20 Ağustos 2014 Çarşamba

Porters Five Force Analysis

The competition is defined as “the race that takes place in product or service markets between the institutions, helps the companies to take free economic decisions.”[1] Therefore in order to be competitive in the market the companies must be eligible enough to compete against the others. Porter’s five forces analyses was created by Mr. Michael Porter and he has defined the forces as shown in the following:[2]

·         The bargaining power of customers:

o   Buyer concentration to firm concentration ratio

o   Bargaining leverage

o   Buyer volume

o   Buyer switching costs relative to firm switching costs

o   Buyer information availability

o   Ability to backward integrate

o   Availability of existing substitute products

o   Buyer price sensitivity

o   Price of total purchase

·         The bargaining power of suppliers

o   Supplier switching costs relative to firm switching costs

o   Degree of differentiation of inputs

o   Presence of substitute inputs

o   Supplier concentration to firm concentration ratio

o   Threat of forward integration by suppliers relative to the threat of backward integration by firms

o   Cost of inputs relative to selling price of the product

·         The threat of new entrants

o   The existence of barriers to entry

o   Economies of product differences

o   Brand Equity

o   Switching costs

o   Capital requirements

o   Access to distribution

o   Absolute cost advantages

o   Learning curve advantages

o   Expected retaliation

o   Government policies

·         The threat of substitute products

o   Buyer propensity to substitute

o   Relative price performance of substitutes

o   Buyer switching costs

o   Perceived level of product differentiation

·         The intensity of competitive rivalry

o   Number of competitors

o   Rate of industry growth

o   Intermittent industry overcapacity

o   Exit barriers

o   Diversity of competitors

o   Informational complexity and asymmetry

o   Brand equity

o   Fixed cost allocation per value added

o   Level of advertising expense

[1] 4054 numbered The Turkish Republic’s Act of Competition, Article 3.
[2] Gregory G. Dess, Alex Miller, Strategic Management, US, Mc Graw Hill, 1993, p. 55.

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