Porter’s Five Forces
Porter’s Five Forces
Porter’s Five Forces is a framework for business strategy development and industry analysis formed by Michael E. Porter of Harvard Business School in 1979. Since then Porter’s Five Forces has become an important tool for analyzing an organizations industry structure in strategic processes. Porter’s Five Forces draws upon Industrial Organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market.
We can say Porter’s Five Forces framework is a simple yet powerful framework that identifies the strength of each of five market levers on an industry. 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 Porters Five Forces Analysis, management can decide how to influence or to exploit particular characteristics of their industry.
Competitive strategy is generally built on the way the industry structure is built and how it changes. Porter propounded that there are 5 forces that are responsible in bringing the change in each and every industry market in some parts or as a whole. These forces do decide the profitability and the competitiveness of a market. Based on these forces the management can know about the current position of the firm and the possible threats from the competitors.
In general, a firm is likely to be more profitable if
the less intense is the rivalry in its industry;
the less danger of potential entrants & the higher the barriers to entry;
the less numerous and less aggressive the firms that sell substitute products, and the more numerous and more aggressive the firms that sell complementary products;
the weaker the bargaining power of
Porter’s Five Forces is a framework for business strategy development and industry analysis formed by Michael E. Porter of Harvard Business School in 1979. Since then Porter’s Five Forces has become an important tool for analyzing an organizations industry structure in strategic processes. Porter’s Five Forces draws upon Industrial Organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market.
We can say Porter’s Five Forces framework is a simple yet powerful framework that identifies the strength of each of five market levers on an industry. 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 Porters Five Forces Analysis, management can decide how to influence or to exploit particular characteristics of their industry.
Competitive strategy is generally built on the way the industry structure is built and how it changes. Porter propounded that there are 5 forces that are responsible in bringing the change in each and every industry market in some parts or as a whole. These forces do decide the profitability and the competitiveness of a market. Based on these forces the management can know about the current position of the firm and the possible threats from the competitors.
In general, a firm is likely to be more profitable if
the less intense is the rivalry in its industry;
the less danger of potential entrants & the higher the barriers to entry;
the less numerous and less aggressive the firms that sell substitute products, and the more numerous and more aggressive the firms that sell complementary products;
the weaker the bargaining power of