Porter's Five Forces
A Brief History: the Five Forces model is named after?Michael E. Porter, a Harvard Business School professor. It was first published in his book Competitive Strategy in 1980. He is a recipient of the Wells Prize in Economics, three McKinsey Awards, and is the author of 14 books.
?
Porter's Five Forces Framework is a method for analyzing competition of a business. It draws from industrial organization economics to derive five forces that determine the competitive intensity and, therefore, the attractiveness of an industry in terms of its profitability. Porter shows how competitive advantage can be connected to profitability. He presents a new perspective on the company’s quality analysis.
?
What Are Porter's Five Forces?
Porter's model can be applied to any?segment?of the economy to understand the level of competition within the industry and enhance a company's long-term profitability. Porter’s Five Forces is a business determining model that provides us information about why different companies can sustain various ways of profitability. The?Five Forces?are the Threat of new market players, the threat of substitute products, power of customers, power of suppliers, industry rivalry which determines the competitive intensity and attractiveness of a market.
Porter’s five forces?help to identify where power lies in a business situation. They are:
1.?????? Supplier power.
2.?????? Buyer power.
3.?????? Competitive rivalry.
4.?????? Threat of substitution.
5.?????? Threat of new entry.
?
KEY POINTS:
?
v? Porter's Five Forces is a framework for analyzing a company's competitive environment.
v? The number and power of a company's competitive rivals, potential new market entrants, suppliers, customers, and substitute products influence a company's profitability.
v? Five Forces analysis can be used to guide business strategy to increase competitive advantage.
?
In the end, we can say that porter’s five forces model analysis have a great impact on the industries and market because it can stack out the direction of a firm in a market and have the ability to let the firm know about their strength and weakness in order to retain a customer.
?
Porter’s framework is still relevant for predicting competitor behavior even after forty years of publication.
?
Thanks.
Sundarraj.S
Leadership Coaching, HR Strategist and Risk free HR Compliance.