PORTER’S COMPETITIVE FORCES
Application: Competitive Analysis, Market Analysis, Strategy Development
Figure P.2: A representation of Porter’s five forces of competitive intensity
(see Porter, M.E., 1990)
Harvard’s Michael Porter is one of the most influential strategy professors living today. Amongst his impressive and prodigious work on competitive strategy he offered a powerful conceptual framework (Porter, M., 1995) which works well as part of the market analysis and strategy development process. His “five forces” of competition are a useful checklist for marketers to work through when analysing a market. They are:
- The power of buyers. Buyers can influence a market by forcing down prices, by demanding higher service and quality, or by playing competitors off against each other. Porter suggested that there are a number of circumstances when a buyer group is powerful including: if they are concentrated, if buying commodities or components, if driven to get price cuts, or if the purchase is unimportant to them.
- The power of suppliers. Suppliers can exert power in a market by raising prices or reducing the quality of the offer. They can squeeze profitability out of the industry. They are powerful if: there are only a few, they have unique offers, are not obliged to ...