1497
Porter's Five Forces
- Topics:
- Strategic Analysis
- Tags:
- Force,
- Industry,
- Management,
- Porter Five Forces,
- Quick MBA.com,
- Strategy
- Source:
- Quick MBA.com
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Overview: It has been observed that the model of pure competition implies that risk-adjusted rates of return should be constant across firms and industries. However, numerous economic studies have affirmed that different industries can sustain different levels of profitability; part of this difference is explained by industry structure. Michael Porter provided a framework that models an industry as being influenced by five forces. The strategic business manager seeking to develop an edge over rival firms can use this model to better understand the industry context in which the firm operates. These five forces are rivalry, threat of substitutes, bargaining power of supplier, bargaining power of buyer and barriers to entry. All these have been discussed in detail in the article. Beside this, Michael Porter identified three generic strategies: cost leadership, differentiation and focus that can be implemented at the business unit level to create a competitive advantage. The proper generic strategy will position the firm to leverage its strengths and defend against the adverse effects of the five forces.
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Format: HTML | Date: Jan 2003 | Pages: 1
