Porters Five Forces

Porter’s five forces Model:

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Buyer power:

Alternatively known as consumer sovereignty, buyer power is consumers’ ability to dictate the producing industry. In this model, the buyer sets the product price within the market. The number of consumers in the market and their purchasing power determines buyer power

Supplier Power:

Supplier power, also known as Supplier Sovereignty, is the supplier’s power to control the market. In this model, supplier power refers to the power suppliers have over buyers to change product availability, prices and quality. The desire for supplier products determines the supplier power with the market.

Threat of substitute products or services:

Threats of substitute products or service in Porter’s Model refer to products within different industries.  A substitute good or service is any good or service that is similar to another product. A threat of a substitute good or service occurs when the demand for the product is influenced by the price of the product.

Threat of new entrants:

Current competitors within the industry are not the only organization to pose a threat within the industry. The risk that new rivals can enter into the market can affect competition. However, barriers of entry reduce the risk of new competitors entering in the market; thus creating a competitive advantage for firms within that particular industry.

Rivalry among existing competitors:

Rivalry is one of the main Porter’s 5 forces that drive competition within industries. Organizations are continuously trying to gain a competitive advantage at the detriment of their rivals. High rivalry causes more competitiveness, which decreases the profit potential for all firms within the industry.

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Reference:

http://www.cohesioncase.com/cc_overview.html

http://www.cgma.org/Resources/Tools/essential-tools/Pages/porters-five-forces.aspx

http://www.cgma.org/Resources/Tools/essential-tools/Pages/porters-five-forces.aspx