Porter’s Five Forces is a framework for analyzing the competitiveness and attractiveness of an industry. The model was developed by Michael Porter in 1979 and is widely used by businesses, consultants, and analysts to understand the forces that shape an industry’s competitive structure. The five forces that make up the framework are:
- Threat of new entrants: This refers to the potential for new competitors to enter the market, which could drive down prices and profits for existing businesses.
- Bargaining power of suppliers: This refers to the strength of the suppliers in the market and their ability to influence the prices and terms of the products they supply.
- Bargaining power of buyers: This refers to the strength of the buyers in the market and their ability to influence the prices and terms of the products they purchase.
- Threat of substitute products or services: This refers to the availability of alternative products or services that could meet the same needs as the products or services in the market.
- Rivalry among existing competitors: This refers to the intensity of competition among existing businesses in the market, which could drive down prices and profits for all participants.
By analyzing each of these forces, businesses can better understand the competitive dynamics of their industry and make strategic decisions to stay ahead of the competition.