Michael Porter's Five Forces

998 Words4 Pages
The Five Forces was first described by Michael Porter in 1979 in a Harvard Business Review. The model is divided into 5 categories; Rivalry of competitors, Suppliers, Buyers, Substitutes, and Potential entrants (Walker, G. 2009). The Five Forces framework explains the average prices and costs of the industry, and therefore the average industry profitability the company should beat. The Five Forces analysis answers key questions such as what is going on in the industry or what matters for competition (Magretta, J, 2012). It jointly determines the attractiveness and benefits of an industry competition (Porter, M. E. 1980). The model shows how the trends will affect the market’s competition, which industries should a company compete in, and how they can position themselves for prosperity (The Five Forces, n.d.). The purpose of the Porter Five Forces is to help companies face these potential threats so they can become more successful in creating strategies to neutralize them (Rice, J. F, 2010). Michael Porter’s model directly tells how the market industry…show more content…
The intensity of rivalry has an influence on prices as well as the costs of competing in different industries (Porter, M. E, 1985). For example, the prices get down and the cost of competing increase, consuming profits. Companies compete for values that they create, and rivalry tends to get more intense depending on the number of competitors they have. It also depends on the growing speed of the market and the exit barrier. Each company are highly committed to themselves, with different goals, diverse approaches for competition, and occasionally, a lack of familiarity with their competitors (The Five Forces, n.d.). Since numerous airline companies compete for the same destinations, they can rely on this force to determine and improve their technology, cabin features, and customer service as the differentiation is low and the fixed costs higher (The Five Forces,
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