Chapter 2:

Opportunities Analysis
Lecturer: Bunny Wathanak Panha
MN415
Five Forces Model
Five forces interact with one another to
determine the setting in which companies
compete and, hence, the attractiveness of
the industry:
1. Rivalry among companies in the industry
2. Bargaining power of suppliers
3. Bargaining power of buyers
4. Threat of new entrants
5. Threat of substitute products or services
Five Forces Model
Industry
Competitors

Rivalry
among
existing firms
Buyers
Bargaining Power
of Buyers
Suppliers
Bargaining Power
of Suppliers
Substitutes
Potential
Entrants
Threat of
New Entrants
Threat of
Substitute
Products or
Services
6-8
Five Forces Model
Industry
Competitors

Rivalry
among
existing firms
Buyers
Bargaining Power
of Buyers
Suppliers
Bargaining Power
of Suppliers
Substitutes
Potential
Entrants
Threat of
New Entrants
Threat of
Substitute
Products or
Services
6-9
Rivalry Among Companies
Strongest of the five forces
Industry is more attractive when:
Number of competitors is large, or, at
the other extreme, quite small
Competitors are not similar in size or
capacity
Industry is growing fast
Opportunity to sell a differentiated
product or service exists
Five Forces Model
Industry
Competitors

Rivalry
among
existing firms
Buyers
Bargaining Power
of Buyers
Suppliers
Bargaining Power
of Suppliers
Substitutes
Potential
Entrants
Threat of
New Entrants
Threat of
Substitute
Products or
Services
Bargaining Power of Suppliers
The greater the leverage of
suppliers, the less attractive the
industry
Industry is more attractive when:
Many suppliers sell a commodity
product
Substitutes are available
Switching costs are low
Items account for a small portion of
the cost of finished products
Five Forces Model
Industry
Competitors

Rivalry
among
existing firms
Buyers
Bargaining Power
of Buyers
Suppliers
Bargaining Power
of Suppliers
Substitutes
Potential
Entrants
Threat of
New Entrants
Threat of
Substitute
Products or
Services
6-9
Bargaining Power of Buyers
Buyers influence is high when number of
customers is small and cost of switching to a
competitors product is low
Industry is more attractive when:
Customers switching costs are high
Number of buyers is large
Customers want differentiated products
Customers find it difficult to collect information
for comparing suppliers
Items account for a small portion of customers
finished products
Five Forces Model
Industry
Competitors

Rivalry
among
existing firms
Buyers
Bargaining Power
of Buyers
Suppliers
Bargaining Power
of Suppliers
Substitutes
Potential
Entrants
Threat of
New Entrants
Threat of
Substitute
Products or
Services
Threat of New Entrants
The larger the pool of potential new
entrants, the less attractive an industry is
Industry is more attractive to new entrants
when:
Advantages of economies of scale are absent
Capital requirements to enter are low
Cost advantages are not related to company size
Buyers are not loyal to existing brands
Government does not restrict the entrance of new
companies
Five Forces Model
Industry
Competitors

Rivalry
among
existing firms
Buyers
Bargaining Power
of Buyers
Suppliers
Bargaining Power
of Suppliers
Substitutes
Potential
Entrants
Threat of
New Entrants
Threat of
Substitute
Products or
Services
Threat of Substitutes
Substitute products or services can turn an
industry on its head
Industry is more attractive to new entrants
when:
Quality substitutes are not readily available
Prices of substitute products are not
significantly lower than those of the industrys
products
Buyers switching costs are high
Five Forces Matrix
0
10
20
30
40
50
60
70
80
90
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
East
West
North
Consumption Chain
Consumption chain analysis is a tool that helps
businesses differentiate their offerings within
a market.
This tool works on the premise that
opportunities for differentiation lurk at every
step of the way your customers take from the
time they first become aware of their need for
your product to the time they finally dispose.

Consumption Chain
Consumption Chain
Construct Your Consumption Chain
1) Select a target segment.
2) Identify the people within your company
who come into contact with members of that
customer segment.
3) Put together a group of people from your
company who come into contact with this
segment.

Construct Your Consumption Chain
4) Ask them to describe your customers' experience,
from point of initial awareness of need to where
product is exhausted or relationship ends.
5) Build the chain while noting "trigger events" that
transpire when a customer moves from one "scene" to
the next.
6) Remember: each business and each segment is
likely to have its own way in which the whole chain
fits together.

Construct Your Consumption Chain
7) Make a critical assessment of how well you are
doing at improving that customers' consumption
experience.
Are there links the customer would prefer to do without?
Are there ways you could serve that segment better?
Are there things you are offering that the customer doesn't
value?
8) Consider the provocative questions in the next
section.
What can you do to create a better overall customer
experience?

Developing a Consumption Chain
When you construct a consumption chain, your
goal is to capture the most important steps a
customer goes through.
The goal here is not to be compulsive but
rather to get a really good feel for how
customers are behaving as they try to get their
needs met. I

Developing a Consumption Chain
Be aware that industry transformations will
show up pragmatically as changes in your
customers' experience. Links change.
Draw a chain that reflects the experiences
they think your customers have with your
company.



PESTLE analysis
PESTLE is an analytical tool which considers
external factors and helps you to think about
their impacts.


PESTLE analysis
Is a useful tool for understanding the big
picture of the environment in which you are
operating

By understanding your environment, you can
take advantage of the opportunities and
minimize the threats.


POLITICAL
Environmental protection/legislation
Consumer protection
Governments attitude
Competition regulation
Advertising standards
Economic
Economic growth
Taxation international trade
Exchange Rate
Employment law
Inflation
Consumer confidence
Minimum wage


Social
Income distribution
Demographics
Labour & Social mobility
Lifestyle changes
Attitudes to work and leisure
Education
Fashion and Fads
Health & Welfare
Living conditions
Technological
Changes in physical sciences
Internet
Energy use and costs
Rates of technological obsolescence
New discoveries
Technology revolutions
Legal
Employment law
Health and Safety
Taxation both corporate and consumer
Other regulations
International trade barriers
Strength of the rule of law


Environmental
How peoples perception and reaction to
environmental issues can affect a
business.