The Five Competitive Forces That Shape Strategy

This article was really interesting as it discussed a matrix developed for creating strategies by a professor at Harvard. Michael Porter the creator, discussed the notion of how powerful this tool is because companies or organizations look at competition too narrowly. The five competitive forces include:

Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard Business Review, 86(1),

Competitive strategy, after Porter, came to be defined as the strategy of a business unit which seeks to achieve sustainable Competitive Advantage (SCA). The literature on strategy deems the market-based view (MBV) and the resource –based view (RBV) as two approaches to giving businesses the competitive edge they need to compete in their industries. Aside from having competitive advantage as their ultimate goal, the two approaches are also similar in the sense that they both make use of particular tools and models in their undertakings. They also differ in numerous ways,

According to Ormanidhi & Stringa (2008), how firms compete and what strategies they choose are imperative questions for companies in every sector of the business world. Their writings state that improved understanding of a firm’s competitiveness would serve as input to improve policies concerning competition and related issues; and improved policies, will provide valuable support to efforts to continuously develop markets and businesses. Within, the author’s place significant emphasis on the concept of competition with echoes from Porter’s five forces model (see Appendix 6). The model illustrates the five forces, which hinge on the determinants of the industry’s overall competitiveness and profitability, which are: threat of new entry, intensity of rivalry among existing firms, pressure from substitute products, bargaining power of buyers, and bargaining power of suppliers.

In this essay, the author describes the, the five competitive forces. In aspects, to figure out and handle with completion is the job of the strategist or planner. Usually, nevertheless, managers explain competition too narrowly, as if it happened only between direct competitors of today. Still competition for income goes outside the limit settled industry competitions to involve four other forces of competitive along suppliers, customers, suppliers, potential entrants, and products of alternative. Within an industry, the extended competition that

Understanding the competitive forces and their underlying forces tells the roots of the industry’s current profitability while providing a framework for anticipating and influencing competition overtime. The Five Competitive Forces are meant for companies strategist to analyse and cope with competition. The five forces defines an industry’s structure and shaped the nature of competitive interaction within an industry. A healthy industry structure should be as much as competitive concern to strategiest as their company’s own positions. Understanding industry structure is also important to effective strategic positioning.The structure of the five forces differs by industry. The main competitive force or forces determine the profitability of

This TPA will discuss about four competitive strategies according to Porter’s five forces model. Furthermore, this TPA will also use the model to help a Malaysian business partner in order to gain competitive advantages and to sustain those four competitive strategies.

In 1979 in Harvard Business Review was published article “How competitive Forces Shape Strategy” by Michael Porter who is nowadays recognized as specialist in competitive strategic planning and economic development. This leads to a development of five forces tool which described in his book “Competitive Strategy: Techniques for Analyzing Industries and Competitors” in 1980. In mid 90s to five forces tool was added sixth force. This model became powerful tool and helps manages to understand insights and outside perspectives of the company. That is undisputable fact that Michael’s five forces have made a huge impact on the strategic planning and identifying main factors that are driving competition. The only thing that makes to doubt in this

Michael Porter expands in the analysis of many of these factors that affect competition in the industry, in order to reach a framework that helps to quickly identify the structural features that are critical to determine the nature of competition in a particular industry. The author concludes that the competitive strategy could be described as making offensive or defensive actions to create a position that could be defensible in an industry, and to deal successfully with the five competitive forces and thus achieving a higher return on investment for the

Chapter 10 review: Porter’s Five Forces model of business strategy is the most important concept of chapter 10. Threat of substitutes, threat of entry, power of buyers, power of suppliers, and the intensity of rivalry. Disruptive technology is an important addition to Porter’s model. Threat of substitutes deals with competitive products or services that can pull away customers by offering better prices or better services. The threat of entry entails regulations or highly competitive market in a certain area of products or services. Power of buyers can mean when an organization has reached a

Rivalry among existing firms is the frequently the major influence on the competitiveness of the industry. A high intensity of existing rivalry is usually decreasing the profit margin.

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

Michael Porter's "The Shape Strategy Five Competitive Forces" are described in the need to consider a wide set of competitors. These forces are very intense in the industry that if a company to get a return on investment is very difficult. When forces are benign, many, if not all, companies are profitable. Some forces are stronger than others, when those forces to determine the profitability of the industry and you are creating a strategy to see the most important. Industry structure determines the long-term profitability and competitiveness and profitability with hope and time to impress provides a framework. Five competitive forces threaten to come between existing competitors, suppliers, power, power of buyers, threat of substitute products or services, and enmity.

The five competitive forces that shape strategy are, (1) Threat of New Entrants, (2) Threat of substitutes, (3) Bargaining Power of Suppliers (4) Bargaining Power of Buyers, and (5) Rivalry among Competitors. Those considered rivalry have measurable factors that rank each force as “Low, “Medium or “High” strength. The combined strength of the five forces determines how appealing the industry is to possible threats. The five forces are briefly defined below.

Barney, J. (1986), Types of competition and the theory of strategy : Toward and integrative framework. Academy of Management Review, II(4): pp791-800