Essay On Porter's Five Forces

Porter’s Five Forces Analysis:

Porter’s five forces is a framework for analyzing an industry and business strategy development. It looks at forces that determine the competitive intensity of an industry and hence the overall attractiveness of that industry. The configuration of the five forces differs by industry. Understanding the competitive forces and their underlying causes reveals the roots of an industry’s current profitability while providing a framework for anticipating and influencing competition over time.

Porter’s five forces include:

1. Threat of New Entrants:
New entrants to an industry, with a desire to gain market share, will put pressure on prices, costs and capital needed to compete. It can affect the profit potential.

2. Bargaining power of suppliers:
The number of suppliers available for each input drives the bargaining power of suppliers. More the suppliers, lower would be their bargaining power.

3. Bargaining power of buyers:
If buyers have a wider range of choice, i.e, they have the liberty to switch between products and services to get the same functions as the current product/service, then they have a higher bargaining power. However, if they are dependent on the product and even if the prices increase, they continue to use the same product, then they have a low bargaining power.

4. Threat of substitutes
A substitute performs the same or a similar function as a product by a different mean. They belong to a completely different industry. High threat of substitutes impacts industry profitability negatively.

5. Rivalry among existing competitors
If competitors offer equally attractive products and services, then one will most likely have little power in the situation, because suppliers and buyers will...

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• Thus, the bargaining power of buyers is medium.

Threat of substitutes
• Power can be generated from different sources. Thermal power is the most dominant one.
• However, with a scarcity of coal, more power would be generated from other sources like nuclear, solar and hydro. However, producing electricity from these sources for huge supply would be difficult.
• Hence, the threat of substitutes is medium.

Rivalry among existing competitors
• The demand for power is way higher than the supply in India.
• However, there has been a spike in the private companies in this industry. Companies like Reliance Energy, Adani Power and Tata Power are now supplying and vying for the market share.
• Major orders of Boiler, Turbine and Generator grabbed by Chinese suppliers from most of the private sector clients.
• So overall the intensity of competitive rivalry is medium.