Porters Five Forces Model

Topics: Strategic management, Porter five forces analysis, Management Pages: 3 (815 words) Published: January 4, 2013
Porter’s Five Forces Model
Posted on April 4, 2009 by admin
Porter’s five forces model helps in accessing where the power lies in a business situation. Porter’s Model is actually a business strategy tool that helps in analyzing the attractiveness in an industry structure. It let you access current strength of your competitive position and the strength of the position that you are planning to attain. Porters Model is considered an important part of planning tool set. When you’re clear about where the power lies, you can take advantage of your strengths and can improve the weaknesses and can compete efficiently and effectively. Porters model of competitive forces assumes that there are five competitive forces that identifies the competitive power in a business situation. These five competitive forces identified by the Michael Porter are:

1. Threat of substitute products
2. Threat of new entrants
3. Intense rivalry among existing players
4. Bargaining power of suppliers
5. Bargaining power of Buyers

1. Threat of substitute products
Threat of substitute products means how easily your customers can switch to your competitors product. Threat of substitute is high when: * There are many substitute products available
* Customer can easily find the product or service that you’re offering at the same or less price * Quality of the competitors’ product is better
* Substitute product is by a company earning high profits so can reduce prices to the lowest level. In the above mentioned situations, Customer can easily switch to substitute products. So substitutes are a threat to your company. When there are actual and potential substitute products available then segment is unattractive. Profits and prices are effected by substitutes so, there is need to closely monitor price trends. In substitute industries, if competition rises or technology modernizes then prices and profits decline. 2. Threat of new entrants

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