Today, the business houses, academic institutions, Public Companies, NGO’s, INGO’s, all kind of sectors are widely using and are depending upon the Porter’s strategic theories. The popular and most widely applied research of Porter includes Porter’s Five Forces, Value Chain and National Diamond and Industry Innovation Clusters. The influential five forces theory consists of the following points:
• Five Forces (1979)
1. The Threat of new entrants: Let’s take an example of a new ABC software company that has been established in a market. This is a threat to the existing software companies in the market. This new entrant shall occupy some share of their profit in the market.
2. Bargaining Power of Supplier: If the manufacturer is dependent on only one supplier then the supplier has higher access to bargaining his terms. This force in market exists if the demand exceeds supply.
3. Bargaining Power of Buyer: If supply exceeds demand then the bargaining power of buyer …show more content…
Threat of Substitute: Pepsi is a threat to Coca-Cola. Before entering any market, it is sensible to do a market study and study on available threats.
5. Rivalry among existing company: Besides the threat of new companies, a business has to also be updated about its existing competitors in the market.
Before commencing any new business it is fruitful to go through Porter’s five forces to gain inside and outside business environment knowledge and feasibility for the business. One can predict the future of a business if the new business can stand till long run or not. The use of this model also lets one know where on the market does the business stands and what are the factors that can hit the profitability of the company? This study will also let the investor to take informed and sensible decision making whether to increase or decline the investment from the