Porter'S Five Forces: Modern SCM201

MODERN SCM201
PORTER’S FIVE
FORCES
GROUP 2 PRESENTATION
1 Bargaining Power of Suppliers
2 Bargaining Power of Customer
3 Threat Of New Entrants

FIVE FORCES
4 Threat of Substitute Products
5 Rivalry Among Competitors

GROUP 2
Bargaining Power of
Suppliers
POWERFUL
Supply gains power, they can increase their prices
easily, or reduce the quality of their product
UNIQUE POSITION
Switching cost From One Supplier to Another
is very expensive
Group 2
NEUTRALIZING
SUPPLIER POWER
Increasing the percent of suppliers’ business
01
dependency on your company
02 High forward integration
03 Multiple suppliers
04
Increasing supplier cost-to-price transparency
Bargaining Power of
Suppliers
• HIGH NUMBER OF SUPPLIES IN THE

WORLD
• LOW COST OF SWITCHING
• HIGH FORWARD INTEGRATION
Brand
=> Bargaining power of suppliers is low and almost Fashion
insignificant
Bargaining Power of
Customer
Zara case study:
-Moderate - indirect bargaining power

Force Zara to innovate and differentiate
Attract and retain buyers
-They have various degrees of negotiating

strength
Bargaining Power of
Customer
-Zara
• Follow a customer-centric approach
• Implement a vertically integrated approach

Launch new trendy fashions
Increase customer satisfaction
-Do not have a direct say in cost reduction

Definition
FAST-FASHION INDUSTRIES
Threat of new entrants: the arrival of other

companies can disrupt how you do business,
depending on some factors like capital
markets, technologies, distribution, ...
THREAT OF NEW
ENTRANTS
FOR ZARA CASE STUDY
LOW PRODUCTION COSTS LOW BRAND LOYALTY

+ Outsourcing manufacturing capabilities Due to the prevalence of digital
reduces production costs. platforms for brand creation and
+ The availability of suppliers, as well as marketing, consumers can access plenty
online distribution platforms or electronic of new brands, designs as well as
commerce, can help new entrants have the services and prices can meet their
advantage of competitive prices. demand easily.
• Remaining true to its fast-fashion model and fashion-
THREAT OF NEW forward philosophy

• Keep its product affordable and attractive.
ENTRANTS • Moving increasingly into supply-chain financing and
investing as a means for tearing down supply-side
barriers to entry
ZARA
SCM201
THREAT OF SUBSTITUTE
PRODUCTS
This refers to the likelihood that your
customers will find another product or service
to replace your product offering. It can be
cheaper, or better, or both
Its depends on:

• Relative performance of substitutes
• Relative price of substitutes
• Switching costs
FAST-FASHION
• Buyer propensity to substitute

H&M NIKE
Their products are considered substitutes

because their designs are sometimes more
suitable, more comfortable under certain
circumstances.
ADIDAS
ZARA
Swiching cost Adora

Montminy
Switching costs can be low to moderate as

fast fashion brands are defaulted to being
affordable. Other fast fashion brands also
have cheaper alternatives.
Korina Villanueva
WWW.GROUP 2.COM
Zara is still different from many
alternative brands
The ability to keep up with rapidly changing fashion

trends and with little delay in collections comes
from creating new designs and getting them into
stores in just a week or two. The clothing collection
is of high quality yet affordable
Rivalry Among Competitors
In form of activities such as advertising,
pricing, product differentiation
Factors:
• Industry growth
• Differentiation
• Fixed costs
• Capacity utilization
• Exit barrier
• Diversity of competitors
Rivalry Among Competitors
ZARA IN COMPETITIVE LANDSCAPE
• Stiff competition from major retailing brands, (H&M, GAP,

UNIQLO,...)
• Highly competitive market, price sensitive
Zara's Competitive Advantages
• Strong brand presence, unique products
• Fast fashion business model
• Vertical integration supply chain model

The stronger those forces, the lower the
firm’s ability to gain and sustain a
competitive advantage
The weaker those forces, the greater the

firm’s ability to gain and sustain a
competitive advantage
Mangers need to craft a strategic position for

the company that leverages forces into
SUMMARY
opportunities and mitigates strong forces
5 FORCES ZARA SCM201
THANKS FOR
LISTENING!
GROUP 2 - PRESENTATION

Porter'S Five Forces: Modern SCM201

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MODERN SCM201

2 Bargaining Power of Customer

3 Threat Of New Entrants

4 Threat of Substitute Products

5 Rivalry Among Competitors

02 High forward integration

• HIGH NUMBER OF SUPPLIES IN THE

• LOW COST OF SWITCHING

• HIGH FORWARD INTEGRATION

-Moderate - indirect bargaining power

-They have various degrees of negotiating

• Implement a vertically integrated approach

-Do not have a direct say in cost reduction

Threat of new entrants: the arrival of other

LOW PRODUCTION COSTS LOW BRAND LOYALTY

THREAT OF NEW forward philosophy

Its depends on:

• Buyer propensity to substitute

Their products are considered substitutes

Swiching cost Adora

Switching costs can be low to moderate as

The ability to keep up with rapidly changing fashion

ZARA IN COMPETITIVE LANDSCAPE

• Stiff competition from major retailing brands, (H&M, GAP,

• Highly competitive market, price sensitive

Zara's Competitive Advantages

• Strong brand presence, unique products

• Fast fashion business model

• Vertical integration supply chain model

The weaker those forces, the greater the

Mangers need to craft a strategic position for

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