Porter's Five Forces

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World & Business - Finance
Tuesday, 29 March 2011 17:21

The model Porter's five forces

The analysis of Porter's five forces is a management tool by which companies can conduct a site analysis of the company through the sector to which it belongs.


It consists of five forces that determine the impact of market returns over the long term.

1. Potential competitors: This refers to the possibility of entry to the market by companies that offer the same product. Analyzing this force can establish entry barriers that impede the establishment of new businesses, increasing our bargaining power in the market.

2. Rivalry among competitors: they are all companies that are competing in the market. The degree of rivalry increase in the same proportion that will increase the number of organizations in a given sector. Through analysis of this force we can compare our strategies and competitive advantages with those of rivals.

3. Threat of substitutes: one sector will be attractive when there are no actual or potential substitutes. The entry of these products on the market makes the price set by the company can not exceed certain thresholds, as they run the risk that customers will be competition.

4. Bargaining power of suppliers: the more suppliers are organized, have more bargaining power and less attractive is the market in the eyes of potential employers. Analyzing the force we can design strategies to position ourselves in a stronger position against the dealer getting better deals.

5. Bargaining power of customers: The more substitutes available in the market, have more bargaining power customers from manufacturers, and less attractive is the market. The analysis of this force allows the company to design marketing strategies to obtain a higher fidelity or loyalty to them.