Essay Five Forces Model

12239 Words May 23rd, 2015 49 Pages

Awareness of the five forces can help a company understand the structure of its industry and stake out a position that is more profitable and less vulnerable to attack.

The Five Competitive
Forces That Shape
by Michael E. Porter

Included with this full-text Harvard Business Review article:
1 Article Summary
The Idea in Brief—the core idea
The Idea in Practice—putting the idea to work
2 The Five Competitive Forces That Shape Strategy
18 Further Reading
A list of related materials, with annotations to guide further exploration of the article’s ideas and applications

Reprint R0801E

The Five Competitive Forces That Shape
The Idea in Brief

The Idea in Practice

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Suppliers—plane and engine manufacturers, along with unionized labor forces—bargain away the lion’s share of airlines’ profits. New players enter the industry in a constant stream. And substitutes are readily available—such as train or car travel. By analyzing all five competitive forces, you gain a complete picture of what’s influencing profitability in your industry. You identify game-changing trends early, so you can swiftly exploit them. And you spot ways to work around constraints on profitability— or even reshape the forces in your favor.

In the heavy-truck industry, many buyers operate large fleets and are highly motivated to drive down truck prices. Trucks are built to regulated standards and offer similar features, so price competition is stiff; unions exercise considerable supplier power; and buyers can use substitutes such as cargo delivery by rail.
To create and sustain long-term profitability within this industry, heavy-truck maker Paccar chose to focus on one customer group where competitive forces are weakest: individual drivers who own their trucks and contract directly with suppliers. These operators have limited clout as buyers and are less price sensitive because of their emotional ties to and economic dependence on their own trucks.
For these customers, Paccar has developed such features as luxurious sleeper cabins, plush leather

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