Question

What is Porter’s Five Forces Framework? Please identify each force individually.

Answer 1

ANSWER-

STEP-1 [ INTRODUCTION OF PORTER'S FIVE FORCES FRAMEWORK]

Porter's five forces were developed in 1979 by Michael E Porter of Harvard Business School. Porter's five forces is a simple framework which is used as to evaluate the competitive strength and position of a business organisation. This forces helps to access the market competition and its attractiveness. This forces helps business organisation to find out where the power lies in the market in a business situation. By understanding the powers, business can understand its strength of its competitive position and can run its business effectively and efficiently.

These five forces also verify that new product or services is potentially profitable. So, these five forces drives market by accessing the market and its competition.

STEP-2 [ FIVE FORCES OF PORTER'S ]

1. SUPPLIER POWER : Suppliers powers can be determined by the numbers of suppliers in the market. Are they many or only few potentially suppliers? Suppliers place much pressure on a business. If supplier has lots of variety of products, then they have huge powers to impact business margins and volumes. Because of this Suppliers have powers to drive up prices .
2. BUYER POWER:  As we know buyers and customers and in the today business enviornment , customers are the king of the market. Buyers powers is determined by the number of buyer in the market. Importance of each buyer in the market, and the option to switch supplier, give buyers the power to drive price down and run its business efficient.
3. COMPETITIVE RIVALRY : This is the most important force which drives the market by the presence of the number of competitors and there capabilities to drive the price in the market. Different Competitors offers different various products can drive price up but Many competitors offering undifferentiated products can reduce the price.
4. THREAT OF SUBSTITUTION: When there is closely substitution available in the market, it provides more chances to customers to switch its alternatives which increases the prices in the market. So, threat of substitution is one of the major forces which drives the market prices.
5. THREAT OF NEW ENTRY : Threat of new entry in the market also affects the prices as Profitable market attract new entrance, which can rise the prices.

STEP -3 [CONCLUSION]

PORTER'S FIVE FORCES HELPS TO DETERMINE THE PRICES AND THE COMPETITIVE STRENGTH TO RUN BUSINESS PROFITABILITY AND EFFECTIVENESS. FIVE FORCES DRIVES THE PRICES AND COMPETITION, AND GIVES OPPORTUNITY AS WELL AS THREATS TO THE BUSINESS.