Five Forces

Good Essays
Claiborne
HCA 421
Engle

Porter’s Five Forces Model is the way organizations can analyze the way all their departments, and the aspects of their business, are working together and how well the organization is maintaining its competitiveness. The Five Forces are
• Threat of new entrants o An essential part of remaining competitive, an organization must constantly be aware of new organizations coming into the same market. They must be prepared to offer better services/costs/etc. than the new organization.
• Threat of substitute products or services o Organizations must be aware of products or services that could be used as a substitute for what they are offering. A cleaning company has to be aware that people are capable of cleaning their own houses. KFC must be aware that people can make their food at home. This helps them to decide how to market their services/products as more necessary than the substitutes.
• Bargaining power of customers o Customers are able to shop for the best prices, and are always more than willing to take their business to the lowest bidder. An organization must be aware of other prices and be able to match those prices if they want to keep their customers. WalMart has a price match guarantee for a reason. People are able to go to one place and spend all their money, and WalMart still makes money because they get the products for less than they are buying them from the suppliers for.
• Bargaining power of suppliers o Not only can customers take their business elsewhere; suppliers can as well. They are looking to get the highest paid price for their product, and will sell to the person who is willing to pay or trade the highest value. In order to get the best products or services to pass on to customers, an organization must be able to successfully bargain with their suppliers
• Intensity of competitive rivalry o If an organization is to be successfully competitive, they must know how close their competitors are to offering

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