Porter’s Five Forces Analysis Assignment Help

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Porter’s Five Forces Analysis Nitty-Gritty

Michael E. Porter recommended Porter’s Five Forces Model that is basically a framework that allows analyzing the competition that a business faces in a specific industry, and also the ways, means, or business strategies that can implement to overcome the competition.

The model considers industrial organization economics as the foundation for the analysis. It includes the forces that operate in a micro-environment as well as macro-environment. Micro-environmental forces are the ones that are close to the business, while the macro-environmental ones that impact the entire economy or the industry that that business operates in.

Porter’s Five Forces Model mentions five forces, as follows:

  • Buyers: The power to bargain on businesses lies with the buyers, thereby leading to the reduction in the price of the product and consequently in the profit earning prospects of the business.
  • Suppliers: Suppliers also possess the power to bargain over businesses. Apparently, this bargaining power is different from that with buyers. The bargaining power with suppliers leads to the increase in the cost of supplies. The supplies are essential for manufacturing finished products that businesses sell in the market. Therefore, due to the increase in the price of supplies, businesses have the obligation to raise the cost of the final product.
  • New competitors: New entrants in the competition also tend to affect existing businesses in a particular industry. The first step that new competitors take is that lower the price of their products or services. This poses a potential threat to the existing businesses as there can be a reduction in the market share and profit margin. A way to overcome this force is by having trademarks, patents, and technical expertise.
  • Substitute products: These products pose a big threat to any business as they can easily replace existing products owing to their lower prices. For instance, street coffee vendors and restaurants are potential substitute’s for coffee. Therefore, someone like Starbucks needs to pay attention to the quality and service of their products to distinguish the brand from others as it is not possible for the brand to compete with these rivals in terms of pricing.
  • Competition: Existing competition poses a tremendous threat to a business as well. Competitors in the same industry constantly try to outperform one another with respect to the advantages, features, and services.

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