Summary from Strategic Advantage
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Michael Porters Five Forces Analysis
Industry x Competitive Position = Profitability.
Two things determine your companys profitability-the industry in which it competes and its strategic position in the industry. Some industries have inherently low profit potential while others are highly profitable. The most profitable companies have a strong competitive position in a highly profitable industry. The poorest companies have weak positions in weak industries.
Five Competitive Forces: Michael Porters Five Forces have become a yardstick for assessing industry profitability. They are
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* Buyers/customers power
* Suppliers power
* Rivalry among competitors
* Threat of new entrants
* Threat of substitute products
The more powerful these forces in an industry, the lower its profit potential. The strength of each force differs by industry and changes over time. Youll find a summary of Porters Five Forces model in our Resource Library.
Industry Analysis: You can use industry analysis in several ways to guide your strategic decisions. Benefit from industry analysis by:
1. Understanding the competitive forces in your industry.
2. Assessing the attractiveness of, and growth opportunities within, a new industry.
3. Developing effective strategies to raise your profitability, power, and competitive position in an industry.
Analyze any industry in just 10 minutes. Heres how:
* Take the Five Forces survey to analyze your current industry or any other industry of interest.
* The survey has five parts for a total of 31 questions.