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Porter’s five force model is named after Michael E. Porter. This model analyses five competitive forces that are required to shape every industry and it also helps to determine its weaknesses and strengths. These forces are- Threat of new entry, Threat of substitution, Supplier power, Buyer power and Competitive rivalry.These above mentioned forces play a significant role in strategy formulation. Profitability of any industry is jointly determined by these forces. Students looking for various topics related to Porter’s five forces can refer Porter’s Five Forces Assignment Help.
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Porter’s Five Forces
Porter’s five forces explained in Porter’s Five Forces Assignment Help are
• Threat of new entry- Level of competition is usually raised by the entry of new entrants. Various key barriers to entry are- economies of scale, customer switching costs, access to industry distribution channels, etc. It can be studied in Porter’s Five Forces Assignment Help.
• Threat of Substitutes- The products that can satisfy the needs of customer is known as substitutes. It is therefore competitors’ substitutes (of products) that can be used in place of company’s products or services. There is an inverse relationship between price and the number of substitutes. When the number of substitutes of a product is less, the opportunity for the firm to raise the product’s price increases and hence the overall profit increases.
• Buyer Power- These are the customers who purchase the products or the firms who distribute the products to the end consumers. These are the people who create demand in the industry. The bargaining power is greater when as given in Porter’s Five Forces Assignment Help- products are standardised, number of dominant buyers is less and the number of sellers is more, buyers threaten to integrate backward into the industry. Basically, it refers to the potential of customers to lower the prices charged by the firms in the company and also to increase the firms cost by demanding better quality and service.
• Supplier Power- Suppliers refers to those who provide input to the industry. Bargaining power of suppliers is the potential of suppliers to increase the price of inputs and costs of industry. These inputs include raw materials, labours, services, etc. It is high when- the number of dominant suppliers is less and number of buyers is high, suppliers threaten to integrate forward into the industry, products are highly valued and undifferentiated. All the factors related to it is discussed in Porter’s Five Forces Assignment Help.
• Competitive Rivalry- It refers to the competitive struggle between different firms for market share. The intensity of rivalry depends on the degree of differentiation, the structure of industry costs, exit barriers, the structure of competition and strategic objectives.
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