Porter’s Five Forces

Porter’s Five Forces

Michel Porter is known for his marketing and management thoughts and skills. He contributed many valuable theories to the modern marketing management. Here we are going to see Porter’s five forces model theory.

The model includes the following five forces −

** Potential entrants
** Bargaining power of suppliers
** Bargaining power of buyers
** Industry competitors
** Threat of substitutes

Let us discuss the five forces one by one.

Potential Entrants
It refers to the addition of new competitors in the existing market. As we know, for each product we have different options or we have different companies offering the same product with some slight variation in price, item etc.

Thus, potential entrants refer to the entrance of new companies in the market and ways to deal with it.

Bargaining Power of Suppliers
A supplier or producer is the one who produces the product desired or required by the market. The supplier is not necessarily a single person; it can be a group, company or anything.

The function of a supplier is to design products as per the requirement of the client, company, market and society.

Bargaining Power of Buyers
Buyer or consumer is the one who swaps the product designed by the supplier as per the demand of the buyer with some valuable commodity.

The function of a buyer is to be precise in what actually is needed and purchase it from the supplier, for example, buying a car or any other product.

Industry Competitors
The companies competing with other companies within the same market are known as industrial competitors.

For example, we can say that Lakme and Maybelline are industrial competitors as they are in the same market, i.e., cosmetic products.

Threat of Substitutes
The threat of a substitute paves way for competition in an industry. The threat of substitution in an industry affects the competitive environment for the firms in that industry and influences those firms’ ability to achieve profitability. The availability of a substitution threat effects the profitability of an industry because consumers can choose to purchase the substitute instead of the industry’s product.