Michael Porter’s Five Forces
Michael Porter’s five forces is a model used to explore the environment in which a product or company operates
Five forces analysis looks at five key areas mainly the threat of entry, the power of buyers, the power of suppliers, the threat of substitutes, and competitive rivalry. New Entrants
Suppliers Industry competitors and extent of rivalry Buyers Substitutes
Introduction to Porter’s 5 forces
The model of the Five Competitive Forces was developed by Michael E. Porter in his book „Competitive Strategy: Techniques for Analyzing Industries and Competitors“ in 1980. Since that time the ‘five forces tool’ has become an important method for analyzing an organizations industry structure in strategic processes.
Porters model is based on the insight that a corporate strategy should meet the opportunities and threats in the organizations external environment. Especially, competitive strategy should based on an understanding of industry structures and the way they change.
Porter has identified five competitive forces that shape every industry and every market. These forces determine the intensity of competition and hence the profitability and attractiveness of an industry. The objective of corporate strategy should be to modify these competitive forces in a way that improves the position of the organization. Porters model supports analysis of the driving forces in an industry. Based on the information derived from the Five Forces Analysis, management can decide how to influence or to exploit particular characteristics of their industry scan.
Overview
The Five Forces model of Porter is an ‘outside looking in’ business unit strategy tool that is used to make an analysis of the attractiveness or value of an industry structure. The Competitive Forces analysis is made by the identification of 5 fundamental competitive forces:
• The entry of competitors (how easy or difficult is it for new entrants to start to compete, which barriers do exist)
• The threat of
Five forces analysis looks at five key areas mainly the threat of entry, the power of buyers, the power of suppliers, the threat of substitutes, and competitive rivalry. New Entrants
Suppliers Industry competitors and extent of rivalry Buyers Substitutes
Introduction to Porter’s 5 forces
The model of the Five Competitive Forces was developed by Michael E. Porter in his book „Competitive Strategy: Techniques for Analyzing Industries and Competitors“ in 1980. Since that time the ‘five forces tool’ has become an important method for analyzing an organizations industry structure in strategic processes.
Porters model is based on the insight that a corporate strategy should meet the opportunities and threats in the organizations external environment. Especially, competitive strategy should based on an understanding of industry structures and the way they change.
Porter has identified five competitive forces that shape every industry and every market. These forces determine the intensity of competition and hence the profitability and attractiveness of an industry. The objective of corporate strategy should be to modify these competitive forces in a way that improves the position of the organization. Porters model supports analysis of the driving forces in an industry. Based on the information derived from the Five Forces Analysis, management can decide how to influence or to exploit particular characteristics of their industry scan.
Overview
The Five Forces model of Porter is an ‘outside looking in’ business unit strategy tool that is used to make an analysis of the attractiveness or value of an industry structure. The Competitive Forces analysis is made by the identification of 5 fundamental competitive forces:
• The entry of competitors (how easy or difficult is it for new entrants to start to compete, which barriers do exist)
• The threat of
References: This tool was created by Harvard Business School professor, Michael Porter, to analyze the attractiveness and likely-profitability of an industry. Since publication, it has become one of the most important business strategy tools. The classic article which introduces it is “How Competitive Forces Shape Strategy” in Harvard Business Review 57, March – April 1979, pages 86-93 Michael Porter’s key books: Competitive Strategy: Techniques for Analyzing Industries and Competitors, 1980 Competitive Advantage: Creating and Sustaining Superior Performance, 1985 Competition in Global Industries, 1986 The Competitive Advantage of Nations, 1990 Key words: Porter’s 5 forces, analysis, review, Porter, Harvard, competitors, substitutes, buyers, suppliers, change, strategic, strategy, competitive, tool, framework