ASSINGNMENT 2

Submitted by:-

Abhishek rana

CIB00002TB

PORTER’S FIVE FORCES MODEL OF COMPETITION

The nature of competition in the industry in large part determines the content of

strategy, especially business level strategy .based it is on the fundamental economics of

the industry, the very profit potential of an industry is determine by competition

interaction. Where these interactions are intense, profit tends to be whittled away by the

activities of competing.

Porter’s model is based on the insight that a corporate strategy should meet the

opportunities and threats in the organizations external environment. Especially,

competitive strategy should base on and understanding of industry structures and the

way they change. 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. The objective of corporate strategy should

be to modify these competitive forces in a way that improves the position of the

organization. Porter’s model supports analysis of the driving forces in an industry.

Based on the information derived from the Five Forces Analysis, management can

decide how to influence or to exploit particular characteristics of their industry.

1. Supplier power. An assessment of how easy it is for suppliers to drive up prices. This is driven by the: number of suppliers of each essential input; uniqueness of their product or service; relative size and strength of the supplier; and cost of switching from one supplier to another. E.g warm welcome and quick service by the staff.2. Buyer power. An assessment of how easy it is for buyers to drive prices down. This is driven by the: number of buyers in the market; importance of each individual buyer to the organisation; and cost to the buyer of switching from one supplier to another. If a business has just a few powerful buyers, they are often able to dictate terms.E.g discount offered by restaurant to their loyal customers.3. Competitive rivalry. The main driver is the number and capability of competitors in the market. Many competitors, offering undifferentiated products and services, will reduce market attractiveness.E.g Sangeet indian restaurant and Indque indian cuisine.4. Threat of substitution. Where close substitute products exist in a market, it increases the likelihood of customers switching to alternatives in response to price increases. This reduces both the power of suppliers and the attractiveness of the market. Like threat of choosing other indian restaurents offering the same menu at almost same price.5. Threat of new entry. Profitable markets attract new entrants, which erodes profitability. Unless incumbents have strong and durable barriers to entry, for example, patents, economies of scale, capital requirements or government policies, then profitability will decline to a competitive rate.

One marketing strategy that is used by the business giving detailed

explanation/justification:

Market penetration Market development

Definition

It is a measure of brand or category popularity. It is defined as the number of people

who buy a specific brand or a category of services at least once in a given period,

divided by the size of the relevant market population. Market penetration is one of the

four growth strategies of the Product-Market Growth Matrix. Market penetration occurs

when a company penetrates a market in which current or similar products already exist.

The best way to achieve this is by gaining competitors' customers. Other ways include

attracting non-users of your product or convincing current clients to use more of your

product/service (by advertising, etc.).

Product development (existing markets, new products): McDonalds is always within

the fast-food industry, but frequently markets new burgers.

Market development (new markets, existing products):  Target customer, your

competition, brand-building techniques and advertising opportunities.

Diversification (new markets, new products): Salad dressings, marinades, or

sauces.

Market Development:

Market development is a growth strategy that identifies and develops new market

segments for current products

A market development strategy targets non-buying customers in currently

targeted segments. It also targets new customers in new segments.

Market development strategy entails expanding the potential market through new users

or new uses. New users can be defined as: new geographic segments, new

demographic segments, new institutional segments or new psychographic segments.

Another way is to expand sales through new uses for the product.

A marketing manager has to think about the following questions before implementing a

market development strategy: Is it profitable? Will it require the introduction of new or

modified products? Is the customer and channel well enough researched and

understood?

The marketing manager uses these four groups to give more focus to the market

segment decision: existing customers, competitor customers, non-buying in current

segments, new segments.

Before you beginYour competitive positioning strategy is the foundation of your entire business – it’s the first thing you should pin down if you’re launching a new company or product. It’s also important when you’re expanding or looking for a new edge.

Profile your market Document the size of your market, and identify your major competitors and how

they’re positioned.

Determine whether your market is in the introductory, growth, mature, or declining stage of its life. This “lifecycle stage” affects your entire marketing strategy.

Segment your market Understand the problems that your market faces. Talk with prospects and

customers, or conduct research if you have the time, budget and opportunity. Uncover their true wants and needs – you’ll learn a great deal about what you can deliver to solve their problems and beat your competitors.

Group your prospects into “segments” or “personas” that have similar problems and can use your offering in similar ways. By grouping prospects into segments or personas, you can efficiently market to each group.

Define how you deliver value At the highest level, there are three core types of value that a company can deliver:

operational efficiency (the lowest price), product leadership (the best product), or customer intimacy (the best solution & service). Determine which one you’re best equipped to deliver; your decision is your method for delivering value.

Evaluate your competition List your competitors. Include any that can solve your customers’ problems, even if

the competitors’ solutions are much different from yours – they’re still your competition.

Rate yourself and your direct competitors based on operational efficiency (price), product leadership and customer intimacy. It’s easy to think you’re the best, so be as impartial as you can be.

Stake a position Identify areas where your competition is vulnerable.

Determine whether you can focus on those vulnerable areas – they’re major opportunities.

Make a decision on how to position your offering or company.

Select the mindshare you want to own, and record your strategy Review the components of your market and evaluate what you want to be known for

in the future. Condense all your research and analysis into the “one thing” that you want to be known for, and design your long-term strategy to achieve it.

After Competitive Positioning; you have a competitive positioning strategy, develop a brand strategy to help you communicate your positioning and solidify your value every time you touch your market. Together, these two strategies are the essential building blocks for your business.

"Perception" is defined as the "process by which individuals select, organize, and

interpret the input from their senses to give meaning and order to the world around

them. Components of perception include the perceiver, target of perception, and the

situation. Factors that influence the perceiver:

Schema: organization and interpretation of information based on past experiences

and knowledge

Motivational state: needs, values, and desires of a perceiver at the time of

perception

Mood: emotions of the perceiver at the time of perception Factors that influence the

target:

Ambiguity: a lack of clarity. If ambiguity increases, the perceiver may find it harder to

form an accurate perception

Social status: a person's real or perceived position in society or in an organization

Impression management: an attempt to control the perceptions or impressions of

others. Targets are likely to use impression management tactics when interacting

with perceivers who have power over them. Several impression management tactics

include behavioral matching between the target of perception and the perceiver,

self-promotion (presenting one's self in a positive light), conforming to situational

norms, appreciating others, or being consistent.