Porter’s Five Forces Model

 Porter’s Five Forces Model

Porter’s five forces framework is used to analyze industry’s competitive forces and to form organization’s strategy according to the results of the analysis. These forces find an industry structure and the stage of competition in that industry. The stronger competitive forces in the industry are the less profitable it is. An industry with low barriers to enter, having few buyers and suppliers but many products and substitute competitors will be seen as highly competitive and therefore less attractive due to low profits. This project industry used this model for analysis the new product is name health fruity base the five forces competitive in business management team.

1. Threat of new entrants

Profitable markets attract new entrants, which erodes profitability. Unless incumbent have strong and durable barriers to entry, for example economies of scale, capital requirement, then profitability will decline to a competitive rate. Profitable markets business that yield high returns will attract new project. New entrants finally will decrease profitability for other firms in the industry. The most interesting segment is one in which entry barriers are high and exit barriers are low. It's worth noting, however, that high barriers to entry almost always make exit more difficult. 

2. Threat of substitutes Product

A substitute product uses a different technology to try to solve the same economic need. Examples a low threat of substitute products makes an industry more attractive and increases profit potential for the firms in the industry, while high threat of substitute products makes an industry less attractive and decreases profit potential for the firms in the industry. The threat of replacement products is one of the factors to consider when analyzing the structural environment of an industry. Furthermore, firms should consider substitutes when there are unidentifiable problems. In addition, this will assist the firm's actions as a side effect if there is material that cannot be supplied from the supplier.

3. Bargaining power of customers

The bargaining power of customers is also described as the market of outputs: the ability of customers to put the organization under pressure, which also affects the customer's sensitivity to price changes. Buyers' power is high if buyers have many alternatives and is low if they have few choices. The factors will influenced by Buyer switching costs and mix and match uniqueness of industry products. Moreover, the cost of source product will be fixed by output the sale and marketing very important to inform about new product to customer. The potential factor of buyer focus on products produced by firms is whether unique products or innovations to new products. In addition, the low cost of each product is also used by estimating the fixed cost of each item. This will control the cost of loss and can achieve the desired target.

4. Bargaining power of suppliers

The bargaining power of suppliers is also described as the market of inputs. Suppliers of raw materials, components, labor to the group can be a source of power over the firm when there are few substitutes. Suppliers may out of supply with the firm or charge excessively high prices for unique resources. For example, firms use expertise in creating new products that are not yet available in the market to enable a competitive advantage. For products that are sourced from weather fruits, it affects sales revenue. This is because if the weather is good for the crop then the source sales will be good next the price will be lower than the price during bad weather for the crop. In addition, suppliers' conditions close to the activity area will also facilitate smooth running activities as it is easy to control.

5. Competitive rivalry

Competitive rivalry is a measure of the number of competition among existing firms. Intense rivalry can limit profits and lead to competitive moves including price cutting, increased advertising expenditures, or spending on product improvements and innovation. Potential factors in business are the Advantages of sustainable competitiveness through innovation, Strong competitive strategies and strong focus ratio. The number of competitors that use the same type of product will affect the strength of the firm. In terms of food product types will make many major competitors in influencing buyer action through the comparison of the quality of a product. For example, healthy fruity products use the mix and match concept where customers will choose the food they want to buy according to their wants and tastes.

References

Porter, M.E. (2008). The Five Competitive Forces That Shape Strategy. Harvard Business Review. Available at: http://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy/

Wikipedia (2017).  Porter's Five Forces. Available at: http://en.wikipedia.org/wiki/Porter_five_forces_analysis