Porters Five Forces An powerpoint by Shevone Bennett

Porter's Five Forces An powerpoint by: Shevone Bennett and Kerone Smith

What is Porter's Five Forces • Porter's Five Forces is a model that identifies and analyzes five competitive forces that shape every industry. • Porter’s Five Forces help to find out an industry's weaknesses and strengths. • It is frequently used to identify an industry's structure to determine corporate strategy. • Porter’s Five Forces was created in 1976 by Michael E Porter to analyze an industry's attractiveness and likely profitability.

What are the five forces • The five forces include: • • • Competitive Rivalry Supplier Power Buyer Power Threat of Substitution Threat of New Entry

Competitive Rivalry • This force is the number of competitors and their ability to threaten a company. • The larger the number of competitors, along with the number of equivalent products and services they offer, the lesser the power of a company. • When competitive rivalry is low, a company has greater power to do what it wants to do to achieve higher sales and profits.

Supplier Power • This force is determined by how easy it is for your suppliers to increase their prices of goods and services. • This is affected by the number of suppliers of key aspects of a good or service, how unique these aspects are, and how much it would cost a company to switch from one supplier to another. • The fewer the number of suppliers, and the more a company depends upon a supplier, the more power a supplier holds.

Buyer Power • This force specifically deals with the ability customers have to drive prices down. • This force is affected by amount of buyers or customers a company has, how significant each customer is and how much would it cost a customer to switch from one company to another. • The smaller and more powerful a client base is, the more power it holds.

Threat of Substitution • This force refers to the likelihood of your customers finding a different way of doing what you do. • For example, if a company to provide a tool or service, people may substitute it by doing the process manually or by outsourcing it. • A substitution that is easy and cheap to make can weaken your position and threaten your profitability.

Threat of New Entry • This force is determined by your position to be affected by other people's ability to enter your market. • The less time and money it costs for a competitor to enter a company's market and be an effective competitor, the more a company's position may be significantly weakened. • An industry with strong barriers to entry is an attractive feature for companies that would prefer to operate in a space with fewer competitors.

Reference • The Mind Tools Content Team. (n. d. ). Porter's Five Forces Understanding Competitive Forces to Maximize Profitability. Retrieved from https: //www. mindtools. com/pages/article/new. TMC_08. htm • Porter's 5 Forces. (n. d. ). Retrieved from https: //www. investopedia. com/terms/p/porter. asp