Question

Early on in the course we talked about Porter's Five Forces Model. Describe two of the 5 forces and in what circumstances this analysis would be useful to a company.

Answer 1

Porter's Five Forces is an analysis tool. it were developed in 1979. It identifies and analyzes five competitive forces that shape every industry, and helps determine an industry's weaknesses and strengths. so that, this Strategic analysts often use Porter’s five forces to understand whether new products or services are potentially profitable. By understanding where power lies, the theory can also be used to identify areas of strength, to improve weaknesses and to avoid mistakes.

Power of suppliers : An assessment of how easy it is for suppliers to drive up prices. it will depends up on the number of suppliers of each of a good or service and how unique these inputs. the cost of switching from one supplier to another and relative size and strength of the supplier.

Power of Customers: This specifically deals with the ability that buyers to drive prices down. This is driven by the number of customers or buyers a company has and how important each customers. how much cost the company to finds its markets and its customers and the cost to the buyer of switching from one supplier to another also. if a company has many, smaller, independent customers will have an easier time charging higher prices to increase profitability.

Competitive rivalry: In this defines the number and the ability of competitors. the number of competitors increases, increase in number of products and services they offer. if competitive rivalry is low that deals to achieve higher sales and profits.

Threat of substitution: Where close substitute products exist in a market that reduces both the power of suppliers and the attractiveness of the market. the customers are going buys alternative products that will lead a company's power can be weakened.

Threat of new entry: Profitable markets that attract new entrants, that affects the market. An industry with strong barriers to entry is an attractive because that allows them to flexible to change their prices or products.