Five Forces Model Assignment Answers
Clarify All Your Doubts on the Five Forces Model
The model is a mechanism that is used by analysts to check the competitiveness of a firm. It basically uses five aspects of a business to determine the intensity of competition that a firm gives to the market. It basically gauges how attractive an industry is in terms of the profit it achieves. The five forces model was derived by Porter with reference from the SWOT analysis. Porter felt that there are certain loopholes in the SWOT analysis, which he tried to recover with his five forces model. More about the history of the model can be learnt by clicking on links like five forces model homework answers.
The five forces used in the model
There are five areas according to which the model works.
- Threat from the entry of new firms
When an industry yields profits, it is sure to attract more firms to invest and start business in these industries. This in turn brings more competition to the firms who are already competing in the industry. Information on how new entries affect an industry can be get from links like five forces model assignment answers.
- Threat that a substitute poses on a product in the industry
A substitute is a product that is similar to the product being sold with features that are slightly different from the one being sold. Several points that pose a threat from a substitute could be –
- The price of the substitute can be low.
- The buyer of the product might decide to switch cost.
- The substitute available in the market can have very close features to the product being sold.
- The power of the consumer to bargain
The power of the consumer to bargain for the price of the product being sold can put a lot of pressure on the industry. The availability of more options can pose more threat on the industry as the power of bargaining increases at such situations. Learning more about consumer’s bargaining power can be possible by checking out five forces model homework answers.
- The power of suppliers to bargain
Availability of more firms for the suppliers can also increase competition as the suppliers get more power to try to increase their rates.
- Rivalry within the industry
Within an industry, there are several firms that sell the same product or similar products. There is competition from these firms within themselves as well. Examples on how competitive firms affect each other can be learnt from links like five forces model assignment answers.
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