New Tools Porter 5 Forces
Tipping the Balance of Power in Any Business Situation
No matter which industry your business is in, you can assess the forces that influence your business, including its strengths and weaknesses, using this set of five Market Forces, in order to leapfrog over your competition by better understanding the industry you and your rivals operate in.
Created by Harvard Business School professor Michael Porter to analyze the attractiveness and likelihood of profitability of an industry, Porter’s Five Forces are a simple but powerful tool for understanding where power lies in any business situation. Using this tool, you can gain insight into the competitive strength of your current position as well as one you’re considering moving into. In this way, you can take fair advantage of situations of strength, improve weaknesses, and avoid missteps.
While these Five Forces are typically used to determine whether new products, services or businesses may be profitable, you can use them to analyze any “balance of power” scenario, including key strategies in your marketing plan. But how to use Porter’s Five Forces?
The Five Forces that determine the balance of power in any business situation are: • Supplier Power. How easy is it for suppliers to drive prices up? The answer depends upon the number of suppliers of each key element, how unique their product or service is, their ability to control you, the cost of switching from one to another, and so on. The fewer your choices, and the more you need their help, the more powerful your suppliers are. • Buyer Power. How easily can your buyers drive prices down? As in Supplier Power, the answer depends upon the number of buyers, how important each buyer is to your business, what it costs them to switch from your products or services to a competitor’s, etc. If you only have a few buyers, they can exercise a lot of control over you. • Competitive Rivalry. The key here is how many competitors you have and what their
No matter which industry your business is in, you can assess the forces that influence your business, including its strengths and weaknesses, using this set of five Market Forces, in order to leapfrog over your competition by better understanding the industry you and your rivals operate in.
Created by Harvard Business School professor Michael Porter to analyze the attractiveness and likelihood of profitability of an industry, Porter’s Five Forces are a simple but powerful tool for understanding where power lies in any business situation. Using this tool, you can gain insight into the competitive strength of your current position as well as one you’re considering moving into. In this way, you can take fair advantage of situations of strength, improve weaknesses, and avoid missteps.
While these Five Forces are typically used to determine whether new products, services or businesses may be profitable, you can use them to analyze any “balance of power” scenario, including key strategies in your marketing plan. But how to use Porter’s Five Forces?
The Five Forces that determine the balance of power in any business situation are: • Supplier Power. How easy is it for suppliers to drive prices up? The answer depends upon the number of suppliers of each key element, how unique their product or service is, their ability to control you, the cost of switching from one to another, and so on. The fewer your choices, and the more you need their help, the more powerful your suppliers are. • Buyer Power. How easily can your buyers drive prices down? As in Supplier Power, the answer depends upon the number of buyers, how important each buyer is to your business, what it costs them to switch from your products or services to a competitor’s, etc. If you only have a few buyers, they can exercise a lot of control over you. • Competitive Rivalry. The key here is how many competitors you have and what their