[MUSIC] What I'd like to introduce you to now is Porters five forces, the very, very well known business tool that manages to assess the external business environment in which their industry operates within. We have competitive rivalry, another force is buyer power, a third force is threat of substitutes, fourth force is supplier power, and the fifth force, and this is in no particular order is threat of entrance. I'm going to provide you with on the platform, three examples of Porter's five forces as applied, and you're going to do up your own Porter's five forces for your industry, and this is what your peers are going to assess. But if I talk through now, each of these five forces, the idea being that Managers actually rank each of the forces. Whether this is a high force, high is something that we need to be concerned about and we need to put strategic action in place, a medium force, or a low force. So, that maybe something that's not an immediate concern, but of course we can't afford to ignore it because things change. So, if we take If we take the airline industry, I'm gonna use the airline industry now and also coffee shops. So, if we took the airline industry to start off with and we looked at competitive rivalry, what managers need to be thinking about is, how competitive is the industry that we're in. Now, If we think about airlines, it's highly competitive. There's many different airlines servicing the same countries, the same routes. So, it has to be on our agenda. We have to be aware of what our competitors doing? What their strategies are? What we need to be doing? Importantly, this is what Porter says, to keep our unique selling point. What stands us aside from our competitors? So, competitive rivalry Is high. If we think about it for all the different coffee shops and cafes that are coming up everywhere. Again, it's very, very high. You've got your well-known brands, your Starbucks your Costa, but you've also got lots and lots of local coffee shops coming up in all of our cities around the world. So, Competitive Rivalry is a strong force, is a high force for both of these industries. If we think about threat of entrance, or threat of new entrance, so this is the people who may enter the industry. So, the organizations that may enter the industry and when we talk about the threat of entrance we're talking about is it easy to enter this industry, is the barrier low, or is the barrier very high and if we think about the airline industry. We would say that the barrier is pretty high, because it's so expensive to actually build a plane, run it, and etc. So, the threat of entrance for the airline industry is actually quite a low force because not everybody can actually start, as I say, building planes and servicing, Airlines to different countries. So, for the airline industry, the threat of entrance is fairly low. However if we looked at coffee shops, the threat of entrance is really high, because it's very easy to open up, relatively speaking, a coffee shop. You may have a mobile coffee van, etc. So, on the one hand it's very high In terms of coffee shops, but it's lower for our airlines. So, what the airlines need to be spending their time doing is very much focusing on what is existing out there. Whereas the coffee shop owners need to be aware of when's the next one opening in our high streets. If we then move on to fire power. And we'll take Buyer Power as to be the consumer. Often, if we're in an industry where there's lots of choice. Buyer Power is higher, it's a high strong force. So, if we use our coffee example and the airline example customers can shop around and that forces prices down. So, the buyer power for both of these industries, I would say it's high for coffee, medium-high to airlines. Cuz there aren't as many airlines as there are coffee shops. And all airlines do the same routes. And if you think about the budget airlines, it's actually quite small. Handful of those, but generally speaking, if there's lots and lots of choice, the customer, the buyer of that product or service is, has the power. On the other side, if we think about the organizer, the suppliers that serve the organization to make sure that the organization has the resources that they need to deliver their product or service to the customer, we have a slightly differently perspective. So again, if we choose the airline industry, supplier power is a strong force. It's a high force. These far fewer suppliers that actually deal with the making, manufacture of aircrafts. Okay. So, Supply Power is high when the resource or the expertise is highly specialized, because the supplier has the power then because the organization or the industry has only got maybe the pick of one or two suppliers. In terms of coffee, it's quite interesting, because Supplier Power won't be as strong, But equally speaking it wouldn't be a low or weak force because there's going to be several makers of coffee. But more and more coffee shops want to specialize in certain coffees. So, the supplier will still have power there. It's not a Ubiquitous. It's not a really mundane product like tomatoes, where there's so many people supplying tomatoes. So, the supplier power for airlines is high. We need to make sure we're treating our suppliers right. And for coffee, slightly less so, but still, consideration that the organization, the industry, wants to protect their suppliers. Then the final one is threat of substitutes. And what we're saying here is that if we decide we don't want to travel by plane, and many people are making that decision because of the environment, etc., what substitutes do we have? So, we obviously have boats. Trains, cars, motorbikes, etc. So, there are substitutes, however some places that we want to get to, we're going to have to take a plane. So, yes, there's going to be some substitutes for some airlines depending on where they're travelling to, I would say particularly the budget airlines within the countries and that's going to be A High Force. Probably more for the long haul it's going to be a slightly weaker force. In terms of coffee, well if you want coffee, you want coffee. There's not really a substitute. However, there are substitutes for hot drinks. And there's many, many of those. Another substitute when we think about coffee shops is more and more people now are buying their own coffee machines and maybe using The coffee shops less. So, that's a brief example of Porter's five forces as applied to two industries. As I said, you're going to apply that to your own. And with a brief example of each of the five forces. [MUSIC]
