Porter’s Five Forces Analysis in Easy Mind MapsNancy
What Is the Porter’s Five Forces Analysis?
This highly popular model, which was pointed out by the Harvard business professor Porter, is used to identify and analyze the most significant five competitive forces in a business industry with at least three competitors. Organizations cloud find out the best profitability solutions for their corporate strategies based on the Porter’s Five Forces Analysis. Such forces may also apply to nearly every industry to check out both the advantages and disadvantages of an enterprise. You may also use some free mind map tools to help you do the work.
What Are All These Five Forces?
It seems that normally enterprises used to get very close to their key competitors. However, according to the Porter’s Five Forces Analysis, firms should look some other aspects and factors that could influence the business environment like the following:
This part is mainly about the strength and number of competitors. In this case, CEOs should consider the product quality, industrial lifecycle stages, marketing campaigns, pricing setting and competitive advantage.
Based on the Porter’s Five Forces Analysis, the power is about how easy it is for suppliers to raise prices. Meanwhile, purchasing managers should check out the total number of potential suppliers, the opportunity cost to switch between different suppliers and the price-performance ratio to the products or services of your suppliers.
For this section, managers should think about how easy it is for customers to force the prices to lower levels. Besides, factors such as the total number of buyers, the overall revenue are also necessary to be considered.
The Threat of Substitution
Porter’s five forces analysis shows that customers may wanna find some better alternative solutions to your products or services at a lower price. For instance, your users may wanna look for outsourcing channels for your expensive applications or software.
The threat of New Entry
Sometimes new players in your market could be quite competitive. If there are no specific technical skills in your industry, like some daily accessories instead of advanced technology products, then you may face quite a large amount of new competitors into your market. The regulations in your sector may also influence profits.
Practical Examples of Porter’s Five Forces Analysis
In some developing countries, market barriers may include the level of basic infrastructure, the federal regulations, and the state power. One more interesting thing is, in developing countries, some social aspects may also greatly impact the domestic business environment in developing countries. For instance, the public voice against foreign dominant retail products. Another recent example is the trade race between the U.S.A. and China. Since last week, the U.S government has decided to forbidden advanced technology firms, like Huawei, to establish and do research in America.