Porter's Five Forces Model
Porter’s Five Forces Model
Patricia A. Phillips
American Military University
Abstract
Michael Porter, an innovative thinker, developed a model known as the Five Forces of Competitive Position. This model assist organization and businesses to better analyze their current position in the competitive market. The five forces are as follows: existing competitive rivalry between suppliers, threat of new market entrants, bargaining power of buyers, power of suppliers and threat of substitute products (including technology change). These five forces are helpful in developing a businesses international strategy. Like anything else developed there are limitations to the model techniques. This paperwork will briefly discuss the Five Forces model and how it can be applied to today’s organizations.
Imagine yourself as a boxing coach. Your trainee is beating U.S competitors with ease. You decide he is ready for an international fight. You are preparing for a huge fight against an international champion. What are some of the steps you would take to ensure your fighter is ready? You wouldn’t send them into the ring unprepared for the battle. As a coach with an ambition to succeed you would want to ensure you develop a strategy that will prepare your fighter to be in the best position to win. In my opinion, Porter’s Five Forces model is similar to the scenario I provided above. It will assist an organization (fighter) in determining the strength of the organization (fighter) as it strives to uphold a competitive status. The first force component in Porter’s model is a potential new entrant. Organizations must analyze the existing companies that are providing the same service. In my example I am going to talk about IKEA (one of the largest players in the home furnishing market). Due to the substantial amount of money needed to start up a home furnishing shop IKEA is able to reduce the threat of new entrants. In addition to this IKEA not only
Patricia A. Phillips
American Military University
Abstract
Michael Porter, an innovative thinker, developed a model known as the Five Forces of Competitive Position. This model assist organization and businesses to better analyze their current position in the competitive market. The five forces are as follows: existing competitive rivalry between suppliers, threat of new market entrants, bargaining power of buyers, power of suppliers and threat of substitute products (including technology change). These five forces are helpful in developing a businesses international strategy. Like anything else developed there are limitations to the model techniques. This paperwork will briefly discuss the Five Forces model and how it can be applied to today’s organizations.
Imagine yourself as a boxing coach. Your trainee is beating U.S competitors with ease. You decide he is ready for an international fight. You are preparing for a huge fight against an international champion. What are some of the steps you would take to ensure your fighter is ready? You wouldn’t send them into the ring unprepared for the battle. As a coach with an ambition to succeed you would want to ensure you develop a strategy that will prepare your fighter to be in the best position to win. In my opinion, Porter’s Five Forces model is similar to the scenario I provided above. It will assist an organization (fighter) in determining the strength of the organization (fighter) as it strives to uphold a competitive status. The first force component in Porter’s model is a potential new entrant. Organizations must analyze the existing companies that are providing the same service. In my example I am going to talk about IKEA (one of the largest players in the home furnishing market). Due to the substantial amount of money needed to start up a home furnishing shop IKEA is able to reduce the threat of new entrants. In addition to this IKEA not only
References: Porter, M. E. (1980). Competitive Strategy: Techniques for Analyzing Industries and Competition (p. 145). New York: The Free Press Raab, G. (2010) The Psychology of Marketing: Cross-Cultural Perspectives. Gower Publishing. Retrieved from http://research-methodology.net/ikea-porters-five-forces-analysis/ Sharma. B. (2006) Change Management. Tata McGraw-Hill International. Retrieved from http://research-methodology.net