Learn how to quickly apply Michael Porter's Five Forces for your business and product strategy to capitalize in the market today. By Wayne Chen @MobiWayne @WayneChenNY @PocketSQRMedia www.pocketsquaremedia.co

1. Consulting
Toolkit
Series
By:
Wayne
Chen,
@MobiWayne
© 2013!
@POCKETSQRMEDIA | POCKETSQUAREMEDIA.CO!

2. Threat
of
New
Entry
Supplier
Power
Competitive
Rivalry
Buyer
Power
Threat
of
Substitution
© 2013 POCKET SQUARE MEDIA!
@MOBIWAYNE!

3. ¡
¡
A
framework
that
helps
you
identify
where
power
lies
in
most
business
situations.
Useful
to
understand
both
the
strength
of
your
current
competitive
business
or
product
situation,
and
the
strength
of
an
opportunity
that
you
are
seeking
to
move
to.
© 2013 POCKET SQUARE MEDIA!
@MOBIWAYNE!

4. Competitive
Rivalry
Threat
of
New
Entry
•
•
•
•
•
Time
&
cost
of
entry
Cost
advantages
Tech
protection
(IP/Patents)
Economies
of
scale
Specialist
knowledge
•
•
•
•
•
•
Threat
of
New
Entry
#
of
competitors
Quality
differences
Switching
costs
Customer
loyalty
Cost
advantages
Cost
of
abandonment
Buyer
Power
Supplier
Power
Competitive
Rivalry
Buyer
Power
•
•
•
•
•
#
of
customers
Size
of
each
order
Difference
between
competitors
Price
sensitivity
Cost
of
switching
Supplier
Power
Threat
of
Substitution
•
•
•
•
•
•
•
•
#
of
suppliers
Size
of
suppliers
Service
uniqueness
Cost
of
switching
or
substitute
© 2013 POCKET SQUARE MEDIA!
Threat
of
Substitution
Substitute’s
Performance
Quality
of
Substitute
Market
Share
Cost
of
Change
@MOBIWAYNE!

5. ¡
¡
Managers
and
executives
can
take
advantage
of
a
situations
such
as
strength,
weakness
areas
to
avoid
costly
missteps.
The
Five
Forces
Analysis
assumes
that
there
are
five
important
forces
that
determine
competitive
power
in
a
business
situation.
© 2013 POCKET SQUARE MEDIA!
@MOBIWAYNE!

6. ¡
¡
¡
¡
Assesses
how
easy
it
is
for
suppliers
to
drive
up
prices
and
cost.
Driven
by
the
number
of
suppliers
of
each
key
input,
the
uniqueness
of
their
product
or
service
Identifies
their
strength
and
control
over
you,
the
cost
of
switching
from
one
to
another,
and
so
on.
Suppliers
are
more
powerful
if
you
have
fewer
supplier
choices
and
require
their
help.
© 2013 POCKET SQUARE MEDIA!
@MOBIWAYNE!

7. ¡
¡
¡
© 2013 POCKET SQUARE MEDIA!
Ask
yourself
how
easy
it
is
for
buyers
to
drive
prices
down
in
the
market?
Consider
the
importance
of
each
individual
buyer
to
your
business,
the
end
cost
to
them
of
switching
from
your
products/
services
to
those
of
someone
else,
and
so
on.
If
you
deal
with
few,
powerful
buyers,
then
they
are
often
able
to
dictate
terms
to
you.
@MOBIWAYNE!

8. ¡
¡
¡
¡
What
is
important
here
is
the
number
and
capability
of
your
competitors.
Review
number
of
competitors
and
if
they
offer
equally
attractive
products
or
services
Suppliers
and
buyers
can
go
elsewhere
if
they
don’t
get
a
good
deal,
meaning
little
power.
If
no-­‐one
else
can
do
what
you
do,
then
you
can
often
have
tremendous
power
in
your
position
for
your
product
or
service.
© 2013 POCKET SQUARE MEDIA!
@MOBIWAYNE!

9. ¡
¡
¡
¡
Affects
the
the
ability
of
your
customers
to
find
a
different
way
of
doing
what
you
do
If
you
supply
a
unique
software
product
that
automates
an
important
process,
people
may
substitute
by
doing
the
process
manually
or
by
outsourcing
it.
If
substitution
is
easy
and
substitution
is
viable,
then
this
weakens
your
power.
Substitution
comes
in
physical
forms
of
replicas
i.e.
watch
manufacturing
to
store-­‐brand
items.
© 2013 POCKET SQUARE MEDIA!
@MOBIWAYNE!

10. ¡
¡
¡
¡
© 2013 POCKET SQUARE MEDIA!
Power
is
also
affected
by
the
ability
of
people
to
enter
your
market.
If
it
costs
little
in
time
or
money
to
enter
your
market
and
compete
effectively
If
there
are
few
economies
of
scale
in
place,
or
if
you
have
little
protection
for
your
key
technologies,
then
new
competitors
can
quickly
enter
your
market
and
weaken
your
position.
If
you
have
strong
and
durable
barriers
to
entry,
then
you
can
preserve
a
favorable
position
and
take
fair
advantage
of
it.
@MOBIWAYNE!

11. ¡
¡
¡
¡
¡
¡
¡
Review
each
forces
one-­‐by-­‐one
and
write
it
down.
Brainstorm
the
factors
for
your
situation,
and
check
against
the
factors
listed.
Summarize
the
size
and
scale
of
the
force
on
the
diagram.
A
"+"
sign
for
a
force
moderately
in
your
favor,
or
"-­‐-­‐"
for
a
force
strongly
against
you
Review
your
worksheet
and
think
through
how
it
affects
you.
Looking
at
things
in
this
way
helps
you
think
through
what
you
could
change
to
increase
your
power
with
respect
to
each
force.
If
you
find
yourself
in
a
structurally
weak
position,
this
tool
helps
you
think
about
what
you
can
do
to
move
into
a
stronger
one.
© 2013 POCKET SQUARE MEDIA!
@MOBIWAYNE!

12. Threat
of
New
Entry
•
•
•
•
•
Inexpensive
entry
point
Some
economies
of
scale
No
tech
or
IP
issues
Low
barrier
to
entry
New
entry
is
easy
Competitive
Rivalry
•
•
•
•
•
Threat
of
New
Entry
15
competitors
Low
switching
costs
Low
customer
loyalty
Customer
loyalty
High
cost
to
abandon
market
Buyer
Power
Supplier
Power
Competitive
Rivalry
Buyer
Power
•
•
•
•
•
Few
&
large
retailers
Large
purchase
orders
Online
distribution
Price
can
be
sensitive
High
buyer
power
Supplier
Power
Threat
of
Substitution
•
•
•
•
5
suppliers
(moderate)
Suppliers
are
large
and
neutral
Able
to
switch
or
substitute
quickly
© 2013 POCKET SQUARE MEDIA!
Threat
of
Substitution
•
Some
cross-­‐product
substitutes
Ability
to
import
foreign
products
@MOBIWAYNE!

13. ¡
Threat
of
new
entry
is
quite
high
§ If
anyone
looks
as
if
there
are
making
a
substantial
profit,
new
competitors
will
enter
the
market
easily.
¡
Competitive
rivalry
is
extremely
high
§ If
someone
raises
prices,
they
will
quickly
undercut.
Market
competition
applies
downward
pressure
on
prices
from
raising
¡
¡
Overall
Recommendation
§ A
tough
industry
for
the
product
or
service
to
flourish
unless
there
there
is
a
new
way
to
find
to
profit.
§ Company
may
need
to
specialize
in
a
sector
of
the
market
that
is
protected
from
some
of
these
forces,
or
find
a
related
business
that's
in
a
stronger
position
Buyer
Power
is
strong
§ Implying
strong
downward
pressure
on
prices.
¡
Some
threat
of
substitution
© 2013 POCKET SQUARE MEDIA!
@MOBIWAYNE!

14. Porter's
Five
Forces
Analysis
is
an
important
tool
for
assessing
the
potential
for
profitability
in
an
industry.
It
works
by
looking
at
the
strength
of
five
important
forces
that
affect
competition:
§ Supplier
Power:
The
power
of
suppliers
to
drive
up
the
prices
of
your
inputs.
§ Buyer
Power:
The
power
of
your
customers
to
drive
down
your
prices.
§ Competitive
Rivalry:
The
strength
of
competition
in
the
industry.
§ The
Threat
of
Substitution:
The
extent
to
which
different
products
and
services
can
be
used
in
place
of
your
own.
§ The
Threat
of
New
Entry:
The
ease
with
which
new
competitors
can
enter
the
market
if
they
see
that
you
are
making
good
profits
(and
then
drive
your
prices
down).
By
thinking
about
how
each
force
affects
your
business,
and
by
identifying
the
strength
and
direction
of
each
force,
you
can
quickly
assess
the
strength
of
your
position
and
your
ability
to
make
a
sustained
profit
in
the
industry
for
your
product
or
service.
© 2013 POCKET SQUARE MEDIA!
@MOBIWAYNE!

15. Contact
information
¡ Wayne
Chen
¡ Wayne@PocketSquareMedia.co
¡ @MobiWayne
or
@WayneChenNY
¡ www.PocketSquareMedia.co
¡ Blog:
www.Enovaminds.com
© 2013 POCKET SQUARE MEDIA!
@MOBIWAYNE!