Porter’s Five Forces
Porter’s Five Forces is a framework used to analyze the competitive environment of a business. It was developed by Michael Porter in 1979 and is used to assess the attractiveness of an industry or market. The framework looks at five key forces that affect the competitive landscape of an industry: the threat of new entrants, the bargaining power of buyers, the bargaining power of suppliers, the threat of substitute products or services, and the intensity of rivalry among existing competitors. By understanding these forces, businesses can better position themselves to compete in the market.
History of Porter’s Five Forces
Porter’s Five Forces was first introduced in 1979 in Michael Porter’s book, Competitive Strategy: Techniques for Analyzing Industries and Competitors. The framework was developed to help businesses understand the competitive environment they operate in and to identify potential opportunities and threats. Since its introduction, the framework has been widely used by businesses to analyze their competitive environment and to develop strategies to gain a competitive advantage.
Comparison of Porter’s Five Forces
| Force | Description | Impact |
|---|---|---|
| Threat of New Entrants | The ease with which new competitors can enter the market. | High |
| Bargaining Power of Buyers | The ability of buyers to negotiate lower prices. | High |
| Bargaining Power of Suppliers | The ability of suppliers to negotiate higher prices. | Low |
| Threat of Substitute Products or Services | The availability of alternative products or services. | High |
| Intensity of Rivalry Among Existing Competitors | The level of competition among existing competitors. | High |
Summary
Porter’s Five Forces is a framework used to analyze the competitive environment of a business. It looks at five key forces that affect the competitive landscape of an industry: the threat of new entrants, the bargaining power of buyers, the bargaining power of suppliers, the threat of substitute products or services, and the intensity of rivalry among existing competitors. By understanding these forces, businesses can better position themselves to compete in the market. For more information about Porter’s Five Forces, visit Harvard Business Review, Investopedia, and Strategy Tools.
See Also
- Competitive Strategy
- Industry Analysis
- Competitive Advantage
- Value Chain Analysis
- SWOT Analysis
- PEST Analysis
- Game Theory
- Business Model Canvas
- Resource-Based View
- Competitive Intelligence
