Michel Porter's Five Force Model

CHAPTER 3
THEORETICAL BACKGROUND OF THE STUDY

COMPETITION ANALYSIS:
Competition analysis is the process of assessing and evaluating the strengths and weakness of one company over its competitors in order to gain the sustainable competitive advantage. This analysis helps to find out the opportunities as well as threats for the company. Bringing together the factors to be considered while analyzing the competition, will help the company in efficient and effective implementation of the strategies and also helps in monitoring the performance of the company which leads to the growth of the company in a very efficient manner. Most often, the competition analysis is carried on to implement the strategies for long term period.
The competition analysis
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For analyzing the market structure, external factors which will have effect on the company is studied. Michel Porter in his study “Five Force Model” suggested five external factors which is helpful in analyzing the competition of the company as well as its competitors and have competitive advantage. These five forces helps in understanding the strategy of the company as well as the strategy of its competitors.

PORTERS FIVE FORCES TO COMPETITION:
Michel Porter was the first to conduct a study on competition analysis.
1. Threat of new entrants:
The threat of new company entering into the business comes within the industry itself. When the insurance company operates its functions in the new area and if the new insurance comes into same operating place, the company has the fear of losing its position. The threat may also arise for the company by entry of new financial service company.
2. Power of buyers:
The large scale companies will have lots of bargaining power with the insurance companies as these companies pay high amount on the premiums of the insurance products in order to secure their business. The competing insurance companies will try to have more and more contacts and try to maintain good relationship with the large scale
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Availability of substitutes:
In the insurance industry, specifically in the life insurance sector there are many competing life insurance companies which are competing each other by providing to the customers the similar featured insurance products. By proving the similar kind of products different insurance companies come into same line of business. The competition among the companies should be such that, the competing companies are not able to provide the similar product line categories.
The competition analysis between the competitors can be accessed through various factors which is internal to the company such as the products offered, employee satisfaction, employee training and motivation, and the financial aspects of the company that is profits earned, assets under management, operating expenses of the company etc. And also on the external factors such as socio economic environment on which the company is operating, customer satisfaction and the competitors providing the similar product line characteristics. This study of competition analysis is made with help of two bases:
• On the basis of product line offered
• On the basis of financial aspects of the

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