Porter’s model shows schematically the competitive business environment by simulating a competitive situation. The main objective of a business is to obtain a sustainable competitive advantage in its sector and thus to generate profit by resisting pressure forces or threats exerted on it.
The original model neglects a form of pressure on companies: The legal constraints imposed by government. That is why this model has evolved: We speak now of the 5 (+1) Porter forces.
- Rivalry among existing firms (Competitive intensity),
- Threat of new entrants,
- Bargaining power of buyers (customers),
- Bargaining power of suppliers,
- Threat of substitute products or services,
- (+1) Regulatory constraints of government.
Objective analysis of Porter’s 5 (+1) forces
This competitive study allows:
- To analyze the context (opportunities and threats) of the market on which the company operates,
- To assist for decision regarding the company’s development strategy,
To identify key success factors that enable the organization to gain competitive advantage in its field,
- To measure the attractiveness of an industry.
Analysis of Porter’s 5 (+1) forces identifies therefore strategic elements that need to master in order to gain competitive advantage. For this, it is necessary to prioritize the 5 (+1) forces to identify strategic actions to be undertaken in order to escape their influence and thus see the profitability of decreased activity.
For more information, you can read: Understanding Michael Porter
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