Porter's 5 Forces Model

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MEMO
TO: Janet Cash, CEO
FROM: Lauren Kesler
DATE: February 24, 2012
SUBJECT: Strategic plan and Five Forces Model

The use of the Porter’s Five Forces Model helps in accessing where the power lies in a business situation. This model is considered an important part of a planning tool set because it can help a business access their strengths and improve their weaknesses to compete with other businesses. Any company that wishes to grow their company and provide better services or products to a worldwide market should see how their business does on Porter’s Five Forces Model.

One force is the threat of substitute products meaning how easily a customer can switch to our competitors. If we can keep our prices low and our quality high, our customers will be happy and stick with our products. By doing this it will allow us to become a more recognizable and profitable company within the global bicycle industry because we will be known for low cost, high quality bicycles and products. I would recommend this strategy due to the fact that this will keep our customers because without our customers, we don’t have a company.

Another force in the model is the threat of new entrants. Since our business is a pretty complicated and high cost, the threat of new entrants is fairly low. It would be hard for a new business to grow to our size quickly enough to overcome us, especially if we keep continuing to become larger. We can reduce the risk of new entrants by closely guarding our trade secrets and therefore forcing other companies to generate other strategies.

Industry rivalry is another major force is business because it’s where the intensity of competitors arises. Within our company we have very loyal customers who prefer our products and will only use our products so we need to be reaching out to customers who are undecided or who prefer or competitors. One tactic to accomplish this strategy would be to reach out to those specific customers and...
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