Porter's Five Forces framework is a commonly used tool for conducting industrial analysis. It helps analyze the competitive dynamics and attractiveness of an industry. The five components of industrial analysis by Porter are:
1. Threat of New Entrants: This component examines the barriers to entry faced by potential new competitors in the industry. High barriers, such as high capital requirements, strong brand loyalty, or government regulations, make it difficult for new entrants to enter the market. Industries with high barriers are generally more attractive in terms of profitability.
2. Bargaining Power of Suppliers: This component assesses the power that suppliers have over the industry. Suppliers with significant power can exert pressure by raising prices, reducing quality, or limiting supply. Industries that are dependent on a few powerful suppliers face higher costs and are generally less attractive.
3. Bargaining Power of Buyers: This component analyzes the power that buyers (customers) have in the industry. Buyers with strong bargaining power can demand lower prices, higher quality, or better service. Industries with a few large and powerful customers may face reduced profitability and higher customer demands.
4. Threat of Substitute Products or Services: This component considers the availability of substitute products or services that can meet the same customer needs. The presence of substitutes places pressure on industry participants to improve their offerings and lower prices. Industries with few or no close substitutes have higher attractiveness and profitability.
5. Intensity of Competitive Rivalry: This component evaluates the level of competition among existing industry players. High rivalry can lead to price wars, aggressive marketing, and reduced profitability. Factors such as the number of competitors, industry growth rate, and product differentiation influence the intensity of rivalry. Industries with low competitive rivalry are generally more attractive.
By analyzing these five components, businesses can gain insights into the competitive landscape of an industry, understand the forces at play, and make informed strategic decisions. The five components of industry analysis by Porter are competition in the industry, potential of new entrants into the industry, power of suppliers, power of customers, and threat of substitute products or services. Porter's Five Forces model is a widely recognized and used tool for industry analysis. The model provides a comprehensive framework for analyzing the competitive dynamics of an industry and determining its overall attractiveness and profitability. By understanding the competitive dynamics of the industry, businesses can develop effective strategies that take advantage of their strengths and mitigate their weaknesses.
The above material was delivered by a presenter from Indonesia in an international webinar held by STEKOM University in collaboration with Kuala Lumpur University from Malaysia. The name of the presenter is Wibi Ardi Alvianto, M.Pd. He is a Lecturer at STEKOM University in the Visual Communication Design Study program. The international webinar was held on May 23 2023 which was hosted by Ms. Novita. The media used in the international seminar is zoom and broadcast directly to Youtube. The event went very well and was quite lively, marked by the many participants who took part and the number of questions asked after the presenters finished delivering their presentations.
This international webinar activity is part of the implementation of STEKOM University's commitment to increase various international activities. This was done in order to realize the vision to become an international-class university. Various international activities carried out by STEKOM University continue from year to year. There are international activities that are sustainable and there are also some international activities that are not sustainable. All types of activities are accommodated internationally and regulated by the International department of STEKOM University.