Five forces model, Management Theories

Five Forces Model

A framework built by Michael Porter that captures the dynamics of the prevailing environmental forces in which an organization operates.  These factors include:

1. Rivalry among Existing Firms.   At the middle of Porter's model is the present state of affairs within a market, previous any external forces are considered. Porter contends that firms are always jockeying for position within a market, and that the rivalry between firms takes on the form of a stable battle for market share.

2. Threat of New Entrants.   The first external driver, this force provides to the potential for new firms to enter an organization. Any time a new firm enters an organization, the competitive balance must be familiar to account for changes in market share, new capacity and new resources.

3. Threat of Substitutes.   Same to the first external force, this second force present the potential changes in market equilibrium caused by the introduction of goods that present a viable alternative choice to the goods presently available in the market, and could decrease the size of the potential market by drawing sales away.

4. Bargaining Power of Suppliers.    This force provides to the effect suppliers can have on determining the availability of materials, and consequently on the providers and demand dynamics operating within a market.

5. Bargaining Power of Buyers.    This force provides to the consequence buyers can have on determining the demand for products or services, and thereby affecting the corresponding price for these products and services.

Posted Date: 10/17/2012 3:35:34 AM | Location : United States

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