Five forces in strategy model or the Porter analysis
The five forces model or Porter analysis was first suggested by Michael E. Porter, a world renowned Harvard Business school professor, in a a Harvard business review article as five competitive forces every business faces within it's industry no matter what industry it is in, which shape industry structure and affect profitability and industry returns over the longer term.This framework of industry and business analysis is very important to every strategist and business leader in setting their own business strategy in the pursuit of attaining a sustainable competitive advantage and achieving superior profitability within its industry.
These five forces are the following:
-Threat of New entrants
-Bargaining power of suppliers
-Bargaining power of customers
-Threat of substitute product and services
-Competition among industry players
Every industry or business can be analysed in details on how the five forces above shape and affect profitability and industry structure, no matter what business or industry is being analysed. The strongest force or forces will ultimately shape the industry and be a focus point of business strategy for business leaders and strategists.
In a certain way the five forces model is slightly similar to SWOT analysis when done as a comparison among peers in the same industry.
Both analyses can prove very usefull in understanding the industry, its structure, why dominant players are who they are, and what other players need to achieve to become a solid competitor or increase profitability. As a strategist or business leader, the use of a porter/strategic forces analyis can include positioning the business where the forces are weak, or other competitors are weaker, exploiting industry and technological change, or using the forces in the business' favor.
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