Michael Porter's Five Forces Analysis

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Michael Porter’s five competitive model forces: (1) the threats of new entrants, (2) the bargaining power of suppliers, (3) the bargaining power of buyers, (4) the threats of substitute products and services, and (5) rivalry among competitors (Kinicki & Williams, 2014, p. 173-174; O’Brien, & Marakas, 2011, p. 46). This model is a starting pointing for identifying the company’s strengths and weaknesses by looking at the industry and itself. This model was developed initially for brick-and-mortar entities; it provides an analysis of the consumer, supplier, new markets, competitors market entry and product domination and substitutes (Brown, DeHayes, Hoffer, Martin, & Perkins, 2012). Each of the five (5) elements of Porter’s competitive forces …show more content…
There are many obstacles that new entrants have to overcome when entering market sectors, these can include established brands, economic cost and the narrow width of the specific marketplace. Aside from the obstacles when a market sector is easily entered and profit gains are immediate, this poses a more significant risk to the established companies having their customers base split or shared (Kinicki & Williams, 2014).
The bargaining power of suppliers, this includes the control suppliers have over the specific market (Kinicki & Williams, 2014). When there is a limited number of suppliers this will directly affect the costs; it shifts the ability of companies to create or sale at competitive levels. The more suppliers in a marketplace or sector, the better competition for the manufacturer to select or move to another supplier when raw materials costs begin to short their profit margins. Some industry sectors have narrow margins due to the cost of raw materials and manufacturing
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Porter’s five competitive forces. The travel industry is an excellent example of how business has adapted to the changes in market needs and available technology. A little over twenty (20) plus years ago, pre-internet era, if you wanted to book travel plans you would physically visit a travel advisor, person to person. When my wife and I were planning our wedding, we decided to take a trip for the honeymoon. In our case, we wanted to take a cruise. The wedding planning was stressful, to say the least, to aid the planning of a trip/cruise out of the country for a small-town couple would have been impossible without a travel planner’s help. We enlisted the assistance of a local travel agency. This agency had a vast number of brochures detailing what could be found at a chosen destination. We selected the destination location, and the agent provides the booking information (dates) and the amenity selection. They were the experts in travel, they lay out the base cost and made a recommendation to make the trip financial outlay as painless as possible. Some of the items they recommended were the port and dock fees, dining selection and room type with rebates and upgrades based on the trip type or time of year. There was only one travel agency in our area, so the agent set pricing. With the limited competition in our market area made this business venture for the seller highly

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