Porter’s Competitive Forces Model

Porter‘s competitive forces model tells that much of the success or failure of a business depends on its ability to respond to its external environment. Figure below shows five external forces that every business must contend with at one time or another.

 

 

Figure: Porter’s Competitive Forces Model

 

It‘s important to understand from this model that a firm‘s success is not predicated on how well it does internally. It must also pay attention to:

  • Traditional competitors: Always trying to steal your customers with new products and
  • New market entrants: Not constrained by traditional ways of producing goods and services, they can easily jump into our markets and steal customers away with cheaper or better products and
  • Substitute products and services: Customers may be willing to try substitute products and services if they decide our price is too high or the quality of our products and services is too
  • Customers: They are now armed with new information resources that make it easier for them to jump to our competitors, new market entrants, or substitute
  • Suppliers: The number of suppliers used may determine how easy or difficult our business will have in controlling our supply chain. Too few suppliers and you lose a lot of