Porter’s Five Forces model is an important tool used to differentiate where power is to be gained and lost within the business world. It gives examples of how businesses compete within markets and how they can assess their potential profitability. It shows how the rivalry between businesses is affected and altered based on several economic conditions and strategies that businesses may take to change an industry. The five forces of this model are supplier power, buyer power, competitive rivalry, threat of substitution and the threat of new entry. Using this model could be extremely helpful in developing one’s international strategy. It gives several concepts and factors to weigh when planning the strategic direction of the management
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I believe that the “threat of substitute” products is very similar to the “threat of new entrants and entry barriers” in that a new organization poses the threat of entry while also potentially posing the threat of substitution. Adversely, an established organization must also be aware of these dangers within the market they are operating. When weighing the option to enter into a global market, a new organization may also experience the “barriers to entry.” New firms may also face extremely expensive costs up front while also facing the competitive pricing of their rivals. This may prevent them from being able to meet their desired profitability.
“Buyer Power” can also effect a new organization because of customer loyalty to an already existing brand or company. This goes further than the examples given from the required reading. The text suggests that buyer power is typically one consumer of several suppliers. However, this can also be multiple buyers, such as the general public or a multitude of small businesses, which provide continued support to an organization that they have dealt with for an extended period of time. Businesses often provide loyalty rewards to longstanding customers. This can greatly affect, and drive down, the prices of an introductory organization which will