ExpertCompetitive Environment — Porter and SWOT
Learning outcomes
- Apply SWOT analysis to assess strategic position.
- Utilise Porter's Five Forces to evaluate industry attractiveness.
- Understand Porter's Value Chain model.
SWOT Analysis
SWOT evaluates a firm's strategic position:
- Strengths (Internal): What we do well (e.g., strong brand).
- Weaknesses (Internal): What we lack (e.g., outdated tech).
- Opportunities (External): Favorable external trends (e.g., a new market opening).
- Threats (External): Unfavorable external trends (e.g., new competitor, strict laws).
In a SWOT analysis, a sudden increase in the cost of raw materials due to global inflation would be classified as a:
Internal vs External
Do not list 'poor management' as a Threat. Poor management is inside the company, so it is a Weakness. Threats come from outside (competitors, economy).
Porter's Five Forces
Michael Porter identified five forces that determine how competitive and profitable an industry is:
- Threat of New Entrants: How easy is it to start a rival business?
- Threat of Substitutes: Can customers use a completely different product? (e.g., taking a train instead of flying).
- Bargaining Power of Buyers: Can customers force prices down?
- Bargaining Power of Suppliers: Can suppliers force costs up?
- Competitive Rivalry: How fierce is the fight between existing players?
According to Porter's Five Forces, which of the following would INCREASE the threat of new entrants?
Exam Focus
Examiners love testing 'Substitutes'. A substitute is NOT a direct competitor (e.g., Pepsi is a rival to Coke, not a substitute). A substitute is a different product fulfilling the same need (e.g., tap water or fruit juice is a substitute for Coke).
Porter's Value Chain divides a firm's activities into Primary and Support activities. Which of the following is a Support activity?
If a supermarket chain buys out its main dairy supplier, which of Porter's Five Forces is it trying to reduce?
In a SWOT analysis, a company's highly skilled and motivated workforce would be classified as a:
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