Five Forces Model

Porter’s Five Forces Analysis is based on the concept that the key objective for any organization should be to gain advantage over its competitors, it is not the industry that an organization is in that counts, but where it wants to compete in terms of the nature of the competition. This competition is provided by the nature of the rivalry between existing firms, the threat of potential entrants and substitutes and the bargaining power of both the suppliers and buyers (Lowson, 2002). The five-forces model is extremely helpful in systematically diagnosing the principal competitive pressures in a market and assessing how strong and important each one is. This straightforward approach is the most widely used technique of competition analysis.

The rivalry among competing sellers. The most powerful of the five competitive forces is usually the competitive battle among rival firms. How vigorously sellers use the competitive weapons at their disposal to jockey for a stronger market position and win a competitive edge over rivals shows the strength of this competitive force. Competitive strategy is the narrower portion of business strategy dealing with a company 's competitive approaches for achieving market success, its offensive moves to secure a competitive edge over rival firms, and its defensive moves to protect its competitive position. As noted by Fleisher and Bensoussan (2003), Porter’s fifth force, competitive rivalry, is also an element addressed by the strategic group analysis where it considers competitive rivalry and how this force both impact and it is impacted by other four forces. Porter (1980, taken from Bowman, 1998) suggests that the level of rivalry, the actual competition between existing producers, varies according to a number of factors.

The market structure for example will be a major determinant in the intensity of rivalry. In a monopolistic market for example, where one firm has the total control of the market, quality,