Hi, I’m Jerah Y.

Torrejos

I’m currently enrolled in the subject Strategic Management CBM 10974

My topic is about the Five Competitive Forces of Michael Porter. I choose to discuss this lesson because I
saw how useful it is as a tool for understanding the competitiveness of a business environment, and for
identifying strategy’s potential profitability. In the future when I create my own business, I would
probably use this.

Porter’s Five Forces Framework is a method for analyzing the business competitions. It is useful to
understand the forces in the environment and industry, so that the strategy that the business will come
up with can be adjusted accordingly.

The five forces are: The threat to new entrants, Bargaining power of suppliers, Rivalry among current
competitors, bargaining power of customers, and threat of substitute products or services

Analyzing the Five Forces can help companies anticipate shifts in competition, shape how industry
structure evolves, and find strategic positions within the industry.

The threat to new entrants

Your business will be affected when other businesses can easily enter into your industry and threaten
your position in the market. So, think about how easily could this happen. How much would it cost or
much time will it take to enter in that industry. If you have string and durable barriers to entry, then you
can preserve a favorable position and take fair advantage of it.

Bargaining power of suppliers

This is determined how easy it is for your suppliers to increase their prices. You should consider how
many suppliers you have. How unique their products are and how expensive it is for you to switch from
supplier into another.

The more supplier you have, the lesser their influence on you and the lesser their impact on your
profitability.

Rivalry among current competitors

It is important to look how many your competitors are and their strength as compared to your business
so that you can strategize how to attract customers and suppliers better. When the competition is
intense, your suppliers and buyers can go easily elsewhere when they are not satisfied with your
product or service and this can tremendously affect your profitability. To attract customers, your
business can resort to price cuts or high-impact marketing.

Bargaining Power of Customers

In bargaining power of customers, you should consider how many customers you have and how big are
their orders. When customers are few, they have more power to discuss terms with you and they can
drive down prices.
Last but no least, the threat of substitute products. Here you will consider the likelihood of substitute
products that would threaten your position and profitability. The more unique your product is the lesser
the likelihood that your customers will choose the substitute instead.