Porter's five forces model

Michael E Porter's five forces of competitive position model

Michael Porter's famous Five Forces of Competitive Position model provides a simple perspective for assessing and analysing the competitive strength and position of a corporation or business organization.

Porter's first book Competitive Strategy (1980), which he wrote in his thirties, became an international best seller, and is considered by many to be a seminal and definitive work on corporate strategy. The book, which has been published in nineteen languages and re-printed approaching sixty times, changed the way business leaders thought and remains a guide of choice for strategic managers the world over.

Aside from his innovative thinking, Porter has a special ability to represent complex concepts in relatively easily accessible formats, notably his Five Forces model, in which market factors can be analysed so as to make a strategic assessment of the competitive position of a given supplier in a given market. The five forces that Porter suggests drive competition are:

PORTERS FIVE FORCES

 

New Market Entrants, eg:

                        • entry ease/barriers

                        • geographical factors

                        • incumbents resistance

                        • new entrant strategy

                        • routes to market

 

 

Buyer Power, eg:

                        • buyer choice

                        • buyers size/number

                        • change cost/frequency

                        • product/service importance

                        • volumes, JIT scheduling

 

 

Product and Technology Development, eg:

                        • alternatives price/quality

                        • market distribution changes

                        • fashion and trends

                        • legislative effects

 

 

Supplier Power, eg:

                        • brand reputation

                        • geographical coverage

                        • product/service level quality

                        • relationships with customers

                        • bidding processes/capabilities

 

 

Competitive Rivalry, eg:

                        • number and size of firms

                        • industry size and trends

                        • fixed v variable cost bases

                        • product/service ranges

                        • differentiation, strategy