Amity School of Business

International BUSINESS MANAGEMENT MODULE 1

Michael Porters five forces model

Developed by Michael E. Porter in his book Competitive Strategy: Techniques for analyzing Industries and Competitors in 1980. Porter has identified five competitive forces that shape every industry and every market. These forces determine the intensity of competition and hence the profitability and attractiveness of an industry.

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Porters five forces model

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Bargaining Power of Suppliers

Suppliers bargaining power is likely to be high whenDominance of few suppliers. No substitute available. suppliers customers are fragmented. switching costs from one supplier to another are high. Integration of suppliers.
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Bargaining Power of Customers

Customers 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 the product.
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Threat of New Entrants

The threat of new entries will depend onHigh 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

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Threat of substitutes is determined by factors likeBrand loyalty of customers. Close customer relationships. Switching costs for customers. The relative price for performance of substitutes. Current trends.
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Competitive Rivalry between Existing Players

Competition between existing players is likely to be high whenmany 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 competitive Advantage

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Why does nation achieve international success in a particular industry? The answer lies in four broad attributes of a nation that shape the environment, in which local firms compete and create the competitive advantage.
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Diamond model
Chance Firm Strategy, structure and rivalry

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Factor Conditions

Demand Conditions

Gover nment
Related and supporting industries
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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 home demand. Internationalization of home demand.

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Related and Supporting industries

Competitive advantage in suppliers industry. Competitive advantage in related industry.

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Firm strategy structure and rivalry

Domestic rivalry creates pressure on firms to innovate.

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Role of Chance. Role of government.

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