"Understanding the competitive forces, and their underlying causes, reveals the roots of an industry's current profitability while providing a framework for anticipating and influencing competition (and profitability) over time." - Michael Porter (2008) Background These five forces can all act against a company unless plans are made to defend against them or influence them in the company's favour. Rivalry among existing competitors - what advantages do competitors have?.Bargaining power of suppliers - how influential are suppliers in deciding price and availability?.Bargaining power of buyers - how effectively can buyers drive a bargain?.Threat of substitute products or services - how easily can an alternative replace the product or service?.Threat of new entrants - what are the barriers to entry for new competitors?.The five forces that shape industry competition that Porter considers in his model are:
The analysis provided by the model provides a valuable insight into the attractiveness of a market, allowing businesses to make strategic decisions regarding the positioning of a product or service.
Porter's Five Forces is a strategic model designed to help business leaders identify, analyse, and evaluate the external factors affecting a company's competitive position.
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