Poter’s Five Forces
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Porter
“Strive for competitive advantage and the forces that affect it.”
Strategic Management
Dr. Cassell
By: Ashleigh Bender
Table of Contents:
I .) Executive Summary
II.) Porters Five Forces Defined
Supplier Power
Buyer Power
Threats of New Entrants
Substitutes Products
Degree of Rivalry
III.) Advantage and Disadvantage of Porter’s Five Forces Model
IV.) Application of Porter’s Five Forces
V .) Porter’s Generic Strategies
Cost Leadership
Differentiation
Focus Strategy
VI .) Advantage and Disadvantage of Porter’s Generic Strategies
VII .) Application of Porter’s Five Forces
VIII.) Bibliography
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Executive Summary:
Michael Porter created two concepts used by industries to either achieve greater competitive advantage or can be used as an over all strategy in the market. Both of these concepts work in conjunction with each other to work towards the ultimate goal of generating revenue and stockholders wealth. In this paper these concepts will be discussed in-depth to explain what they are, how they are an advantage and disadvantage and how to apply them.
Introduction:
When a company is formulating a strategy, the framework for such an analysis is the environment. In order to fully assess what the company is capable of a manger needs to look at both external and internal forces that affect the company in order to effectively develop a strategy. A company can formulate a strategy based on the forces that affect the industry as a whole.
The structure of the industry has a large influence on a company and their ability to compete and the strategies that are available to them. Forces that are outside of the industry affect all firms in the industry and the key to effectively compete is the differing abilities of firms to deal with these forces.
Competition in an industry is inevitable and is created through the underlying economic structure that goes beyond the behavior of the competitors. The state of competition in an industry is based on five competitive forces. These forces combined determine the profit potential in the industry.
On a broader sense of things, a company can choose to pick one of three generic strategies. These strategies require a commitment to one strategy. Also, these are designed to outperform competitors in the industry to earn higher revenues. When combined, a company can choose what to do within the five forces to create an ultimate strategy within the given environment.
Porters Five Forces:
The Five forces is a model created by Michael E. Porter of Harvard Business in 1979. The five forces is a framework for an industry analysis and the business strategy development. This framework uses concepts developed within the industrial organization economics. The forces determine the competitive intensity and attractiveness of a market.
These forces affect the company and their ability to serve its customers and produce a profit. This means that a change in such forces will require the company