Management Strategy/Five Forces
Michael Porter, one of the leading researchers in the field of business and a professor at Harvard Business School, has identified five key forces which affect the strategy of any industry. These forces are:
- Threat of New Entrants
- Threat of Substitutes
- Industry Competition
- Bargaining Power of Suppliers
- Bargaining Power of Buyers
Managers use the Five Forces model to help identify opportunities or evaluate decisions in the context of the environment. Often, the Five Forces are mapped against a SWOT analysis to develop a corporate strategy.
To complete a Five Forces analysis, it is often best to build a grid on a piece of paper and label each section--keeping Industry Competition separate. Fill-in each section and to develop a view of the industry. Then, think about if the industry is truly competitive or if the industry is a monopoly or oligopoly. What makes your company able to compete in this environment?