Porter’s Five Competitive Forces Analysis
New Market Entrants
Supplier Power
Competitive Rivalry
Buyer Power
Product & Technology Development
Porter’s Five Competitive Force s Analysis Table of Contents
Introduction ..................................................................................................................................... 1 About Michael Porter .................................................................................................................. 1 Porter's Five Forces ......................................................................................................................... 3 Other Things Michael Porter is known for ................................................................................. 4 The Main Characteristics of Porter‟s Five Forces Analysis ........................................................... 4 Force 1: The Degree of Rivalry .................................................................................................. 5 Force 2: The Threat of Entry ...................................................................................................... 5 Force 3: The Threat of Substitutes .............................................................................................. 6 Force 4: Buyer Power ................................................................................................................. 6 Force 5: Supplier Power.............................................................................................................. 6 The Limitations of Porter‟s Five Force Model ........................................................................... 7
Porter’s Five Competitive Force s Analysis
Introduction
T
here is continuing interest in the study of the forces that impact on companies, particularly the forces that can be harnessed to provide a competitive advantage. The ideas and models that emerged during the period from 1979 to the mid-1980s (Porter, 1998) were based on the idea that competitive advantage came from the ability to earn a return on investment that was better than the average for the industry sector (Thurlby, 1998).1
About Michael Porter
Michael Porter is an American who was born in 1947. After first graduating in aeronautical engineering, Mr. Porter received an economics doctorate at Harvard, where he was later honored with a university professorship. Porter's famous Five Forces of Competitive Position model presents a simple point of view for assessing and analyzing the competitive strength and position of a corporation or business organization. Mr. Porter‟s research group is based at the Harvard Business School. He also co-founded the Foundation Strategy Group with Mark Kramer. This foundation is 'a mission-driven social enterprise, dedicated to advancing the practice of philanthropy and corporate social investments, through consulting to foundations and corporations'. 2 Porter's first book, Competitive Strategy (1980), which he wrote in his thirties, became an international best seller. It is considered by many to be an influential and definitive effort on corporate strategy. The book has been published in nineteen languages and re-printed almost sixty times. It has changed the way business leaders think, and internationally, it still is a guide of choice for strategic managers. When he finished working on corporate strategy, Porter extended the application of his ideas and theories to international economies and the competitive positioning of entire nations. In 1985 Porter was appointed to President Ronald Reagan's Commission on Industrial Competitiveness, which marked the widening of his perspective to national economies. By the 1990's Porter had created a reputation as a strategy expert on the international speaking circuit. He was among the world's highest earning academic scholars, second only to Tom Peters. Aside from his innovative thinking, Porter has a special talent for presenting comp