When we talk about a marketing plan and the tools we can use, we should never forget Porter’s analysis or Porter’s Five Forces . This model provides a strategic thinking framework for determining the profitability of a sector in order to assess its long-term value.
In this post, we’re going to talk more in-depth about this tool and each of its features.
Who is Michael Porter? Porter’s 5 Forces
Born in 1947 in the USA, Michael Porter is an economist and professor at Harvard Business School famous for developing the 5 forces matrix that bears his name.
Michael Porter is an economist and professor at Harvard Business School famous for developing the 5 forces matrix that bears his name.
He is the author of 18 books and more list to data than 125 articles on . He has won numerous awards and his models and theories inspire many courses on strategy and competitiveness in business schools.
In fact, he is known as one of the greatest economists in world history, an undisputed figure in the economic and business world. His theories on the value chain, clusters, and the Five Forces have been widely known around the world.
What are Porter’s 5 forces?
Michael Porter argues in his first book, “Competitive Strategy,” that potential.
of a company is defined by five forces:
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The power of the customer,
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The power of the provider,
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New entrants,
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The threat generated by substitute products and
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The nature of rivalry.
The usefulness of this management tool is that companies can analyze and measure their resources against these five chatgpt integration: improve user experience on your site forces. From there, they will be optimally positioned to establish and plan strategies that leverage their opportunities or strengths to address threats and weaknesses.
What are Porter’s 5 forces?
As we’ve indicated, the five forces Porter describes are: customer bargaining power, supplier bargaining power, threat of new entrants, threat of new substitute products, and rivalry among competitors. Let’s examine each of these in more detail below.
1. The of customers
Porter believes that the more organized consumers are, the more demands and conditions they will impose on price, quality, or services . Therefore, the company’s margin will be smaller and the market will be less attractive. Furthermore, the customer has the power to choose any other service or product from the competition. This situation becomes more evident if there are several potential suppliers.
In the face of this threat, various strategies can be used, such as:
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Increase investment in marketing and advertising
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Improve sales channels
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Increase the quality of the product and/or service or reduce its price
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Providing new added value
2. The bargaining power of suppliers
When are highly organized within their sector, have relevant resources, and offer conditions regarding prices and order sizes, they create a more attractive market . Here, we measure how easy it is for our suppliers to vary prices, delivery times, payment methods, or even change quality standards. The smaller the supplier base, the less negotiating power we have.
Some strategies to follow to avoid japan data depending on a single supplier or to find better options are:
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Increase our supplier portfolio
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Establish long-term alliances with them
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Switch to manufacturing our own raw materials
3. The threat of new entrants
If the barriers to entry in an industry are not very accessible, then it is not attractive . The threat is that other companies with the same products and new resources could enter and take over that market share.
In this sense, the most important barriers to preserving our market share are:
4. The threat of new substitute products
A market or segment will not be attractive if there are substitute products, or if they are more technologically advanced or offer lower prices . These products and/or services pose a threat because they often set a limit on the price that can be charged for a product. We must always be aware of new developments in our sector and the influence these developments may have on our organization.
To combat it we propose some strategies :
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Improve sales channels
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Increase marketing investment
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Increase product quality or reduce its cost
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Diversify production towards possible substitute products
5. Rivalry between competitors
This factor is the result of the previous four and provides the organization with the information necessary to establish its market positioning strategies. Each competitor establishes strategies to stand out from the rest. Thus, strong rivalry translates into many strategies. Rivalry increases if competitors are numerous, well-positioned, or have fixed costs , among other factors. In these cases, these would be unattractive markets.
