Five Strengths Of Michael Porter's Five Forces Model
Michael Porter’s Five Forces Model
Michael Porter’s five forces model is a framework to analyse level of competition within an industry and business strategy development. The model identifies five (5) forces that determine the competitive intensity and therefore attractiveness of an Industry.
The Competitive Environment is impacted by numerous factors including:
Customers, Suppliers, Unions, Associations, New Entrants, Interest Groups, Substitutes, Competitors and Creditors.
Porter 's Five (5) Forces Analysis is an important tool for assessing the potential for profitability in an industry. With a little adaptation, it is also useful as a way of assessing the balance of power in more general situations.
It works by looking at the strength of five (5) important forces that affect competition:
· Supplier Power: The power of suppliers to increase the cost of inputs.
· Buyer Power: The power of customers to reduce prices.
· Competitive Rivalry: The strength/power of competition in the industry.
· The Threat of Substitution: The extent to which different products and services can be used in place of your own.
· The Threat of New Entry: The ease with which new competitors can enter the market if they see that you are making good profits (and then drive prices down). By identifying how each force affects the business, and the strength and direction of each force, an assessment of the strength of the company’s position and its ability to make a sustained profit in the
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