Five Forces Model
Assignment 1: Porter’s Five Forces Analysis
L(Deia J. McNeal
Strayer University
Companies not only have to be able to survive but also thrive as a lucrative business in today’s market. In order to gain the ability to survive and thrive, as well as, establish longevity, companies must create a competitive advantage. In this instance, the industry is the desktop computer. For the sake of the analysis, I will call the company seeking to enter the desktop computer industry -- Plum. Plum Computers must create an environment in which their customers place greater value with Plum desktop computers than with desktops offered by competitors. Per the textbook for this class, Plum Computers must “use three common tools to analyze and develop competitive advantages: Five Forces Model, three generic strategies, and value chain analysis” (Strayer University, 2008, p.17). This analysis will focus on the first of the three common analytical tools -- Five Forces Model. Michael Porter, a Harvard University Business School professor, developed the Five Forces Model as a tool to assist companies in determining the intensity of competition and relative attractiveness of entering a new industry or industry segment (Wikipedia). Porter’s Five Forces Model includes five areas: buyer power, supplier power, threat of substitute products or services, threat of new entrants, and rivalry among existing competitors. Buyer power is “high when buyers have many choices of whom to buy from and low when their choices are few” (Strayer University, 2008, p. 458). The buyer power in the desktop computer industry is high because consumers have several options when it comes to purchasing a desktop -- E-Machines, Dell, Apple, Sony, HP, and Gateway just to name a few. To gain and maintain a competitive advantage and reduce buyer power, Plum Computers “must make it more attractive” for consumers to purchase their desktop from them versus their competitors (Strayer University, 2008, p. 18).
L(Deia J. McNeal
Strayer University
Companies not only have to be able to survive but also thrive as a lucrative business in today’s market. In order to gain the ability to survive and thrive, as well as, establish longevity, companies must create a competitive advantage. In this instance, the industry is the desktop computer. For the sake of the analysis, I will call the company seeking to enter the desktop computer industry -- Plum. Plum Computers must create an environment in which their customers place greater value with Plum desktop computers than with desktops offered by competitors. Per the textbook for this class, Plum Computers must “use three common tools to analyze and develop competitive advantages: Five Forces Model, three generic strategies, and value chain analysis” (Strayer University, 2008, p.17). This analysis will focus on the first of the three common analytical tools -- Five Forces Model. Michael Porter, a Harvard University Business School professor, developed the Five Forces Model as a tool to assist companies in determining the intensity of competition and relative attractiveness of entering a new industry or industry segment (Wikipedia). Porter’s Five Forces Model includes five areas: buyer power, supplier power, threat of substitute products or services, threat of new entrants, and rivalry among existing competitors. Buyer power is “high when buyers have many choices of whom to buy from and low when their choices are few” (Strayer University, 2008, p. 458). The buyer power in the desktop computer industry is high because consumers have several options when it comes to purchasing a desktop -- E-Machines, Dell, Apple, Sony, HP, and Gateway just to name a few. To gain and maintain a competitive advantage and reduce buyer power, Plum Computers “must make it more attractive” for consumers to purchase their desktop from them versus their competitors (Strayer University, 2008, p. 18).