what is porter’s 5 forces/Current competition intensity etc.
what is porters 5 forces Porter’s Five Forces Model is an analysis method used to examine opportunities and threats in a specific industry.what is porters 5 forces
In other words, the model examines whether it is profitable to set up a company in a particular region. It depends on the market structure.
Each of the five Bode forces are factors affecting profitability and they are as follows:
- The current intensity of competition.
- potential competitors.
- Alternative product.
- The bargaining power of suppliers.
- The bargaining power of customers.
- All of this was developed in Michael E. Porter’s 1982 book Competitive Strategy: Analyzing Industry Technology and Competitors.
The main purpose of this analysis is to find opportunities and identify threats to companies that have entered an industry and those that are planning to enter. Therefore, your profit is guaranteed. what is porters 5 forces According to the model, industry attractiveness depends on the role of these five core competencies, which together determine the potential for higher returns.
In this sense, Porter’s analysis can be performed in any market that has the potential to improve profitability in the long run. In addition, it increases resistance to unexpected events. An example of the above is that when a recession occurs, our company is affected as little as possible. management studies
1. Intensity of current competition
- It indicates the performance of the current competitors in the industry and is necessary to understand the level of competition. To do this, the following points should be examined: Number of competitors and the balance between them: concentrated industries (few firms, large market shares) are more competitive than segmented industries (many firms with homogeneous market and low share). my sure 11 apk
- Industry growth: As the industry expands further, the competition also gets tougher.
- Liquidity Barriers: These barriers prevent companies from moving from one sector to another within the same market.
- For example, our goal is to move from the customer segment to the higher income segment.
- Exit barriers: These are the factors that prevent a sector from being abandoned.
- Product differentiation: If an industry has a higher level of product differentiation (marketing strategies based on creating consumer perceptions of a product different from other products), the intensity of competition decreases.
- Diversity of competitors: When competitors have different strategies (see business strategy), the degree of competition increases because it is difficult to predict their behavior.
2. Potential competitors
It refers to a company that wants to compete in an industry. The more attractive the industry, the greater the number of potential actors. It depends on the following factors: The five forces of the goalkeeper
- Entry Barriers: We can define them as the factors that make it difficult for new firms to enter the industry.
- Economies of scale, for example, pose barriers to entry because they require high initial investment from new entrants. So a decrease in unit costs is observed only when revenues are increased.
- Product differentiation: Mature companies may have patents or customer portfolios. This forces new players to invest heavily to retain new buyers.
- Other reasons: Observable, making it difficult for new competitors to enter. For example, lack of capital or difficulties in accessing distribution channels.
3. Substitute products
They are defined as goods or services that satisfy the same need. The attractiveness of the industry is starting to wane as more alternative products emerge. The threat of these emerging alternatives depends on the extent to which consumer demand is met. In addition, it affects the price and cost of replacing one element with another.
4 and 5. Bargaining power of suppliers and customers
Porter’s strength 4 is the ability to negotiate with suppliers and 5 is the ability to negotiate with customers. However, because the analysis of the two forces is very similar, they are often studied together. Bargaining power is the ability to determine the terms of a transaction. Therefore, the attractiveness of the industry has diminished due to this increasing dominance of buyers. Potter’s Five Forces
According to Porter, the main factors affecting bargaining power are as follows:
- Industry focus.
- The volume of transactions between customers and suppliers.
- The degree of differentiation between a product or service.
- Costs of switching service providers.
- What benefit does the customer get from the provider?
- The real threat of forward or backward vertical integration.
- The importance of the product or service being sold.
- The possibility of storing goods.
- The level of information that one party has in relation to the other.