Applying Porter’s Five Forces to Analyze an Industry of Your Choice
Your task in this assignment is to perform a Five Forces analysis and report your findings and insights. Your written report should follow the structure below:
• Define your industry and its key players
• Assess the strength of each force in the industry
• Evaluate the overall effects of the forces and draw a clear conclusion on the industry’s profitability potential (favorable or unfavorable). Support your conclusion with data
• Identify some of the key trends or changes going forward and discuss their impacts
Your report should be formatted with: 12-point Times New Roman font, 1-inch margins on all sides, 1.5-spaced to double-spaced. The writing part of your submission should not exceed three pages, though you can include up to two additional pages of (only) references, citations, and supporting tables and figures. All sources must be cited.
Important: Please submit your report in PDF Format Expectations
The basic expectations for this assignment are that i) you show a solid understanding of the Five Forces model by making a consistent argument between your assessments of the forces and whether incumbent firms in your industry are likely to have profits above economy-wide average (i.e., favorable) or below average (i.e., unfavorable); and ii) your assessments of the forces are reasonable and (ideally) backed up by research and citations. High-quality reports will be determined based on quality of writing and evidence of effort that goes above and beyond the basic requirements. For instance, instead of just citing the raw data on industry profitability, a high-quality report would process the data and present a figure that clearly illustrates the favorability of an industry. A well-written report is easy to read, well-organized, and makes many substantive arguments with logical coherence and clarity. Such a report typically requires several rounds of revisions and iterations.
Helpful Resources:
In addition to class slides, I recommend familiarizing yourself with “The Five Competitive Forces That Shape Strategy” article by Michael Porter and Strategy Reading: Industry Analysis. In particular, the textbook chapter provides some helpful guidelines for performing a Five Forces analysis and includes a good example analyzing the discount retail industry.
Five Forces Worksheet: I have uploaded the template (in pdf and slide formats) on Blackboard under “Industry Report.” The worksheet should help organize your analysis and aid your writing. It is also a helpful way to check if your assessments, conclusion, and data are all consistent. The worksheet is for your own project work. You do not need to include it in your final submission.
Industry Data: There are several ways to get industry-level data on profitability. Check out BU Library’s Resources for SI751: https://library.bu.edu/innovation and Prof. Damodaran’s page at NYU Stern: people.stern.nyu.edu/adamodar/New_Home_Page/datafile/margin.html. If you do not find what you are looking for, I recommend looking up the public companies in your industry and check out their financial reports. Usually, you will get a good sense of the industry financials by looking into what is going on with its large players.
Choice of Industry:
You can choose any industry for this assignment except for the ones discussed in class and/or in the textbook (the “off-limit” ones include: automobile, soft drinks, venture capital, mid-range hotels, beer breweries, and airlines). You may choose the industry you are in, an industry you are excited to explore, or an industry that you enjoy being a consumer of. A clear and concise definition of the industry is crucial to the consistency of your analysis. My recommendation is to not define your industry too broadly (e.g., “Food & Beverages”, “Transportation”, “Services” would be too broad). Instead, be as specific as possible so you are very clear with which companies are in your industry and which ones are not. If you get stuck while examining the forces, check back to see if your definition is too broad or too narrow. Adjust your scope if needed. The key here is consistency.
For the industry I would like to use Starbucks and the Global Coffee Industry. There are many great resources when you google “Starbucks Porter’s 5 Forces” For example:
http://panmore.com/starbucks-coffee-five-forces-analysis-porters-model
Attached is a sample report to give an example of expectations of the professor.
