Porter's Five Forces Model

Porter's five forces Model is a powerful tool to understand the competition in the market. These
forces determine your current business position and pave the successful way.

If you are sure about your strength or power,you can exploit your qualities and can enhance the
shortcomings productively and adequately.

Porter's model consists of 5 competitive forces that will help you in identifying the competitive
power in business. These five competitive forces are:

 Threat of substitute products

 Threat of new entrants
 Intense rivalry among existing players
 Bargaining power of suppliers
 Bargaining power of Buyers

Threat of Substitute Products

Threat of substitute products- It indicates how effectively your customer switch from your product
to competitor's product. Threat of substitute increases when:

 Number of substitute products available at market in low prices as compared to yours.

 It may also happen because of the competitors product quality.

Substitutes are a danger to your organization,when there are genuine and potential substitutes are
available, segment is not attractive. Benefits and costs affect substitutes in this way.

Threat to New Participants

As a new competitor enters your market it debilitates your strength. Risk of new passage relies on
entry and exit barriers. Threat to new entrant is high when:

 You have less capital to invest in your business

 Clients can without much stress switch (low exchanging cost)
 Your item do not have any special features or quality.

Intense Rivalry Among Existing Players

Industry Rivalry mean the power of competition among the current rivals in the market, it relies
upon number of contenders and their capabilities. Industry Rivalry is high when:

 low switching cost for customers

 Fixed cost is high turns to high production and low price.
Bargaining Power of Suppliers-

Bargaining Power of supplier implies how difficult is the situation of a supplier. How your supplier
control the Price of supplies.

 Suppliers are more powerful when-

 Suppliers focused and efficient.
 Number of substitutes accessible to provisions
 They have better product to switch
 Switching cost, starting with one providers then onto the next, is high
 You are not an imperative client to Supplier

Bargaining Power of Buyers

Bargaining Power of Buyers implies, How much control the they need to degrade the cost of their
item, Can they cooperate in requesting substantial volumes. Buyers have more purchasing power:

 Purchaser buys in bulks

 Product does not have special features
 Buyer's switching cost item is low
 Buying cost is low

Michael Porters five forces model gives helpful contribution to SWOT Analysis and is considered as
an effective instrument for industry focused study.