Porter's Five Forces

What’s Porter’s five forces? It is a simple but powerful tool for understanding where power lies in a business situation. I think it is quite useful and helpful for an organization to enter a market or even essential for an organization which is already in the market. The five forces help me to understand both the strength of the current competitive position.

 

From Porter’s five force, I understand that a company shouldn’t just concentrate with his business only compete with his competitor, that’s not enough. This is because in the market, not just the competitor will be the only one who will affect your profit and successful.

 

 

The five forces are: Supplier power, buyer power, and competitive rivalry, threat of substitution and threat of new entry. Different market would have different forces made by different part of environment. This five forces are micro. Giving an example, market of shampoo. The threat of entry is not so difficult. When you got enough capital, you may enter the market,. In addition, the bargaining power of buyers are quite high, as the market has different large and small origination. There are lots of substitute, the market provide lots of choice for buyer. Therefore buyers got a very high bargaining power. With the same reason, the threat of substitution is high. There are lots of different brands, Dove and Dettol etc. However, the bargaining power of supplier might not be so high, because they could use different raw materials to produce their final product. The company can use different substitution for their product ingredients.

 

I believe this forces must be suitable for every market for many years. Because it shows different forces which will affect the company. From the five forces, you could know what is the company’s weakness, and the avoid taking wrong steps by thinking wrongly for your organization. http://www.youtube.com/watch?v=mYF2_FBCvXw

After watching the Five Forces through this link, I am surely understand and more clearly know how to use this five forces into different market and industry, as what he have said, for airline industry, it would be easy to enter but hard to bargin with buyers. In reality, nowadays, people discover and creates many different' 'clever' products. There are lots of substitutes. It really depends how your product can be survive in yor own market, and this five forces will definitly can help you!!