Porter's Five-Force model Essay Example | Topics and Well Written Essays - 500 words

Porters Five-Force model - Essay ExampleIt is crucial for any international business to critically study the competitive environment of the assiduity. The number of nigh(a) substitutes, availability of resources, buying power of the consumers, threat of new entrants and the level of rivalry between existing stanchs must be studied closely to determine whether the sedulousness would present the firm with a favorable and profitable environment. Porters Five forces model allows a firm to critically analyze each and all factor in the respective elements of industry competitiveness noted above (Swaan et al, 1999).Porter describes five forces which affect the industrys competitiveness. The Threat of Substitute Products open in the market determines the power which a business may have in the industry. If the harvest is a generic one which has high substitutes in the market, the industry will be considered as highly competitive. Similarly, high level of close substitutes means that th e buyers cost of switching is low and imposes a high threat to the firms. also this factor, all the factors are included in Figure 1 (Swaan et al, 1999).Likewise, if the buyers in the industry have a high negotiating power, the firms will be lead to cast down their profit margins and the prices. A high negotiating power means that there would be less number of buyers as compared to the number of sellers in the market. Also, switching costs would be low and the products would be common rather than differentiated. Simultaneously, when there are fewer suppliers in the market who sell highly technical or hard to fix raw materials, they would have more negotiating power (Swaan et al, 1999).The ability and the ease of new entrants in the market also say how much competition a firm can expect in the future. With all these specifics, comes rivalry between firms. If one promotional campaign is followed aggressively by competing firms, the rivalry would be high. Similarly, the level of pro duct