Michael Porter Checklist

1
Michael Porter Checklist

• Businesses as systems within systems of systems
• Brian Berrys classic paper "Cities as Systems
  Within Systems of Cities" Papers in Regional
  Science (1964) is acknowledged

2
Business A system within systems

• The players
• Rivals
• Suppliers
• Customers
• Potential entrants
• Government regulators
• Producers of substitutes
• Producers of complements
• The macroeconomic environment

3
Porters Five Forces in Industry Analysis

• Rivalry
• Entry and barriers to entry
• Substitutes and complements
• Bargaining power of customers
• Bargaining power of suppliers

4
Porters Five Forces in Industry Analysis

• Whats the industry you will analyze?
• Firms affected by same factors
• Technologies
• Legal constraints
• Customer preferences
• Broad definition of industry
• Identify niches relevant to your analysis
• Narrow definition of industry
• Pay attention to substitute products relevant to
  your analysis

5
Substitutes and Complements

• Substitutes
• Increase demand elasticity facing your industry
• Limit industry profitability
• Will firms offering substitute products compete
  aggressively?
• Will new substitutes be developed?
• Complements
• Their gain your gain their gain
• How well does your industry piggyback?
• Will new complements come along?

6
Customer Bargaining Power

• How concentrated are client industries?
• Is your industrys product a major budget item
  for client industries?
• Is it essential to client industrys product?
• Impact on product quality
• Can customer switch
• or is customer locked in?
• Is customer well informed?

7
Supplier Bargaining Power

• How concentrated is supplier industry?
• Are there substitutes for suppliers products?
• Is your industry a major customer?
• Is suppliers product an essential input?
• Can you switch or are you locked in?

8
Threat of entry Barriers to entry

• Barriers
• Economies of scale
• Economies of scope
• Product differentiation brand loyalty
• Capital requirements for entry
• Access to distribution channels
• Access to specialized resources
• Entrant learning curve
• Your customer lock-in
• Aggressive opposition to entry?
• Resources in reserve scare em off

9
Rivalry in Industry

• Price competition?
• Industry concentration
• Niches
• Product differentiation
• Customer switching costs
• customer lock in
• Industry growth
• Ease of exit