Porter's 5 Forces: How to Analyze a Company's Competitive Forces
Posted: Mon Jan 20, 2025 8:41 am
Porter's 5 Forces is a model created by Michael Porter, an American professor at Harvard Business School, in 1979. It is one of the best-known tools and models for analyzing the sector to assess its long-term value.
In this article we will talk more about this model and how to apply it correctly.
What are Porter's forces?
Michael Porter in his book Competitive Strategy mentions that chile phone number list are 5 forces that can condition the profitability of the company in the analyzed sector.
These 5 forces are:
Threat of new competitors
Rivalry among existing competitors
Threat of substitute products or services
Supplier bargaining power
Customer bargaining power
This management tool allows companies to measure and analyze their level of competitiveness and create appropriate strategies to take advantage of market opportunities and minimize threats.
Porter's 5 forces model
Threat of new competitors
In every niche or market there are certain barriers to entry that present obstacles for a new competitor to enter the market. The easier it is for our new competitors to enter our market, the greater the threat they pose to us. If it is easy for new competitors to enter our market, then there is a great risk that they will offer better products or at lower prices.
The most important barriers to entry are:
Access to distribution channels : The company has to build distribution channels and generate trust so that the end customer buys its product.
Legal barriers : Regulations change depending on several factors such as region, country, sector, etc. How difficult is it to comply with all the legal requirements in our market?
Economy of scale : Large companies are already established in the market with high levels of production. This enables them to reduce costs, which is reflected in their competitiveness.
Customer bargaining power
Porter explains that customers can organize among themselves to demand higher quality of the product or agree on a maximum price to pay for it, which will harm the company's profit . The bargaining power of our customer can increase the more our competitors increase their bargaining power.
In this article we will talk more about this model and how to apply it correctly.
What are Porter's forces?
Michael Porter in his book Competitive Strategy mentions that chile phone number list are 5 forces that can condition the profitability of the company in the analyzed sector.
These 5 forces are:
Threat of new competitors
Rivalry among existing competitors
Threat of substitute products or services
Supplier bargaining power
Customer bargaining power
This management tool allows companies to measure and analyze their level of competitiveness and create appropriate strategies to take advantage of market opportunities and minimize threats.
Porter's 5 forces model
Threat of new competitors
In every niche or market there are certain barriers to entry that present obstacles for a new competitor to enter the market. The easier it is for our new competitors to enter our market, the greater the threat they pose to us. If it is easy for new competitors to enter our market, then there is a great risk that they will offer better products or at lower prices.
The most important barriers to entry are:
Access to distribution channels : The company has to build distribution channels and generate trust so that the end customer buys its product.
Legal barriers : Regulations change depending on several factors such as region, country, sector, etc. How difficult is it to comply with all the legal requirements in our market?
Economy of scale : Large companies are already established in the market with high levels of production. This enables them to reduce costs, which is reflected in their competitiveness.
Customer bargaining power
Porter explains that customers can organize among themselves to demand higher quality of the product or agree on a maximum price to pay for it, which will harm the company's profit . The bargaining power of our customer can increase the more our competitors increase their bargaining power.