PORTER’S FIVE FORCES MODEL
WHAT IS THE MODEL ABOUT School professor, Michael Porter. This tool was created by Harvard Business profitability of an industry/ company. To analyze the attractiveness and likely- dynamics between these forces, a company can By studying the structure of the model and discover opportunities for improving upon your strategies.
SIGNIFICANCE OF THE MODEL/ WHEN DO YOU USE THE MODEL position. Making a qualitative evaluation of a firm's strategic point or 'check-list' they might use. For most consultants, the framework is only a starting services or businesses have the potential to be profitable The tool is used to identify whether new products, decision Analyze Competitor’s position
For Creating new strategies ,plans and investment The Model also supplements SWOT analysis
competitor’s /industry RIVALRY: The rivalry amongst existing firms analysis will help you to understand the risk that your competitors may compete for market position and if their competitive tactics are likely to be effective.
You will find that your competitors may compete for market position using tactics such as;
increased customer service, or
through offering longer warrantee periods Analyzing Industry Rivalry
To analyze industry rivalry in your industry, you will need to consider the following factors :
BARGAINING POWER OF THE BUYER’S: Bargaining power of the buyer’s is the ability of the buyer’s to put the firm under pressure to reduce the prices. It is also called as the Market of Output
To analyze the Bargaining Power of your Customers you will need to review your industry by considering the following generic criteria :
BARGAINING POWER OF THE SUPPLIER’S Bargaining power of the supplier’s is the ability of supplier’s to increase the price of the inputs and hence it is also called as the Market of Inputs
It is found that as the bargaining power of suppliers increases the industry profitability tends to decrease.
To analyze the bargaining power of suppliers to one’s industry, one will need to consider the following factors :
Threat of substitutes An analysis of the threat of substitute products will identify the likelihood that customers to your industry will switch to purchasing an alternative product from outside your industry.
To analyze the threat of Substitute Products, one need’s to consider the following factors :
BARRIERS TO ENTRY: An analysis of the threat of new entrants will discover how high the entry barriers are in your industry. An industry with high barriers to entry will have less risk from new competitors than an industry with low barriers to entry.
An analysis of the threat of new entrants seeks to identify the “barriers to entry” or the things about the industry that will make it harder for a new entrant to shift into the industry.
To analyses the threat of new entrants to one’s industry, one need’s to consider the following factors :