How to analyse an industry ? Industry Analysis !! Automobile (Porter 5 forces model)

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How to analyse the Industry?

 What is "Porter 5 Forces Model" and how can it be used?

 

Before any kind of investment in the share market it becomes necessary for us to analyse the Industry. For industry analyses we have a model called “Porter 5 Forces Model". This model basically works on 5 key parameters which should be considered before any kind of investment. Remember investment always does not mean Equity, it can be Debt or you want to start your own business also.

So these are those 5 key parameters.

 

1) Threats of New Entrants 

2) Bargaining Power of Buyers 

3) Bargaining Power of Suppliers 

5) Threats of Substitute 

5) Rivalry among Existing Customers 



 

1

Heavy Capital Requirement?

2

Economy Of Scale (Can Business produce High volume with Lower Cost)?

3

Business Differentiation (Which makes the product unique)?

4

Low Switching Cost (Switch in new technology like. Windows to android)?

5

Brand Focused Industry?

6

Ease Of Distribution channels?

 Threats of New Entrants (15%)

1

Large no. of wholesaler and retailers buyers (forces business to make prices low)?

2

Substitute products are available?

3

Buyers are sensitive to price ?

Bargaining Power of Buyers (20%)

1

Limited suppliers?

2

Scarce resources (Raw material etc. easily available)?

3

Switching supplier cost high (Ordering Cost, Transportation cost etc.)?

Bargaining Power of Suppliers (20%)`

1

Is there a substitute product available which can easily substitute our product (E.g. Tea-Coffee, Film cameras replaced by Digital Film cameras)?

Threats of Substitute (20%)

1

High No. of competitors?

2

Slow Industry Growth Rate? (Causes rivals to fight harder to maintain Mkt. Share)

3

No Product Differentiation ?(Which helps them insulate by Price Wars)

4

No Patents, Copyrights, Trademark?

Rivalry Among Existing Customers (25%)

 

To understand how to use this model in practical way please watch the attached video.


Jatin Goel

(Investor Choices)

 


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