Porter's Five Forces

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The five competitive forces that shape strategy Introduction The five competitve forces that shape strategy also know as Porter’s five forces was first pubilshed in 1979 in the Harvard Business Review by a young associate professor at the Harvard Business School, Michael E. Porter. This article started a revolution in the strategy field and has since than shaped a generation of academic research and business practise. Throughout the last thirty years Porter’s Five Forces Analysis has been the most used strategy tool in academics as well as management training. (Porter, 2008) Porter used a certain structure for his study, called framework. In a framework only the smallest number of core elements are used to capture the full richness…show more content…
The aspirant must offer a product that is much cheaper or offers a great advantage to the demand side. 3. Capital requirements can be a substantial entry barrier, if companies have to invest a lot of capital to compete in a certain industry. The barrier is especially greater if companies have to use their capital for unrecoverable and therefore harder to finance expenditures like R&D and advertising. 4. Cost advantages independent of size may exists in form of first-mover advantages. The existing companies may have a benefit from their early entry and the experience and market knowledged that comes with it. Other advantages might be, favourable government policies, access to cheap raw materials, the use of patents and established brand identities. 5. Unequal access to distribution channels is a serious problem for every new entrant because companies have to gain access to distribution in order to compete effectively in the industry. The stronger the ties between incumbent firms and distribution firms are, the harder the entry will be. Sometimes new entrants have to find alternate ways of distribution their products. 6. Restrictive Government policy can make an entry more difficult by introducing licensing requirements and restrictions of foreign investment. Governments as well are capable of aiding entries through subsidies or research funding. Government intervention has an amplifying (or

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