Company style 5 forces of competition in porter. Analysis of Porter's Five Forces Model of Competition

Since the time of Adam Smith, the theory of market relations has changed significantly. Both the theoretical base and applied branches are developing. In the field of competition studies, Porter's five forces analysis model is currently popular. With its help, it is possible to make a detailed analysis of the environment and develop a counteraction strategy. It should be noted that this is not a panacea and not even the only theory in the field of studying competitiveness.

The history of the emergence of the five competitive forces model by M. Porter

Comprehension of any theory is inseparable from understanding the way of thinking of its author. Michael Eugene Porter was born in 1947 in Michigan, United States of America. Eternal excellence. Winner of many awards. He has seven honorary doctorates. He is currently a professor at the Harvard Business School in Boston.

This is a thin gray-haired man in all the photographs, invariably in a tie. He travels a lot around the world giving lectures and seminars. Excellent speaker. Skillfully manages the attention of listeners and feels the mood of the audience well. During the lecture, he can relax, take off his tie. He speaks passionately. His theory of the five forces of competition has been around for about forty years, and M. Porter continues to work on its improvement and adaptation to modern conditions of a market economy.

Dr. Porter's theory was used in their work by such large companies as DuPont, Royal Dutch Shell, Procter & Gamble, Nevskaya Kosmetika and many others.

Summary of Michael Porter's Five Factor Model

The essence of Porter's theory is the differentiation of competitive forces and the analysis of individual indicators. The theory is successful, judging by the fact that M. Porter has collaborated with many, and at the same time the company has always achieved success in the competition.

M. Porter sees the company's weakness in the fact that managers look at the problem of competition narrowly, seeing evil for themselves only in firms that occupy the same cell in the economy with them. Whereas competition is a combination of the main forces that affect the economic viability of a company. Among the competitive forces in Porter's model are:

1. Intensity of competition in the industry.
2. The emergence of substitutes.
3. Problems with suppliers.
4. Problems with consumers.
5. The threat of new competitors.

During lectures, Porter draws a diagram simply with chalk on a blackboard. In textbooks, this depiction of the theory of the five forces of competition is often found.

Each factor of influence can be considered separately.

Intensity of competition in the industry

The model involves an analysis of the industry and what factors are behind competition problems. M. Porter speaks of the "threshold of entry." An example is air travel. Starting a business in this area, from his point of view, is quite easy: You just need to have one plane. You can start the first regular flight. However, there are many airlines that provide the same services. The passenger can choose, and if the ticket is cheaper, fly another flight in an hour. Or he will use another mode of transport, etc. With such a threshold for entering the business and regulated competition, the profitability is quite low. The intensity of competition is also determined by:

1. A large number of similar companies carrying out the same type of activity or providing the same types of services.
2. Typical similarity of manufactured goods.
3. The level of costs for the production of goods and services (stably high cost).
4. High entry barrier (maturity and saturation of the market).

Profitability also depends on the internal structure of the industry. And susceptibility to "storm influence of external forces."

The emergence of substitutes

There is always the possibility of new types of goods of the same purpose appearing on the market. The task of management is to foresee the possibility of commodity substitution and respond in a timely manner to such facts. A new product on the market may be cheaper at cost or meet other, higher requirements. The threat of the appearance of a new product can be prevented if the pricing and marketing policy of the company is properly organized:

1. Price competition can shift the attention of the buyer to low prices instead of focusing on quality.
2. Advertising attacks draw attention to the product and distract from the possibility of its replacement.
3. The production of new attractive products within the company reduces the possibility of product substitution.
4. Improving the quality of service in the sale and distribution of the product will reduce the competitiveness of the substitute.

Problems with suppliers

Suppliers have the same competitive environment, defined by the same criteria. Their strength is determined by:

1. The presence of large companies-suppliers. The possibility of a monopoly.
2. The uniqueness of the supplied goods.
3. An option when the industry where the goods are supplied is not the main one for the supplier.
4. Constancy. Lack of supply will lead to the liquidation of the company itself.
5. The ability to take over the acquiring firm through vertical integration.

Suppliers can:

1. Raise the price of your products.
2. Reduce the number of products and services provided.

The consumer factor

Buyers affect competitiveness as much as other factors. Their strength depends on such factors:

1. Consolidation of consumers. Often - their organization around a society.
2. The importance of the product to the consumer.
3. Breadth of product use areas.
4. The level of awareness about substitutes and areas of application of the product.

A strong consumer can:

1. To put pressure on prices in order to reduce them.
2. Require high quality.
3. Demand better service.
4. Push manufacturers against each other.

The threat of new competitors

The risk of new players appearing in an existing niche is determined by economic attractiveness and the threshold for entering the business. Such factors influence:

1. The price attractiveness of entering the market.
2. Low cost of organizing production (services).
3. Ease of entry into the business (entry threshold).

How the model is used: situation analysis and strategy building

M. Porter explains that the principle of his method of the five forces of competition is a systematic and integrated approach to building a strategy for relationships with all market participants.

For successful and competitive work it is necessary:

1. Analysis of the industry, identifying the factors that are behind the competition.
2. Determining the structure of the industry. Its attractiveness and threshold of entry.
3. Understanding industry dynamics. How quickly changes occur, the direction of movement.

The circle of interested subjects is expanding as much as possible. The main strategic task in all industries is to find a unique need that the company will satisfy with its activities. For this, the procedure is defined:

1. Determining company priorities, such as making a profit, achieving a monopoly, expanding, etc.
2. Identification of the circle of the most powerful factors of the five forces.
3. Specification of the problem facing the company in terms of specific strength.
4. Choice of factors that can be mitigated.
5. Drawing up an action plan to bring the idea to life.

An example of mathematical factor analysis

Forces can be evaluated mathematically, for example, in the form of a table. Let's give an example of a calculation for the construction industry, specifically for installers (installers) of plastic windows.

Evaluation criteria are made on a ten-point system. The final rating is calculated by the formula:

The calculation can be carried out independently for several sources, different authors and for several industries, after which a priority area is determined.

Table: assessment of competitive forces in the construction industry

In accordance with the table, we see that the industry is attractive. Quite high competitiveness - 8 and the possibility of new competitors - 6. Consumer power is low "1" due to high demand for plastic windows. The possibility of the emergence of substitutes is below average. In the supplier market, and these are the manufacturers of plastic windows, monopoly, suppliers have a strong influence. They can dictate their terms. From these data conclusions follow, and it is possible to recommend:

1. Our influence on existing competitors is small. We can fight with quality, but at the moment it is not cost-effective. Rating "8". Let's analyze the possibility of price reduction.
2. The possibility of the emergence of substitutes is small. There is a market for plastic and wooden windows. Consumers are defined. It is recommended to promote the advantage of our plastic, monitor prices and services of related companies.
3. The power of suppliers is high because of the monopoly. This is a very strong influence on the market. The threat needs to be reduced. Let's assume that there are funds. It is necessary to repurchase a share in the existing production in order to influence the supply or organize a new production of finished products.
4. The consumer is not organized. Demand exceeds supply. The influence of this factor at this stage can be neglected.
5. The possibility of new competitors is high. To carry out measures to reduce the attractiveness of the market for new enterprises - to adjust the quality and price policy.

Video: a detailed description of the choice of competitive strategy according to Porter

Modified Porter model for countries and regions, "national diamond"

Dr. Michael Porter works not only in the field of meso-environment (M. Porter's terminology) - relations at the level of companies. He developed a similar approach for the macroeconomics of countries and individual peoples.. To analyze the situation and prospects for the development of states, he suggested using a "competitive rhombus".

The analysis of the economy of states is based on the concepts of the initial state of the economy, the conditions of demand, the state of individual industries and the strategy of the state. The key issue is the effective use of natural and national features with the involvement of foreign technologies and investments.

In Russia, Dr. Porter became widely known after 2005, when, at the invitation of the government, he was engaged in research on the country's competitiveness. The report of Dr. Michael Porter was published in 2006, but in full is known only to specialists. From Porter's point of view, the main drawback is the raw material orientation of the Russian economy. And focus on large vertically integrated companies. This thesis was then repeatedly played up in the media of different countries. Porter criticizes the idea of ​​national leaders, from his point of view, she died with General Motors. Mobile companies are the backbone of the economy.

Key Aspects of Michael Porter's Five Competitive Forces Theory

From the last lectures of Michael Porter, we can conclude that from his point of view, the main thing is:

• An integrated approach to addressing the issue of the importance and influence of the various forces of competition.
• Orientation of the entire managerial staff to the ultimate goal and ways to achieve it.
• Openness of the company. The strategy should not be a secret. Dr. M. Porter's personal experience shows that it does not matter at all whether competitors are aware of the adopted strategy. But openness in this matter contributes to the general adjustment of management actions in a given direction.
• Intuitive approach. Porter himself believes that actions to counter the forces of competitiveness should be intuitive and largely spontaneous.
• Changes in time. Impact factors are variable and subject to temporary adjustment.

At all levels of competition, M. Porter uses the concepts of positive and negative competition. An example of a positive is those actions of the company, as a result of which the quality of goods or services improves.

In order to make a company a leader in any field, the approach is general. This differentiates the company from other enterprises, the concentration of management on the main goal and the application of a successful strategy in the field of competitiveness.

An analysis of the external environment can also be carried out using the M. Porter model (Fig. 2.1), which includes 5 main elements that need to be controlled when forming further actions.

Rice. 2.1

Each of the factors should be considered separately.

Industry Competition:

Competition in the industry is observed mainly between five large companies that are fighting for passengers, trying to attract them with better service, comfortable flights and the price of air tickets.

Competition between large market participants is increasing as each company uses a series of measures to improve its market position, which force competitors to introduce changes as well. These measures include: pricing policy, better customer service, special ways to sell tickets, check in and receive luggage.

In this case, Aeroflot must predict the actions of competitors and, by its actions, be ahead of them in development, increasing its market share. At the same time, such competitors with an insignificant market share do not pose a threat to Aeroflot.

The threat of substitute products

In this case, substitute goods will be other means of transport: road, rail, water, bus, etc. They will satisfy the same need of people - the need to move. The presence of a large number of possible substitutes increases competition. In this case, the company must influence the quality of services, the variety of destinations, the price of tickets, the methods of their purchase, the time of transportation, the comfort for customers, so that consumers prefer air transportation. Here, the advantage of air transport will be a shorter travel time.

The greatest influence should be given to rail transport and emphasize the advantages of air transport over it (in particular, less time spent on travel, better service, etc.)

The threat of competitors

For Aeroflot, the threat of the emergence of new competitors is insignificant, since entry into this market requires large start-up costs, the largest of which are associated with the formation of a fleet of ships and further large capital investments are required. Also very expensive are technologies related to check-in, baggage claim, airport and aircraft maintenance.

In addition, all air routes are already operated by Russian airlines, and there is no need for new firms.

In addition, the name "Aeroflot" for the consumer is synonymous with reliable and high-quality air transportation, a long and successful existence in the market, so consumers prefer this particular company.

Also, thanks to a large number of air destinations and a large fleet of modern vessels, the company saves on scale, i.e. has the ability to reduce unit costs. After all, a large number of flights helps the aviation company to fill each flight, using all possible options for moving passengers. The activity of local airports also shows increasing economies of scale. Ticket office space, ticket agents, seat reservation equipment, baggage drop-off, pick-up, and transportation, passenger boarding, ground services—all these resources are used more efficiently when business is high rather than low. (Because airport workers, with only a few flights a day, are free most of the time.) Moreover, all maintenance, scheduling and other logistics operations are handled more efficiently on a larger scale.

Bargaining power of suppliers:

The main suppliers here are airports, they receive aircraft, provide runways, connect flights, etc. It is on the effective work of air carriers with them that the formation of an air transportation network without failures depends.

Airlines also depend on fuel suppliers, which account for about a third of all transportation costs. As soon as fuel prices rise, companies are forced to look for ways to reduce transportation costs or raise airfare prices.

Bargaining power of consumers:

Consumers of Russian airline services are various groups of the population that differ in terms of travel purposes, income and structure of consumer priorities.

The most general segmentation of the market allows it to be divided into the market of business passengers and traveling people. To analyze the competitiveness of a company, it is very important to evaluate the client base, since for passengers in general the service is standardized and in general terms represents a movement from point A to point B, therefore, when choosing, the client is guided by a special number of indicators. These include: the price of the trip, the duration of the trip, the quality of the service provided, the schedule, safety, comfort conditions during the trip.

If these indicators are not taken into account, then the consumer can easily switch to the services of another company, since his awareness in this industry is usually high, and if necessary, having found a price or service advantage from a competitor company, the consumer will use its services. And for each airline, increasing the number of passengers should be the main goal.

In general, airlines are most influenced by suppliers (airports). Since the existence of airlines is impossible without coordinated work with them, for example, they may not accept the aircraft due to non-compliance with environmental standards or the size of the aircraft, the capabilities of the airport, the size of the corridor, they also service arriving aircraft - refueling, unloading - loading luggage and others.

The analysis is carried out by identifying 5 competitive forces:

The threat of new competitors (new entrants). How easy or difficult it is for new entrants to compete, what are the barriers. Threat of substitute products. How easy it is to replace a product or service, in particular, to reduce the cost.

Market power of buyers (customers). How strong is the position of buyers. Can they jointly order large quantities.

Market power of suppliers. How strong is the position of the sellers. Are there many potential suppliers or only a few, a monopoly?

The level of intensity of rivalry between existing players (rivalry). Is there strong competition between existing players? Is there a dominant player or is everyone equal in strength and size?

Threat of competitors.

The situation is such that new competitors bring with them additional resources and claim a part of the market share. Rivalry intensifies, profits decline. A certain competitive response will also require additional resources, which will reduce profits. For this parameter, we need to look at the following points:

• 1. Economies of scale.
• 2. Capital/investment requirements.
• 3. Costs from the transition of customers.
• 4. Access to marketing channels in the market.
• 5. Access to technology.
• 6. Brand loyalty. Are customers loyal?
• 7. The likelihood of retaliatory measures from existing players in the market.

The threat of substitute products

• 1. We will have to limit the price of our product if there are competitive alternatives. To analyze the situation, we need to answer the following questions:
• 1) Quality. Are substitute products better?
• 2) Are buyers ready for a replacement?
• 3) What is the ratio of the relative price and effectiveness of the substitute product?
• 4) The cost of switching to a substitute product. Is it easy to switch to another product?

Bargaining power of consumers

If customers have stronger market power than suppliers, they will take advantage of this by lowering the supplier's profit margin. To analyze this parameter, we will need to answer the following questions:

• 1. Concentration of buyers. How many sellers and buyers are in the market?
• 2. Differentiation. Are the products standardized?
• 3. Profitability of buyers. Buyers are forced to set strict conditions?
• 5. Switching costs. Is it easy for buyers to switch suppliers?

Bargaining power of suppliers

Having power over us, they will raise prices, which will badly affect our profitability.

• 1. Concentration of suppliers. Are there many buyers and few dominant suppliers?
• 2. Branding. Is the supplier brand strong?
• 3. Profitability of suppliers. Are suppliers forced to raise prices?
• 4. What is the role of quality and services in the market?

The level of competition.

If there is a strong player in the market, our products need a certain competitive response, which will require additional resources, which will reduce profits. Here it is important to consider the following points:

• 1. The structure of competition. The competition is all the more intense, the more small or equal competitors there are; competition is less intense if there is a clear market leader.
• 2. The cost structure of the market. Markets with high fixed costs provoke competitors to bring production to full capacity by lowering prices, if necessary.
• 3. Switching costs. Competition is reduced when buyers face high switching costs.

exit barriers. When barriers to exit are high, competitors tend to compete more.

Practical analysis of the five forces of M. Porter.

The threat of new competitors. The threat of new competitors in the industry depends on the "height" of a large number of entry barriers to the beauty industry in Marks. Entry barriers to an industry can take many forms.

Capital costs for newcomers to enter the industry.

If new beauty boutiques enter the beauty industry, then the capital costs for them will be relatively low, therefore, the threat of new competitors is high.

Brand loyalty and consumer poaching costs. Our beauty store has gained many regular customers over the years of existence, this is facilitated by a convenient location. But, our store covers only some areas of cosmetology, unlike competitors who specialize in a wide range of cosmetology services. Our competitors give customers the opportunity to receive a whole range of services in one beauty salon. Ours is inferior in this regard, although it follows the latest in the field of cosmetology and our specialists are always ready to advise clients. Therefore, emerging new enterprises in the beauty industry, as a rule of the modern business model (maximum services in one place), will not be too difficult to lure customers.

Unavailability of distribution channels. A newcomer to the industry has to fight for equal access to distribution channels, to look for their customers, which may entail additional costs. Large, well-known cosmetics stores (salons) have fairly strong distribution channels, based on quality

services, professionalism, location. In this case, it will be difficult for new competitors - salons to penetrate the industry.

Economies of scale in the production of existing competitors in the industry. It is impossible to achieve more or less significant economies of scale in this industry - since manual labor still dominates. Only a few advanced beauty stores have switched to hardware methods, replacing manual labor with the capabilities of cosmetology equipment. As a rule, this speeds up procedures, reduces the risk of human error, and most importantly, it often gives a greater effect than manual procedures. Such stores spend less time on each client, less. In addition, many hardware technologies are limited to physiotherapy - electric current, radio waves of different frequencies, etc. In such cosmetology equipment, there are practically no consumables at all, or they are minimal. Network beauty salons also achieve a certain effect from the scale of production - they "knock out" discounts from suppliers of professional cosmetics, independently and centrally engage in staff training.

The threat of the emergence of substitute services exists, because Currently, plastic surgery is gaining popularity. For the price, this indirect service - a substitute is much more expensive, but the effect and quality are at a higher level than cosmetics, even if they are elite cosmetics. Based on the desire of the consumer to get a quick, efficient and high-quality result, his willingness to switch to this service - a substitute is quite high. But there are also limitations, which are the high price, as well as the risk to health. Plastic surgery, although it guarantees the result, but the consequences, as practice shows, can be both positive and negative.

Buyer leverage.

The number of cosmetics buyers at each beauty salon (shop) is large - hundreds per month, but each of them operates largely independently of each other. Each consumer is especially valuable for the store, as we are well aware of the superiority of some competitors in the range of services, in their quality. The prospect of losing customers, especially regular ones, can induce the salon (store) to make additional concessions. Thus, we can conclude that the leverage of buyers to some extent put pressure on the competitiveness of our store, although they are not large companies, but individual consumers.

Supplier leverage. This is an important link in the system of creating and distributing the company's customer value. Suppliers of competing beauty stores can exert competitive pressure if they can provide individual players in the beauty salon market with more favorable conditions in terms of prices, quality, consumer properties of equipment, professional cosmetics, consumables or delivery times. Any little thing can affect the work of the store. Even such a seemingly trifle as disposable aprons for sales assistants. But still, comparing the degree of influence of suppliers in the beauty industry with other industries, one has to come to the conclusion that, in general, the supplied material resources are not unique and can be replaced. Replacement costs are also not high. Suppliers in the beauty industry are not large firms - their market is diluted into hundreds of players, the competition among them is perhaps even higher. Consequently, competitive influence from suppliers is greatly reduced.

The level of competition in the industry. Salons in the industry compete with each other on both price and non-price basis. The size of beauty industry enterprises is small, which determines the presence of non-rigid entry barriers, the product is mature. Consumers maintain brand loyalty, which makes it easier for the salon to compete, and that competition will not be on price. Buyers are active and direct and indirect substitute services are available, hence the degree of competitive rivalry is higher.

Conclusion: The key factor on which to focus the analysis of the strategy is the level of competition in the industry, which is quite high. You can have a different attitude towards traditional marketing techniques, we can assume that the beauty industry does not require such a complex level of research. But the industry is gradually moving from a state of childhood to maturity, the number of salons is growing, they appear even in small towns, competition is intensifying, which means that marketing analysis methods will be able to save from acting “at random” when forming a development strategy for the salon business.

Analysis of the Five Competitive Forces Model by Michael Porter
1. The level of competition in the market and the competitiveness of the product
1.1. Threats from substitute products
Evaluation parameter	Parameter Estimation
Substitutes "price / quality"	Exist and hold a high market share	Recently entered the market, and their share is small	Does not exist
Grade:
Final score:
	Low threat from substitute products
	Average level of threat from substitute products
	High level of threat from substitute products
1.2. Level of intra-industry competition
Evaluation parameter	Parameter Estimation
Number of players	High level of market saturation	Average level of market saturation (3-10)	Small number of players (1-3)
Grade:
Market Growth Rate	Decline or stagnation	Slowing but growing
Grade:
Level of product differentiation in the market	Companies sell a standardized product	Standard in key product properties and difference in additional parameters	The products of the companies differ significantly from each other.
Grade:
Restriction on price increases	There is no possibility of any price increase	Possible price increase to cover rising costs	Possible price increase to increase profits
Grade:
Final score
	Low level of intra-industry competition
5-8 points	Average level of intra-industry competition
9-12 points	High level of intra-industry competition
1.3. Assessment of the threat of entry of new players
Evaluation parameters	Parameter Estimation
Economies of scale in production	Absent	Existed by only a few market players	meaningful
Grade:
Brands with a high level of recognition and loyalty	Major players missing	2 players present	2-3 major players hold more than 80% of the market
Grade:
Product differentiation	Low level of product diversity	There are micro niches	All possible niches are occupied by players
Grade:
The level of investment required to enter the market	Low (pays off in 1-3 months of work)	Medium (pays off in 6-12 months of work)	High (pays for itself in more than 1 year of work)
Grade:
Access to distribution channels	Fully open access	Access requires moderate investment	Access restricted
Grade:
Government policy	State influence is minimal	State influence is present, but it is insignificant	The state completely regulates the industry
Grade:
Competitors' willingness to cut prices	Players will not go for price cuts	Major players will not go to lower prices	Whenever prices go down, competitors do the same.
Grade:
Industry Growth Rate	tall and growing	decelerating	stagnation or fall
Grade:
Final score
	Low level of threat of entry of new players
9-16 points	Average level of threat of entry of new players
17-24 points	High level of threat of entry of new players
2. Consumer Exit Threats
2.1. Bargaining power of buyers
Evaluation parameter	Parameter Estimation
The share of buyers with a large volume of sales	Over 80% of sales keep multiple customers	Not a large part of customers hold about 50% of sales	Sales volume is evenly distributed
Grade:
Ease of switching to substitute products	The product has complete analogues	The product has a number of important, but secondary properties	The company's product is completely unique, there are no analogues
Grade:
Price Sensitivity	The customer will always switch to the product with the lower price.	The buyer is susceptible to a significant change in price	The buyer is not price sensitive
Grade:
The level of customer satisfaction with the quality of the goods	Dissatisfaction with key properties	Dissatisfaction with secondary properties	Complete satisfaction with the quality of the offer
Grade:
Final score
	Low Threat of Customer Exit
5-8 points	Average customer exit threat
9-12 points	High risk of losing customers
3. Threats from suppliers
Evaluation parameters	Parameter Estimation
Number of suppliers		Few suppliers or monopoly	Wide choice of suppliers
Grade:
Limited supplier resources		Resource supplies are limited	No restrictions on supply volumes
Grade:
Switching costs to other suppliers		High costs	Low costs
Grade:
Supplier interest in the industry		Low industry priority for supplier	High industry priority for the supplier
Grade:
Final score
	low level of supplier influence
5-6 points	average level of influence of suppliers
7-8 points

The analysis is carried out to identify the opportunities and dangers that a company in the industry may face. M. Porter proposed the “five forces” model, which is argued by the fact that the higher the pressure from the selected factors, the less the company has the opportunity to increase profits. The company, by changing its strategy, can influence these forces in its favor. The five forces are shown in Fig. 6.1.

Rice. 6.1. Porter's Five Forces Model

1. The risk of entry of potential competitors jeopardizes the company's profitability. The threat of possible entry of new competitors into the market depends on two factors:

Reactions of existing competitors,

The presence of barriers to entry into the industry.

There are six prerequisites that create barriers to entry.

1. Economies of scale creates an absolute cost advantage that deters entrant entrants, forcing them either to enter the industry on a large scale of production or to accept inflated costs in advance.

2. Product differentiation. The identification of a brand with a company is a barrier to entry: newcomers need to overcome consumer loyalty to existing brands.

3. The need for capital.

4. Access to distribution channels. The more limited the distribution channels, the harder it is to break into this industry. Sometimes these barriers are so severe that new entrants are forced to create their own distribution channels.

5. Government policy. The government can limit or even eliminate the intrusion into the industry by such methods as licensing and restrictions on access to sources of raw materials.

6. Forecast regarding the reaction of existing competitors in the industry is the basis for the decision to invade the industry. Fears can serve as a deliberately hostile attitude of competitors in a privileged position.

From the point of view of strategy formation, the determining factor is the stage of the industry life cycle.

2. Rivalry between existing companies in the industry possible according to different parameters: price, quality, assortment. The intensity of competition depends on how actively industry participants are trying to change these indicators. Competition in the industry is intensified by a number of factors presented below.

1. Growth in the number of competing companies, leveling them in size and potential.

2. Slowdown in demand for products. The decline in growth is causing competition to intensify as companies increase market share by taking away markets from competitors.

3. Price cuts and other increases in sales. Fixed costs make up a significant portion of production costs, and underutilized capacity increases the cost of production as fixed costs are spread over fewer items.

4. Consumer loyalty to the brand. There are three models of customer relationship to the company:

Emotionally positive - customers rarely overestimate their needs, considering the choice in favor of a particular company as optimal;

Indifferent - customers rarely overestimate their consumer needs, based on the fact that reorientation to another company is associated with undesirable costs;

Estimated-rational - the group is more inclined to overestimate its capabilities and requests, based on such criteria as the price of the product, quality characteristics and the level of service.

- 5. Attempts by companies to improve their position in the market at the expense of competitors. For example, the acquisition of small competitors, the introduction of new products, an increase in advertising costs.

- 6. Successful implementation of strategic actions. The greater the benefits of an opportunity, the more likely it is that competing companies will show interest in them.

- 7. Large differences between participating companies– in strategies, resource base and microenvironment conditions.

- 8. Acquisition of one of the companies by a major player in another industry(even weak with its subsequent transformation into a strong one).

- 9. Exit costs outweigh costs of continuing to compete. The more obstacles to exiting the market, the stronger the company's determination to stay and continue the fight, despite the low level of income or even losses. The result is excess production capacity, leading to increased price competition. Typically, exit barriers include the following:

Equipment that has no alternative uses;

Economic dependence on the industry;

Emotional attraction to the industry;

Strategic relationship between SZH.

Below is the relationship between the described factors of competition (Table 6.1):

Table 6.1

The relationship of competition factors

The forces of competition acting on a firm evolve over the life cycle of an industry.

3. Opportunity for buyers to "bargain" .

The degree of pressure from consumers depends on:

1) from the ability of consumers to dictate the terms of supply;

2) on the level of competitive significance of the impact between the company and consumers.

The ability of buyers to "bargain" poses a threat of pressure on prices due to the need for better quality or service. At the same time, consumers should be understood not only as final consumers, but also as intermediate ones. Given this fact, buyers are strongest in the following situations:

When the supply industry consists of many small companies and there are few buyers;

When buyers make purchases in large quantities;

When an industry depends on individual buyers for most of its activities;

When intermediate buyers receive a small profit that encourages them to reduce the costs associated with purchasing activities;

When economically for buyers acquisitions from different companies are equivalent;

When the products provided by the supplier industry do not affect the quality of goods and services of intermediate buyers.

4. The ability of suppliers to "bargain" .

Suppliers put pressure on market participants when concluding a deal, by increasing the price or reducing the quality of goods. The strength of a supplier depends on the following factors:

The ability to put pressure on the consumer in the direction of changing the conditions of supply (price and quality);

The level of interaction between suppliers and consumers in the industry.

Strong pressure from suppliers in the following cases:

When a product has few substitutes, it is important to the company;

When a group of suppliers is not under competitive pressure to offer their products to the industry;

When consumers are not important customers;

When suppliers supply such products, it is costly for companies to switch from one type to another;

When buying companies are unable to use the threat of vertical integration backwards;

When it is cheaper for a company to buy a product than it is to produce it.

5. Threat of replacement products .

The existence of complete replacement products creates a competitive threat that limits a company's prices and profitability. Substitute products pose a threat when their quantity is sufficient, prices are affordable, consumer properties are satisfactory, and the transition to substitutes is not associated with excessive costs. Substitute products that deserve special attention from a strategic point of view are products that can provide better value for money than those available in the industry.

Thus, the effectiveness of a competitive strategy is determined by the effectiveness of the company's protection from the influence of five factors, the ability to compensate for competitive pressure and the ability to create sustainable competitive advantages.

Many managers, when making strategic decisions, take into account only the level of competition in the industry and their own advantages. However, this is not enough. A more comprehensive approach uses Porter's Five Forces Analysis.

You will learn:

• How to assess the attractiveness of the market.
• How to do Porter's five forces analysis.
• Porter's 5 force analysis example.

Porter's Five Forces Analysis- this is not a dogma. This is primarily a concept that makes it possible to determine the level of competition and the attractiveness of doing business in a particular market. In the methodology that will be discussed, there are no strict definitions and exact calculation formulas. The main idea is the compilation of pentagrams based on an assessment of the key parameters of the five forces.

1. Firstly, Porter's five forces analysis makes sense to use only when it is necessary to make some kind of strategic decision. If, for example, you have planned the acquisition of a new company, a fundamental change in technology, etc. In general, when it comes to serious investments. In cases of operational management, such an analysis cannot be called a priority.
2. Secondly, An example of an analysis of Porter's 5 Forces should be extremely specific: by industry and within the industry for a specific sales market. Otherwise, there will be an average temperature in the hospital.
3. Third, the results of the analysis should be evaluated based on the objectives of the company. Because the same result for a company that is already on the market, and for a company that is just about to enter it, can be the opposite. So, if it’s hard to enter, then it’s bad for a beginner, but good for someone who is already playing.
4. Fourth, Porter analysis is an auxiliary tool and one of many methods in the chain for assessing the market and the company's capabilities.

Porter's Five Forces Analysis Method

Porter's analysis of five forces is based on five parameters, the strength of which is determined by evaluating their components. The order of evaluation does not matter much. But usually this analysis starts with , then comes the threat of new players, then the threat of substitute products, and after that, the bargaining power of consumers and the bargaining power of suppliers.

The method for calculating the magnitude of Porter's forces can be different. I used scoring method for each of the components of each Porter force. At first, I evaluated the components using the binary system - zero or one. In this case, zero was a positive factor, and one was a negative factor (see table).

Thus, points are scored for each Porter's strength. They are counted (as a rule, the arithmetic mean is calculated and rounded off), and then a pentagram is built to visually assess the position. The conclusion from this pentagram, relatively speaking, is this: the larger the area of ​​the filled polygon, which was formed as a result of constructing a five-axis diagram, the less attractive the market is for an existing player. And accordingly, the smaller the shaded area, the more attractive the market.

Analysis of 5 forces according to Porter with an example

Let's consider the analysis on an example. The area of ​​the polygon on the first pentagram is quite large. From this we can conclude that the first market (tractors for transport companies) is heavier, more competitive. This is a classic mature, high-tech market. On the second pentagram, the area of ​​the polygon is smaller. Accordingly, the second market (reflective films) is simpler and less competitive. Is such an assessment sufficient for an objective conclusion? Obviously not. Let's consider the situation in more detail.

Let's look at the first example again. This market is more difficult. If we analyze it from the point of view of a company already operating in this market, the plus is obvious: the threat of new players entering is extremely low. There are global brands of tractor manufacturers - several European and American companies. The Chinese, who are trying to enter the market, will practically not be able to do so. However, there is another threat - a rather high possibility of the appearance of substitute products. Moreover, it can be just a similar product, for example, a van with a trailer, and, if you look more broadly, with a high price for tractors, transport companies can switch to rail transportation, sea transport, etc.

Porter's 5 forces structure (example of analysis in the table)

As for the second market, it is at first glance easier: less competition, fewer new players, weaker market power of both suppliers and buyers. Indeed, this market is more attractive, but there is a rather high probability of the emergence of new players. Therefore, if you do not have a significant technological advantage or know-how that allows you to fix a position in the market, a new manufacturer with a lower production cost can force you out of this market.

Table. Example of assessing the bargaining power of suppliers

Direction of movement in analysis

Thus, the analysis shows where to concentrate efforts. In the first market, the main driving factor is high competition. Accordingly, all our efforts should be aimed at securing a place, standing out from competitors, differentiating, offering some new product that will be better than competitors.

And if we look at the second market, the main task here is to protect ourselves from new players. Let's say you apply to government agencies with a proposal to introduce higher requirements for technical regulation, which would allow you to protect yourself from competitors' lower-quality goods. That is, as a result of the analysis, you should get a vector, the direction of movement. Any specific management decisions are not made only on the basis of Porter's analysis.

• Building a sales department: instructions for the head

How to conduct a competitive analysis to stand out in a niche: a ready-made algorithm

It is not enough to follow the accounts of competitors in social networks and subscribe to mailing lists. You need a strategy that will allow you to monitor your competitors on an ongoing basis and get up-to-date information about changes in the market.

The editors of the magazine "Commercial Director" considered method of conducting your own competitive analysis, which is geared towards e-commerce businesses.

Sources of Information for Porter Analysis

The fundamental point for Porter's analysis is the data sources for assessing the situation on the market. This may be your own assessment based on open sources. Of course, the reliability of such information is not high, but it may be suitable for the initial stage. The second method is the method of peer review, when the decision is made by a group of experts recognized in a particular industry. And the third - custom research.

Which source of information to choose depends on how significant the investment is and how unclear the market situation is. So, if we invest hundreds of millions of dollars, enter the Russian market and think whether to build a plant, it probably makes sense to order a study. If you need to correct the direction of movement - just to understand, a little to the left or a little to the right - an expert opinion is quite enough for this.