Business Analysis Of Michael Porter's Five Forces Model
The five forces model was first established in 1979 by Michael Porter in an article written in the Harvard Business Review, “How competitive forces shape strategy”. This model of analysis helps to examine why industries are able to hold different levels of productivity. This is model is use worldwide to assist in examining the industry structure of companies and its corporate strategy. Porter has founded five forces that help shape every market and industry, these forces are used to measure competition and profitability of the industry.
Porter’s five force model consists of five forces governing competition of a particular industry these forces are:
1. Threats of new entrants
As Porter explains in his article (1979) new …show more content…
Porter’s concept for five forces can be used by a company to defend against their competitors thus allowing them to gain profitably over the industry. Upper management is able to apply this concept to the business to protect the company for new entrants and any substitutes that arise in the industry therefore the company can be prepared and tackle the threats in a way that doesn’t cause a harm to the profits. There will constantly be industry structure changes throughout the years, this gives the ability to for buyer or suppliers to become either more powerful or less powerful. If they become powerful companies need to be able to use the five forces model to defend themselves in order to remain the successful business. Porter’s five forces models is a necessary requirement use to exploit industry structural change and be able to keep the rivalry among existing …show more content…
Karagiannaopoulos, N. Georgopoulos and K. Nikolopoulous discusses the internet has changed the way business is now conducted around the world and now information is all digitalized, packaged and transferred. Porter’s article “Strategy and the internet” published in 2001, bother these articles are similar as they examine how technology and the internet has impacted the five forces model. Porter argues that the internet has opened up opportunities for buyers to access information about producers and suppliers in a easy manner, thus leading to a boost in bargaining power. He also states, “the internet reduces barriers to entry” for example producing a software can be cost initially by high however it is inexpensive to reproduce therefore barriers to enter and reproduce the product has been reduced by the internet. Both articles show that the internet has impacted Porter’s five forces model from 1979 to 2001, with the advances of the internet there is an impact on barriers to entry, substitutes and on buyers and suppliers. It can be seen that in the space of twenty-two years changes have impacted the five competitive forces model thus leading to affecting the