2b) Michael Porter’s Five forces Model
Michael Porter provided a framework of five forces that determine industry attractiveness and long-run profitability. These five competitive forces are: threat of new entrants, threat of substitutes, bargaining power of buyers, bargaining power of suppliers and degree of rivalry between existing competitors.
The degree of rivalry between competitors in one industry is the most obvious of the five forces. It is influenced by the structure of the competition. A large number of firms increases rivalry because more firms compete for the same customers and resources. It is less when an industry has a clear market leader. Slow market growth causes firms to fight for market share. The structure of indus
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