Porter 5 Forces Model

Question 1

Porter model

Answer 1

Here are the smart notes:

Porter’s Five Forces Model

• Identifies 5 factors that determine competition in an industry/market:
  
  1. Threats from potential entrants
  2. Threats from substitute products/services
  3. Bargaining power of suppliers
  4. Bargaining power of customers
  5. Competitive rivalry within the industry/market

Impact of Strong Competition

• Firms must charge competitive prices to avoid losing market share.
• Firms must offer products/services with extra value to customers (e.g., higher quality, faster delivery).
• Strong competition leads to low profitability.

Analysing the Five Forces

• Helps strategic managers choose markets/industries to operate in.
• Informs decisions on how to compete and achieve profitability.