PORTER’S FIVE FORCES OF COMPETITIVE ADVANTAGE
Michael Eugene Porter (born May 23, 1947)is the Bishop William Lawrence University Professor at. He is a leading authority on company strategy and the competitiveness of nations and regions. Michael Porter’s work is recognized in many governments, corporations and academic circles globally. He chairs Harvard Business School's program dedicated for newly appointed CEOs of very large corporations.
Five forces of competitive advantage are proposed by Michael E. Porter of Harvard Business School in 1979. It is a well-known model for industry analysis and business strategy development. This model is used to know the attractiveness and profitability of the industry. Porter’s model includes the following elements.
The Threat of New Entrants:
In an industry, which has profitability is attractive for new business entry. A huge number of businesses in any industry increase the competition and decrease profitability. There are some factors on which new entry in any industry depends.
Initial investment
Regulatory barriers.
Market barriers
Environmental barriers
Bargaining Power of Buyers:
Buyer’s main intention is to receive the product at lowest price but highest quality. Industry condition enables or disables buyers to bargain. Following factors can be influencing in increasing or decreasing bargaining power of buyers. The higher bargaining power of buyer ensure high competitive industry condition.
Buyer volume
Buyer switching costs relative to firm switching costs
Buyer information availability
Availability of existing substitute products
Buyer price sensitivity
Bargaining power of suppliers:
Bargaining power of suppliers also has effect on competitiveness of any industry. Following factors have effect on bargaining power of supplier.
Demand for the raw materials
Availability of raw materials
Presence of substitute inputs
Strength of distribution channel
Rivalry among existing competitors:
For most industries, the intensity of competitive rivalry is the major determinant of the competitiveness of the industry.
Sustainable competitive advantage through innovation
Competition between online and offline companies
Level of advertising expense
Powerful competitive strategy
Threat of substitute products or services:
Availability of substitute products gives additional bargaining power to buyers and affects the competitiveness of the industry.
Buyer propensity to substitute
Relative price performance of substitute
Buyer switching costs
Perceived level of product differentiation
Number of substitute products available in the market
Ease of substitution
Michael Eugene Porter (born May 23, 1947)is the Bishop William Lawrence University Professor at. He is a leading authority on company strategy and the competitiveness of nations and regions. Michael Porter’s work is recognized in many governments, corporations and academic circles globally. He chairs Harvard Business School's program dedicated for newly appointed CEOs of very large corporations.
Five forces of competitive advantage are proposed by Michael E. Porter of Harvard Business School in 1979. It is a well-known model for industry analysis and business strategy development. This model is used to know the attractiveness and profitability of the industry. Porter’s model includes the following elements.
The Threat of New Entrants:
In an industry, which has profitability is attractive for new business entry. A huge number of businesses in any industry increase the competition and decrease profitability. There are some factors on which new entry in any industry depends.
Initial investment
Regulatory barriers.
Market barriers
Environmental barriers
Bargaining Power of Buyers:
Buyer’s main intention is to receive the product at lowest price but highest quality. Industry condition enables or disables buyers to bargain. Following factors can be influencing in increasing or decreasing bargaining power of buyers. The higher bargaining power of buyer ensure high competitive industry condition.
Buyer volume
Buyer switching costs relative to firm switching costs
Buyer information availability
Availability of existing substitute products
Buyer price sensitivity
Bargaining power of suppliers:
Bargaining power of suppliers also has effect on competitiveness of any industry. Following factors have effect on bargaining power of supplier.
Demand for the raw materials
Availability of raw materials
Presence of substitute inputs
Strength of distribution channel
Rivalry among existing competitors:
For most industries, the intensity of competitive rivalry is the major determinant of the competitiveness of the industry.
Sustainable competitive advantage through innovation
Competition between online and offline companies
Level of advertising expense
Powerful competitive strategy
Threat of substitute products or services:
Availability of substitute products gives additional bargaining power to buyers and affects the competitiveness of the industry.
Buyer propensity to substitute
Relative price performance of substitute
Buyer switching costs
Perceived level of product differentiation
Number of substitute products available in the market
Ease of substitution
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