Poters Five Forces Analysis

Topics: Strategic management, Porter five forces analysis, Profit Pages: 3 (742 words) Published: December 21, 2010

Michel porter(1998) provided a frame work that models an industry as being influenced by five forces. This simple tool that supports strategic understanding where power lies in a business situation. It also help to understand both the firms current competitive position, &strength of a position that the company looking to move in to. Five forces diagram in the (Appendices 1.1).

Threat of new entrants:
Profitable markets that yield high return will attract new firms. This result in many new entrants, which eventually will decrease profitability for all firms in the industry. Unless the entry of new firms can be blocked by incumbents, the abnormal profit rate will fall towards zero. Though the Honda motors leading the market at the present, its market share was affected by the new entrants Toyota &Nissan, in early days. On the other hand Honda struggled when it was tried to land in the European market. Now the threat of new entrants is low because of the high barriers to entry. E.g. cost &capital

The intensity of competitive rivalry:
for most industries this is the major determinant of competitiveness of the industry. it’s based on price, quality &innovation. This competitive rivalry is high in Honda motors, because most countries manufacturing own brand vehicle. E.g. maruthi by India. Not only that the international automobile companies are also the competitors for Honda motors.

The threat of substitute:
The existence of products outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives. Threat of substitute is high for Honda because the availability of non Honda products is in the market. So its lead the customer for more option about the product.

Bargaining power of buyers:
This means to what...
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