Application Of Porter's Five Forces Model

Hennessy Anne C. Fong

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Introduction

In creating or changing to a new business, one might have questions or doubts about the profitability of the industry. They might not know where to start or what to look for. Some of them might also not have any idea of the factors that would affect the competition and profitability of a business. Harvard Business School’s Michael E. Porter, an economist, researcher, author, adviser, speaker, and professor, developed the five forces model in 1979. His five forces analysis is a framework that identifies different competitive forces in the industry. He is widely recognized around the globe for his extensive research and received a great number of awards. His works influenced many authors or experts

This framework will make them aware of the different forces that they should consider in planning or strategizing. This could be used in deciding whether in which industry they would prefer to build up their businesses. The five forces will also help the managers to see and analyze the potential profitability of an industry sector. Additionally, this will help the managers to decide whether they should adjust or develop new competitive strategies. They can also formulate or develop different options such as new strategic direction and product differentiation that would improve their competitive position. These forces also allows the organization to systematically analyze the market structure and competitive situation. This helps them understand the strength and weaknesses of their company. The Porter’s five forces also influences the concepts of management which are planning, control, leadership, and organization. Planning is thinking of actions or strategies in advance in order to achieve the desired goal. It is very essential in starting or changing a business so managers must consider all factors or forces that will affect the operation. According to Porter, it might be difficult for new companies to enter an industry if the barriers of entry is high. Managers should carefully analyze and weigh different factors and barriers

No doubt that the internet has really influenced the people’s habits, way of thinking, and lifestyle. This is why, as suggested by different authors, it is important to extend the old forces with new ones that will consider the new technologies and innovations. Many authors from different industries agree with him and big companies even used his model. Different people have different opinions so some authors do not agree with him. But still, it is up to the company or manager to decide whether or not they would use the Porter’s model. But for me, this analysis tool really is very effective and it gives relevant information businesses could use in formulating a strategy and analyzing competition in the