From the perspective of the five forces model, which force is most relevant here

Sometimes a sixth force is added to the competitive forces Porter conceptualized. The model is called Porter’s Six Forces. The sixth force of competition is:

6. Complementors

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Porter’s Five Forces Example

Analyzing Porter’s five forces example does not always yield a simple or straightforward evaluation of the attractiveness and profitability of an industry. Some of the forces may be strong, increasing competition and decreasing profit potential, while other forces may be weak, decreasing competition and increasing profit potential. The results may be conflicting and the interpretation depends on the particular business and the particular industry. However, for the sake of simplicity, there is an overall attractive industry structure and an overall unattractive industry structure. Porter’s five forces model is merely a framework.

According to Michael Porter’s five competitive forces industry analysis, an attractive industry has the following characteristics. The threat of new entrants is low. The bargaining power of suppliers is weak. Then the bargaining power of buyers is weak. The threat of substitute products is low. Finally, the intensity of rivalry among industry competitors is low. Complementary products or services are unavailable. If Porter’s forces of competition are as described above, then the industry is attractive and there is profit potential.

According to Porter’s 5 forces of competition, an unattractive industry has the following characteristics. The threat of new entrants is high. Then the bargaining power of suppliers is strong. The bargaining power of buyers is strong. The threat of substitute products is high. Finally, the intensity of rivalry among industry competitors is high. Complementary products or services are unavailable. If the forces of competition are as described above, then the industry is unattractive and there is limited profit potential.

Porter’s Analysis – Attractive Industry

The following indicates an attractive industry:

• Threat of entrants is low
• Threat of substitute products is low
• Bargaining power of buyers is low/weak
• Bargaining power of suppliers is low/weak
• Intensity of rivalry among existing firms is low

Porter’s Analysis – Unattractive Industry

The following indicates an unattractive industry:

• Threat of entrants is high
• Threat of substitute products is high
• Bargaining power of buyers is high/strong
• Bargaining power of suppliers is high/strong
• Intensity of rivalry among existing firms is high

Porter’s 5 Forces Strengths

The 5 forces of competition is a strong tool for conducting an in-depth analysis of the competitive structure of an industry. Furthermore, Porter’s 5 forces model can be used to complement a SWOT analysis. In addition, the 5 forces framework is useful in strategic planning and can help a company determine whether or not to enter an industry or market by evaluating the potential for profitability.

Porter’s 5 Forces Weaknesses

Porter’s 5 forces of competition have a few weaknesses and limitations. First, the model underestimates the influence of a company’s core competencies on its ability to achieve profit. It, instead, assumes the industry structure is the sole determining factor. Then Porter’s 5 forces definition is difficult to apply to large multinational corporations with synergies and interdependencies achieved from a portfolio of businesses. Additionally, the five forces framework assumes there is no collusion in the industry. Finally, Porter’s analysis doesn’t consider the possibility of creating a new market.
As you use Porter’s five forces of competition to shape profit potential, it’s important to expand analysis by evaluating the entire external environment. Download the free External Analysis whitepaper to overcome obstacles and be prepared to react to external forces..

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