Case Study : Five Forces Model

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FIVE FORCES MODEL One must understand the structure of the industry in which they are competing in to know how to formulate strategies that will create a profitable business. Harvard Business School professor Michael Porter realized this, and in 1979, developed the five forces model. This model is designed to provide informative ways to use effective strategy that would identify, analyze and manage the external factors in an organization’s environment (Martin, 2014). The model consists of five competitive forces: Bargaining Power of Buyers, Bargaining Power of Suppliers, Threat of New Entrants, Threat of Substitutes and lastly Competitive Rivalry. Understanding these forces can allow a company to make better predictions, create more competitive strategies and increase profits (Harvard Business Review, 2014). When it comes to the bargaining power of buyers or customers, they are always looking to pay less and get more. The bargaining power of suppliers who differ from the buyers in wanting to get paid more and deliver less (Harvard Business Review, 2014). There is always a threat of new entrants that can come into the industry and bring new capacity, and if it is relatively easy for these new entrants to enter it can erode the fundamental attractiveness of the industry (HBS Michael Porter on Competitive Strategy Part 1, 2014). Then there are the threat of substitutes these can be new services or products that meet the same basic needs as you do which can put a cap as to what
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