possible Few possible substitutessubstitutes

Many possible Many possible substitutessubstitutes

Competitive rivalryCompetitive rivalry Little rivalryLittle rivalry Intense rivalryIntense rivalry

PEST Analysis

This form of business analysis examines the externalThis form of business analysis examines the externalenvironment and the global factors that may affect a environment and the global factors that may affect a business. It can provide a quick and visual representation ofbusiness. It can provide a quick and visual representation of the external pressures facing a business, and their possible constraints on the external pressures facing a business, and their possible constraints on

strategy.strategy.It is usually divided into four external influencesIt is usually divided into four external influenceson a businesson a business

P – PoliticalP – PoliticalE – EconomicE – EconomicS – SocialS – SocialT – Technological T – Technological

This is concerned with how political developments, This is concerned with how political developments, regionally, nationally and internationally might affect a regionally, nationally and internationally might affect a business’s strategy. business’s strategy.

Employee protection-Employee protection-health/safety, redundancy pay, discrimination, health/safety, redundancy pay, discrimination, minimum wageminimum wage

Consumer protection-Consumer protection-truth in advertising, high-pressure sales tactics, sales truth in advertising, high-pressure sales tactics, sales agreementsagreements

Competition protection-Competition protection-unfair trade practices, monopoly, mergers & takeoversunfair trade practices, monopoly, mergers & takeovers

This involves the analysis of a wide variety of economic This involves the analysis of a wide variety of economic factors and their effects on a business. They include:factors and their effects on a business. They include:Economic growth and rising living standardsEconomic growth and rising living standardsLow/high levels of inflationLow/high levels of inflationLow/high levels of unemploymentLow/high levels of unemploymentBalance of payments Balance of payments (value of imports vs. exports)(value of imports vs. exports)

What competitive advantage might a business gain by What competitive advantage might a business gain by social changes taking place outside of the business?social changes taking place outside of the business?

Aging population, reduced birth rates, longer life Aging population, reduced birth rates, longer life expectancyexpectancy

Changing role of women in the workplaceChanging role of women in the workplace Improved Education – better skilled workersImproved Education – better skilled workers Early retirement, more leisure timeEarly retirement, more leisure time Rising divorce rates, more “single” householdsRising divorce rates, more “single” households Job securityJob security Immigration creating a wider range of consumer tastesImmigration creating a wider range of consumer tastes

The impact of technological advancement on business The impact of technological advancement on business strategy. strategy.

Business Software applications (word processing, Business Software applications (word processing, spreadsheets, database, accounting systems, inventory spreadsheets, database, accounting systems, inventory systems)systems)Computer-aided designComputer-aided designComputer-aided manufacturingComputer-aided manufacturingInternet/IntranetInternet/Intranet

ENVIRONMENTAL FACTOR competition economy demographics government interference consumer behavior political issues location

Equal pay act (1970) Sex discrimination act (1975) Sales of goods act (1979) Health and safety at work act (1974)

INDUSTORY FACTOR

Competitor Technology Utilization of resources Cost Value

LOCAL FACTOR NATIONAL FACTOR GLOBAL FACTOR

CPM (competitor profile matrix):CPM (competitor profile matrix):

In order to better In order to better understand the external environment and the understand the external environment and the competition in a particular industry, firms often use competition in a particular industry, firms often use CPM. The matrix identifies the firm’s key competitors CPM. The matrix identifies the firm’s key competitors and compares them using industry’s critical success and compares them using industry’s critical success factors. The analysis also reveals company’s relative factors. The analysis also reveals company’s relative strengths and weaknesses against its competitors.strengths and weaknesses against its competitors.

IMPORTANCEIMPORTANCE::

In most industries, competitors tend to have In most industries, competitors tend to have distinct strengths and weaknesses. While one particular player distinct strengths and weaknesses. While one particular player might have the lowest manufacturing costs, another could have might have the lowest manufacturing costs, another could have the most recognized brand name. Yet another competitor could the most recognized brand name. Yet another competitor could have the tastiest or most durable product, As a result, you can have the tastiest or most durable product, As a result, you can rank companies in terms of the "total package" they bring to the rank companies in terms of the "total package" they bring to the table. This allows a manager or business owner to identify the table. This allows a manager or business owner to identify the strongest competitors as well as the areas where she most strongest competitors as well as the areas where she most needs to improve.needs to improve.

The weights must be between 0 and 1 and the The weights must be between 0 and 1 and the sum of the weights for all attributes must add up to 1. sum of the weights for all attributes must add up to 1. Naturally, the more critical an attribute, the higher its Naturally, the more critical an attribute, the higher its weight must be. In case of supermarkets, the weights weight must be. In case of supermarkets, the weights might be 0.3, 0.3, 0.25 and 0.15 for location, product might be 0.3, 0.3, 0.25 and 0.15 for location, product selection, price and customer service, respectively.selection, price and customer service, respectively.

Weightage:Weightage:

Critical success factors Critical success factors (CSF) are the key areas, which must be performed at (CSF) are the key areas, which must be performed at the highest possible level of excellence if organizations the highest possible level of excellence if organizations want succeed in the particular industry. They vary want succeed in the particular industry. They vary between different industries or even strategic groups between different industries or even strategic groups and include both internal and external factors.and include both internal and external factors.

Critical success factors (CSF):Critical success factors (CSF):

We can define RATING as number of We can define RATING as number of higher success factor as much any organization get strong higher success factor as much any organization get strong in any factor weather it is internal or external as much it get in any factor weather it is internal or external as much it get rating.rating.Scoring :Scoring :

weightage weightage Rating Scoring Rating Scoring

Rating and Score:Rating and Score:

Example of C.P.MExample of C.P.M

AnyAny

Question ?

Question ?