Porter's Five Forces

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Porter’s Five Forces in an International Market
Chase Smith
American Public University

Abstract
This paper discusses and describes Michael Porter’s Five Forces Model. It shows how this model can be beneficial in developing a strategy for expansion in new markets, including those operating internationally. And it also shows that though the Porter Five Forces Model has some flaws, it can be useful overall in developing new strategies in business.

When developing a strategic plan in business, one has to take into account all the many factors that will affect their chosen market. To help facilitate this, Michael Porter developed a model describing five forces that influence the market. This paper discusses and describes Michael Porter’s Five Forces Model. It shows how this model can be beneficial in developing a strategy for expansion in new markets, including those operating internationally. And it also shows that though the Porter Five Forces Model has some flaws, it can be useful overall in developing new strategies in business. Porter describes these five forces as “threat of new potential entrants, threat of substitute product/services, bargaining power of suppliers, bargaining power of buyers,” and “rivalry among current competitors” (Management Study Guide, 2012, para. 1). The threat of potential new entrant refers to the threat that a new company may decide to enter the specified market. This company could be a new start-up, or may be a well-established company looking to diversify. In either scenario, the entry of a new firm will decrease market share and likely cause rivalry among other firms to regain this lost share of the market. The risk of new entrants to a certain market can vary depending on barriers to entry such as government regulation, high costs of entry, or brand loyalty. Threat of substitutes is the threat of other closely related products (or services) that can satisfy a customer’s need. If there are many close...
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