Porter 6 Forces
Assessment of the Six Forces
Porter's forces analysis is a framework for industry analysis and business strategy development that draws upon industrial organization economics to determine the competitive intensity and overall industry profitability. These forces are 1) potential entry of new competitors, 2) bargaining power of suppliers, 3) bargaining power of buyers, 4) substitute products, 5) rivalry among competing sellers in an industry, and 6) power of stakeholders. A change in any of the forces normally requires a business unit to re-assess the marketplace given the overall change in industry information and adjust strategies.
Threat of New Entrants
The first force, potential entry of new competitors, measures the barriers to entry in a particular market place and whether or not new players can easily transition into the industry. If this is low then there is low level of threat of new firms entering the industry and vice versa. As it has been stated by Michael Dell, his only fear about his business empire is the possibility of new entrants to the market who could adversely affect his business. And moreover, Dell’s new strategy is the product diversification; therefore, almost all electronic companies are potential entrants to this new market. Due to the lack of legal governmental barriers and low economies of scale, threats of new entrants are moderate. There is low capital investment for independent stores as well as low product differentiation. However, unrecognized brand names may cause a barrier for entry. MODERATE
The Bargaining Power of Suppliers
The second force, bargaining power of suppliers, determines the amount of influence that suppliers of raw materials, components, labor, and services have on firms in a given industry. When there are few substitutes this can be a source of power over the firm because of the uniqueness of the supplier’s product. In this case the level would be high, and if opposite
Porter's forces analysis is a framework for industry analysis and business strategy development that draws upon industrial organization economics to determine the competitive intensity and overall industry profitability. These forces are 1) potential entry of new competitors, 2) bargaining power of suppliers, 3) bargaining power of buyers, 4) substitute products, 5) rivalry among competing sellers in an industry, and 6) power of stakeholders. A change in any of the forces normally requires a business unit to re-assess the marketplace given the overall change in industry information and adjust strategies.
Threat of New Entrants
The first force, potential entry of new competitors, measures the barriers to entry in a particular market place and whether or not new players can easily transition into the industry. If this is low then there is low level of threat of new firms entering the industry and vice versa. As it has been stated by Michael Dell, his only fear about his business empire is the possibility of new entrants to the market who could adversely affect his business. And moreover, Dell’s new strategy is the product diversification; therefore, almost all electronic companies are potential entrants to this new market. Due to the lack of legal governmental barriers and low economies of scale, threats of new entrants are moderate. There is low capital investment for independent stores as well as low product differentiation. However, unrecognized brand names may cause a barrier for entry. MODERATE
The Bargaining Power of Suppliers
The second force, bargaining power of suppliers, determines the amount of influence that suppliers of raw materials, components, labor, and services have on firms in a given industry. When there are few substitutes this can be a source of power over the firm because of the uniqueness of the supplier’s product. In this case the level would be high, and if opposite