What is the Five Forces model of Porter?
The Five Forces model of Porter is an Outside-in business unit strategy tool that is used to make an analysis of the attractiveness (value) of an industry structure. The Competitive Forces analysis is made by the identification of 5 fundamental competitive forces: • Entry of competitors. How easy or difficult is it for new entrants to start competing, which barriers do exist. • Threat of substitutes. How easy can a product or service be substituted, especially made cheaper. • Bargaining power of buyers. How strong is the position of buyers. Can they work together in ordering large volumes. • Bargaining power of suppliers. How strong is the position of sellers. Do many potential suppliers exist or only few potential suppliers, monopoly? • Rivalry among the existing players. Does a strong competition between the existing players exist? Is one player very dominant or are all equal in strength and size. Sometimes a sixth competitive force is added: • Government. Porter’s Competitive Forces
