The five-force analysis model was put forward by Michael Porter in the early 1980s, which had a far-reaching global impact on enterprise strategy formulation. Used in competitive strategy analysis can effectively analyze the competitive environment of customers. These five forces are: the bargaining power of suppliers, the bargaining power of buyers, the entry ability of potential competitors, the substitution ability of substitutes and the current competitiveness of competitors in the industry. The change of different combinations of the five forces ultimately affects the change of the profit potential of the industry.
The five-force model brings together a large number of different factors in a simple model to analyze the basic competitive situation of an industry. The five-force model determines five main sources of competition, namely, the bargaining power of suppliers and buyers, the threat of potential entrants, the threat of substitutes, and finally the competition between companies in the same industry. The proposal of feasible strategy should first include the confirmation and evaluation of these five forces. The characteristics and importance of different forces vary with different industries and companies.
Consulting tool
ansoff matrix
Case interview score
Analytical tools/frameworks
Arthur little
Andy Grove's
Six-force analysis model
Boston matrix
benchmarking
Analysis of Porter's Five Forces
model
Porter value chain
analysis model
Boston empirical curve
Porter's Diamond Theory Model
Bain profit pool
diagnostic tool
Porter's Competitive Strategy
Roulette model
Porter's Industry Competition Structure
analysis model
Porter's trade organization
model
Five factors of change
BCG 34 rule matrix
Product/market evolution
matrix
Gap analysis
strategic informationsystem
Strategic grid model
CSP model
Innovation dynamic model
Quantitative strategic planning matrix
grand strategy matrix
Multi-point competition
Dupont analysis
Directional policy matrix
Drucker's Seven Kinds
The source of innovation
Dual-core mode
Service Golden Triangle
Faulkner and Bowman's
Customer matrix
Faulkner and Bowman's
Producer matrix
FRICT financing analysis method
General Electric Matrix/McKinsey Matrix
Gallup path
Stability strategy
Advanced swot analysis
Create value for shareholders
Supply and demand model
Key success factors
analyse
Post value evaluation
Corporate vision planning
methodological framework
Analysis of core competitiveness
model
Huaxin Yue Hui labor
Capital index
Identification of core competitiveness
tool
Environmental uncertainty analysis
Strategic groups in the industry
Analytical matrix
transverse value chain analysis
Strategic groups in the industry
analyse
IT added value matrix
Competition profile matrix
Basic competitive strategy
Triangular model of competitive strategy
Overview of competitor analysis
Value network
Performance prism model
Price sensitivity test method
Cost analysis of competitors
Causality of competitive advantage
model
Opponent analysis
Value chain analysis method
Descriptive method
Four-level model competes for resources.
Value chain information management
the kj method
Card-type intelligent excitation method
KT decision method
Extended method matrix
Stakeholder analysis
radar map
Lei Wen's force field analysis.
Six thinking hats
Profit pool analysis method
Process analysis model
Mckinsey 7S Model
Mckinsey seven-step analysis method
Mckinsey's three-level theory
Mckinsey logic tree analysis method
Mckinsey's Seven-step Poetry Singing Method
McKinsey Customer Profitability
matrix
Mckinsey 5Cs model
internal external matrix
Internal factor evaluation matrix
Nolan's Stage Model
kraft paper
Internal value chain analysis
Now/method/need
Pest analysis model
PAEI management role model
PIMS analysis
Perot technical classification
PESTEL analysis model
Analysis of enterprise quality and vitality
QFD method
Correlation analysis of enterprise value
model
Nine-force analysis of enterprise competitiveness
model
Five elements analysis method of enterprise strategy
Personnel competency maturity model
Economic analysis of human resources
Scorer index
RFM model
Learning mode of reading
GREP model
talent model
Reactive oxygen species/root mean square matrix
3C strategic triangle model
SWOT analysis model
Four-chain model
SERVQUAL model
SIPOC model
SCOR model
Three Dimensional Business Definition
Virtual value chain
SFO model
Structural behavior performance
Thomson and Sticker Land.
way
V matrix
Gyroscope model
External factor evaluation matrix
Threat analysis matrix
New 7S principle
Behavior anchoring rating scale
New Boston matrix
System analysis method
System logic analysis method
Physical value chain
Information value chain model
strategy implementation model
Bowman's strategic clock
Strategic position and action
Evaluation matrix
strategic map
Organizational growth stage model
Strategic choice matrix
Patent analysis
Analysis model of management elements
Strategic groups model
Comprehensive strategic theory
Vertical value chain analysis
Importance-urgency model
Knowledge chain model
Knowledge value chain model
Richard hall-Piebao Lauandi Farm Co.
organizational structure model
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[Edit] 1. Bargaining power of suppliers
Suppliers mainly affect the profitability and product competitiveness of existing enterprises in the industry through their ability to increase the price of input factors and reduce the quality of unit value. The strength of suppliers mainly depends on what input factors they provide to buyers. When the value of the input factors provided by the supplier constitutes a large proportion of the total cost of the buyer's products, which is very important to the production process of the buyer's products, or seriously affects the quality of the buyer's products, the potential bargaining power of the supplier to the buyer is greatly enhanced. Generally speaking, suppliers who meet the following conditions will have relatively strong bargaining power:
-The supplier industry is controlled by some enterprises which have relatively stable market position and are not troubled by fierce market competition. There are so many buyers for their products that it is impossible for every individual buyer to become an important customer of the supplier.
-The products of supplier enterprises have their own characteristics, which makes it difficult for buyers to convert or the conversion cost is too high, or it is difficult to find substitutes that can compete with the products of supplier enterprises.
-It is convenient for suppliers to carry out forward alliance or integration, but it is difficult for buyers to carry out backward alliance or integration. (Note: According to China, the store is a big bully)
[Editor] 2. The buyer's bargaining power
Buyers mainly affect the profitability of existing enterprises in the industry by lowering prices and demanding higher quality products or services. Generally speaking, buyers who meet the following conditions may have strong bargaining power:
-The total number of buyers is small, but each buyer's purchase volume is large, accounting for a large proportion of the seller's sales.
-The seller's industry consists of a large number of relatively small enterprises.
Buyers basically buy standardized products, and it is economical and feasible to buy products from multiple manufacturers at the same time.
-The buyer has the ability to achieve backward integration, but the seller cannot achieve forward integration. (Note: Simply based on China, the guest deceives the Lord)
[Editor] 3. The threat of new entrants.
While bringing new production capacity and new resources to the industry, new entrants will hope to win a place in the market that has been carved up by existing enterprises, which may lead to competition with existing enterprises for raw materials and market share, and eventually lead to the reduction of profitability of existing enterprises in the industry, and even endanger their survival in serious cases. The severity of the threat of competitive entry depends on two factors, namely, the size of obstacles to entering new fields and the expected response of existing enterprises to entrants.
Barriers to entry mainly include economies of scale, product differences, capital requirements, switching costs, development of sales channels, government actions and policies (such as the comprehensive, balanced and unified construction of petrochemical enterprises in the country), and cost disadvantages that are not dominated by scale (such as trade secrets, the relationship between production and supply, learning and experience curve effects, etc.). ), natural resources (such as the occupation of minerals by metallurgical industry) and geographical environment (such as the shipyard can only be built in coastal cities). Some of the obstacles are that it is expected that the reaction of existing enterprises to entrants is mainly the possibility of retaliation, which depends on the financial situation, retaliation record, fixed assets scale and industry growth rate of relevant manufacturers. In short, the possibility of a new enterprise entering an industry depends on the relative size of the potential income, as well as the costs and risks subjectively estimated by the entrants. (Note: potential peers and followers)
[Editor] 4. The threat of substitutes
Two enterprises in the same industry or different industries may compete with each other because of the substitution of their products. This kind of competition from substitutes will affect the competitive strategy of existing enterprises in the industry in various forms. First of all, the improvement of the sales price and profit potential of existing enterprise products will be limited by the existence of substitutes that can be easily accepted by users; Second, due to the invasion of substitute producers, existing enterprises must improve the quality of their products, or lower their prices by reducing costs, or make their products distinctive, otherwise their sales and profit growth goals may be frustrated; Thirdly, the competitive intensity of substitute producers is affected by the switching cost of product buyers. In short, the lower the price, the better the quality, the lower the switching cost of users, and the stronger the competitive pressure it can produce; The intensity of this competitive pressure from substitute producers can be described by investigating the growth rate of substitute sales, the production capacity and profit expansion of substitute manufacturers. A rare commodity that can be hoarded at a better price ―― something that can be used.
[Editor] 5. Competition degree of competitors in the same industry
The interests of enterprises in most industries are closely linked. As a part of the overall strategy of an enterprise, the goal of each enterprise's competitive strategy is to make its own enterprise gain an advantage over its competitors. Therefore, conflicts and confrontations will inevitably occur in the implementation, which constitute the competition among existing enterprises. The competition among existing enterprises is often manifested in price, advertising, product introduction, after-sales service and so on, and its competitive intensity is related to many factors.
Generally speaking, the following conditions will mean the intensification of competition among existing enterprises in the industry, that is, the entry threshold of the industry is low, there are more evenly matched competitors, and the scope of competitors is wide; The market tends to mature and the demand for products grows slowly; Competitors try to promote sales by reducing prices; Competitors provide almost the same products or services, and the user switching cost is very low; If a strategic action is successful, its income is considerable; After receiving the weak enterprises in the industry, the strong enterprises outside the industry launched an offensive action, making the newly accepted enterprises become the main competitors in the market; The obstacle to quitting is higher, that is, the cost of quitting the competition is higher than the cost of continuing to participate in the competition. The obstacles to exit here are mainly influenced by economic, strategic, emotional and social and political relations, including: asset specificity, fixed cost of exit, strategic mutual containment, emotional unacceptability, and various restrictions from the government and society.
Every enterprise in the industry has to deal with the threats brought by the above forces more or less, and customers have to face the actions of every competitor in the industry. Unless you think that confrontation is necessary and beneficial, such as demanding a large market share, customers can protect themselves by setting up entry barriers, including differentiation and transformation. When customers determine their strengths and weaknesses (see SWOT analysis), they must position themselves so as to follow the trend, instead of being damaged by the expected changes of environmental factors, such as product life cycle and industry growth rate. And then protect yourself and be prepared to effectively deal with the actions of other enterprises.
According to the above discussion of the five competitive forces, enterprises can take measures to deal with these five competitive forces, isolate their own operations from the competitive forces as much as possible, and try to influence the industry competition rules from their own interests, first occupy a favorable market position, and then launch offensive competitive actions, so as to enhance their market position and competitive strength.