Porter’s Five-Forces Model

Former chair and CEO of PepsiCo Wayne Calloway said, “Nothing focuses the mind better than the constant sight of a competitor that wants to wipe you off the map.” As illustrated in Figure 3-3, Porter’s Five-Forces Model of competitive analysis is a widely used approach for developing strategies in many industries. The intensity of competition among firms varies widely across industries. Table 3-6 reveals the average gross profit margin and earnings per share (EPS) for firms in different industries. Note the substantial variation among industries. For example, note that industry operating margins range from 4 to 34 percent, whereas industry EPS values range from –16 to 2.23. Note that food manufacturers have the lowest ...

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