6. M.Porters five forces analysis.

Porter five forces analysis are a technique for the analysis of branches and development of strategy of the business, developed by Michael Porter at the Harvard business school in 1979.

Five forces of Porter include:

• Rivalry;

• Threat of new entrants;

• Supplier power;

• Buyer power;

• Threat of substitutes.

Threat of occurrence of products-substitutes

• Presence of products-substitutes, propensity of consumers to which can increase owing to price change (elasticity of demand).

• Propensity of consumers to purchase of products-substitutes

• Comparison of the price and qualities of products-substitutes

• Switching cost on a product-substitute for the consumer

• Level of perception of differentiation of a product

Threat of occurrence of new players

The markets, making high profit, involve new players. As a result there are the numerous new players essentially reducing profit. If not to undertake actions on blocking or difficulty of an input of new players, the profit will consistently decrease with growth of level of a competition (the perfect competition see).

• Presence of barriers of an input (the licence, patents, copyrights, etc.)

• Necessity of expenses for differentiation of a product

• Brand cost

• Cost of switching or transient costs

• Starting expenses for new players

• Access to distribution

• Advantages in the cost price

• Advantages in position on a curve of acquisition of knowledge

• Expected reciprocal actions of old players

• Reaction of the government and-or other regulators of the market

The market power of suppliers

Suppliers of raw materials, components, labour and services can influence company activity. Suppliers can refuse to work with the company or, for example, to establish excessively high prices for unique resources.

• Comparison of cost of switching of suppliers and cost of switching of the company

• Degree of differentiation of raw materials and initial materials

• Presence of substitutes of suppliers

• Comparison of concentration of suppliers and concentration of the company

• Solidarity of a labour (for example activity of trade unions)

• Integration threat forward suppliers can affect possibility of the company of integration back

• Comparison of cost of raw materials and initial materials and sale price of a product of the company

The Market power of consumers

Ability of consumers to influence the company, and also reaction of sensitivity of the consumer to price change.

• Concentration of consumers to level of concentration of the company

• Degree of dependence on existing channels of distribution

• Quantity of consumers

• Comparison of cost of switching of the consumer and cost of switching of the company

• Availability of the information to consumers

• Possibility of vertical integration (construction of holdings with vertical integration)

• Availability of existing products-substitutes

• Price sensitivity of consumers

• Distinctive advantages of products the companies (uniqueness)

Level of competitive struggle

For the majority of branches, it is the defining factor influencing level of a competition in branch. Sometimes players compete aggressively, sometimes there is not price competition in innovations, marketing, business models etc.

• Quantity of competitors

• Level of growth of the market

• Criteria of saturation of the market

• Input barriers in branch

• Barriers of an exit from branch

• Distinctive lines of competitors

• Level of expenses of competitors on advertising

• Ambitions of the first persons and shareholders of competitors