Porter 's Five Competitive Forces Model Essay

971 Words Aug 27th, 2016 4 Pages
As the business environment is changing and developing rapidly, making thorough business strategies seems to be critical for firms of different industries to cope with the competition. To acquire comprehensive business strategies, it is significant for firms to analyze and evaluate the competitive environment that they are or would be involved in. Porter 's competitive forces model has been a tool served to reveal the industry structure and enable firms to be aware of their own position (Porter 2008, p. 80). This essay will present the essentials of the model, followed by the implementation in lutein products industry.

The five forces model
Porter 's five competitive forces was first proposed by Michael E. Porter in 1979. According to Porter (1979, p. 137), an industrial competitive structure could be defined by five forces including the existing industrial rivals, the threat of substitutive products, the bargaining power from suppliers, the bargaining power from buyers and the entry of new competitors. In terms of the rivalry among the existing competitors, the higher degree of rivalry, the lower profitability of the industry and the intensity of rivalry is related to factors such as competitors ' quantity, price competition and exit barriers (Porter 2008, p. 85). For instance, the current rivalry in China shale gas industry is relatively low because of the monopolization mode (Yunna 2014, p. 803). The threat of substitutes seems to be an important element,…

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