Five Forces
Porter 's Competitive Forces Used as Industry Standards
Porter 's Competitive Forces Used as Industry Standards In business today there are many factors, aside from products and services that contribute to industry dynamics and standards. It is generally understood that a SWOT analysis be conducted in order to identify a company’s: Strength, Weakness, Opportunity, and Treat. Through this analysis, a company will develop methods of doing business by which a company can generate revenue to sustain itself. As commerce began to expand globally, so did the framework for industry analysis and business strategy development. In 1979 Michael E. Porter, then a professor of Harvard Business School, developed techniques for analyzing industries and competitors. He designed of the most respected models to assist with this analysis known as the Porter’s Five Forces Model. Understanding the dynamics of competitors within an industry is critical for several reasons. First, it can help to asses the potential opportunities of your venture, especially if entering the market as a new player. It can also be a critical step to better differentiate yourself from others that offer the similar products or services. Proter’s Five Forces attempts to realistically assess potential levels of profitability, opportuinty and risk based on five key factors in an industry: Threat of new entrants into an industry, Barganing power of suppliers, Barganing power of customers, Threat of substitute products, and Degree of comepetitive rivalry. The threat of new entrants into an industry is associated with low profits. If new entrants move into an industry they will gain marketshare and rivalry will intensify. However, to make positions of existing firms stronger barriers need to be established. If barriers of entry are low then the threat of new entrants will be high. Some high barriers are: Investment
Porter 's Competitive Forces Used as Industry Standards In business today there are many factors, aside from products and services that contribute to industry dynamics and standards. It is generally understood that a SWOT analysis be conducted in order to identify a company’s: Strength, Weakness, Opportunity, and Treat. Through this analysis, a company will develop methods of doing business by which a company can generate revenue to sustain itself. As commerce began to expand globally, so did the framework for industry analysis and business strategy development. In 1979 Michael E. Porter, then a professor of Harvard Business School, developed techniques for analyzing industries and competitors. He designed of the most respected models to assist with this analysis known as the Porter’s Five Forces Model. Understanding the dynamics of competitors within an industry is critical for several reasons. First, it can help to asses the potential opportunities of your venture, especially if entering the market as a new player. It can also be a critical step to better differentiate yourself from others that offer the similar products or services. Proter’s Five Forces attempts to realistically assess potential levels of profitability, opportuinty and risk based on five key factors in an industry: Threat of new entrants into an industry, Barganing power of suppliers, Barganing power of customers, Threat of substitute products, and Degree of comepetitive rivalry. The threat of new entrants into an industry is associated with low profits. If new entrants move into an industry they will gain marketshare and rivalry will intensify. However, to make positions of existing firms stronger barriers need to be established. If barriers of entry are low then the threat of new entrants will be high. Some high barriers are: Investment
References: Lawrence, W. (2008). Faculty and Research. Michael E. Porter. Retrieved from http://www.hbs.edu/faculty/Pages/profile.aspx?facId=6532&facInfo=res Porter, M. (2008). The Five Competitive Forces tha Shape Strategy. Retrieved from http://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy/ Riley, J. (2012). Business Strategy. PortersFive Forces Model: analyzing industry strucuture. Retrieved from http://www.tutor2u.net/business/strategy/porter_five_forces.htm Berry, T. (2008). Porter’s Five Forces. Porter’s Five Forces. Retrieved from http://articles.bplans.com/business/porters-five-forces/119