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Porters Five ForcesRevision
A2 BUSINESS UNIT 4
Learning Objectives To be able to explain what the business expects to gain
from analysing the five forces identified by Porter
To understand what impact each force will have on price
and profits
To apply Porter’s Five Forces to Toyota
MAKING BUSINESS DECISIONS
7/27/2019 Porters Five Forces.pptx
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Learning Objectives To be able to explain what the business expects to gain
from analysis Porter’s Five Forces
To understand what impact each force will have on
prices and profits To apply Porter’s Five Forces to Toyota
Porter’s Five
Forces
Revision
PORTERS FIVE FORCES REVISION
Understanding Porter
Porter outlines five forces or factors which determine the profitability of anindustry. He argues that the ultimate aim of competitive strategy is to copewith and ideally change those rules in favour of the business.
Where the collective strength of those five forces is favourable, a businesswill be able to earn above average rates of return on capital. Where theyare unfavourable, a business will be locked into low returns or wildlyfluctuating returns.
Definition:
Porter’s Five Forces A model put forward by Michael Porter looking at the
competitive environment.
7/27/2019 Porters Five Forces.pptx
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Learning Objectives To be able to explain what the business expects to gain
from analysis Porter’s Five Forces
To understand what impact each force will have on
prices and profits To apply Porter’s Five Forces to Toyota
Porter’s Five
Forces
Revision
RATIO ANALYSIS REVISION
Revise Porter’s Five Forces focusing on impacts of
each force on prices and profits.20
M
I
NU
T
E
S
7/27/2019 Porters Five Forces.pptx
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Learning Objectives To be able to explain what the business expects to gain
from analysis Porter’s Five Forces
To understand what impact each force will have on
prices and profits To apply Porter’s Five Forces to Toyota
Porter’s Five
Forces
Revision
PORTERS FIVE FORCES TOYOTA
Application
What is Toyota’scompetitiveenvironment like?
Rivalry of Industry Competitors (High)
Some product and brandingdifferences, but many products are
similar
Slow industry growth so it is all about
gaining market shareA race for Developing hybrid and eco
friendly models and other newtechnologies
Intense price competition anddiscounting
Medium/High exit barriers
Threats of Substitution (Low)
• A mass public transportationsystem?
• Affordable private jets?
Threat of New Entrants
(Medium/Low)
• Due to high up front investment costs and thepresence of several strong brands, it is hard toenter this industry
• However, some recent new entrants have entered
the market in Em
erging countries (e.g. Tata Motors)
Customer Power
(Medium/ High)• Easy to switch brands
• Several cars offered in eachcategory
• Customers expect tonegotiate on price with thecar dealer
Supplier Power (Low/Medium)
•
Numerous, diluted suppliers• But quite hard for
Manufacturers to switchsuppliers
• Suppliers survive only if themanufacturer survives, so theyhave to work together
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Learning Objectives To be able to explain what the business expects to gain
from analysis Porter’s Five Forces
To understand what impact each force will have on
prices and profits To apply Porter’s Five Forces to Toyota
Porter’s Five
Forces
Revision
RATIO ANALYSIS REVISION
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