Porter’s five forces Essay Example for Free

ushers five forces EssayMichael E Porter developed the Porters five forces analysis in 1979 which serves as a framework for industry analysis and business strategy development. Its five forces pin down the competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the overall industry profitability. Three of Porters five forces refer to competition from outside(a) sources. The remainder are internal threats. It is useful to use Porters five forces in conjunction with SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats). Porter referred to these forces as the micro environment. They consist of those forces cockeyed to a comp either that affect its ability to serve its customers and make a profit.The stronger the forces, the less profit they will make and vice-versa. A change in any of the forces normally, requires a business unit to re-assess the marketplace given the overall change in industry information. The overal l industry attractiveness does not imply that every firm in the industry will return the same profitability. Porters five forces include three forces from horizontal competition threat of substitute products, the threat of establish rivals, and the threat of new entrants and two forces from vertical competition the bargaining power of suppliers and the bargaining power of customers.The threat of the entry of new competitorsThe treat of new entrants search on the ease with which they can enter the market.Markets with high profits will attracts new firms. The major barriers are* Need for economies of scale* High entry be* Lack of distribution channels* Government policies such as selective subsidies* Cost advantages of existing firms such as access to raw materials, know how* salutary product- loyal customersThe intensity of competitive rivalryStrong rivalry will reduce profits. This occurs when* Many firms, none dominant* Slow market growth* opinionated costs are high* High exi t costs* Similar productsIn high competitive markets, threat of new entrants is high.