Porters Five Forces

8 Pages 1935 Words

riables to influence a fifth force, the level of competition in an industry.

As the title indicates Porter suggested five areas where managers can analyse and ascertain its position compared to its rivals. Enabling the firm to obtain an idea of their products position (sales, market share etc), then develop strategies for 'competitive advantage' and then use their market mix (product, price, distribution and promotion) to differentiate themselves from their rivals. The analysis can be used to develop product changes and influence planning and development strategies. This process can be repeated throughout the products life cycle, by analysing the rivals and the products performance in sales, profits, customer satisfaction etc. They can also introduce policies to impact on these forces to their organisations interest - to reduce competitive forces.



As stated above four of the five forces impact on the fifth, Competitive Rivalry. The aim of the organisation is to reduce the competition and hence improve the scope for profits.

This assignment will look at each of the five forces in turn, identify the factors that impact on them and examine a little more one of the core factors. .

Power of suppliers
Powerful suppliers can reduce an organisations ability to influence Competitive Rivalry and capturing for itself some of the profits. Suppliers are essential for the success of an organisation. Raw materials and other inputs are needed to complete the finish product. Suppliers have greater influence and power:
• If they are one of few suppliers or the only supplier. If the suppliers are more concentrated than the buyers or if the customers are fragmented and have low bargaining power.
• If switching costs are high, it is costly for the organisation to move from one supplier to another.
• The supplier can forward integrate to obtain higher margins, a manufacturer acquiring a distributor.
• If there is no or limited...