Porter's five forces is one competition analysis model between companies. It was created in 1979 by Professor Michael Porter and is widely used in business administration and marketing strategies. marketing.
The 5 forces are the elements of competition that must be analyzed in order to decide which business strategy is more efficient against the competition.
According to Porter, the 5 forces must be analyzed together with the market competition rules.
To use the tool it is necessary to analyze the aspects (strengths). The 5 competitive forces, also called Porter's Matrix, are the following:
1. Rivalry between competitors
Analysis and location of other companies that may be competitors for offering the same product or service. It is necessary to know if the competition is direct, if the other brands are consolidated in the market and what are the advantages they offer to the customer.
2. Threat of substitute products
Identification of products offered by other companies that have the same function or solve the same problem. It must be verified if the product offered by the competitor has more benefits in relation to what is offered by the company.
3. Threat from new competitors
Identification of possibilities and attitudes that are capable of preventing the emergence of new competitors. For example: creating a strong brand in the market and signing exclusive contracts with clients.
4. Bargaining power of suppliers
Check which are the best suppliers and prioritize that the chosen ones are not the only available suppliers. This measure serves to prevent them from having the power to decide on prices and delivery terms.
5. Customers' bargaining power
Analysis of the customer's strength in the negotiation before deciding on the product. It is important to take into account the other offers on the market and the reach of the internet and e-commerce.
The bargaining power is also called Bargaining power.
To take full advantage of the tool, the company must constantly assess Porter's strengths to make the best strategic decisions.
Based on the decisions taken based on the analyzed results, it is necessary to avoid the arrival of new products or competing companies, while retaining the customer's loyalty.
Michael Porter also created the model for the Value Chain.