Question

The Five forces model is one of the better- known approaches to evaluating a company’s competitive position in light of the structure of its industry. Name and briefly explain the five (5) forces model.

Answer 1

This assessment will name and briefly explain the five forces model by Michael E. Porter

1. Threat of entry:

risk of entry for the competitors is the first force that affects the business organization's competitive position.

The threat of entrants in any industry tells about the capacity and attempt to gain the market share. The competitive position depends upon the entry and exit barriers in the respective industry.

2. Bargaining power of buyers:

The power of buyers is another in affecting the company's competitive position.

It depends upon various factors and circumstances.

If there are a large volume buyers and industry have high fixed cost, the product is standard and undifferentiated; buyers are price-sensitive when there is low switching cost, the power of consumer will be more. They will shape the quality price and distribution channels of the product.

3. Bargaining power of suppliers:

this force means how strong the position of the seller to influence the business organization is.

The raw material supplier will be dominant if the raw material is unique and differentiated and available to view firms and is more concentrated, and the raw material has no substitute.

4. Substitute product:

This force determines the degree of competition in the industry the business is operating. It means how easily consumers can switch to the competitor's product.

Various factors will determine the strength of competitive pressure from substitute products, like the availability of substitutes and the price of the substitute product, the quality, and other relevant attributes.

5. Rivalry between the existing firms:

It refers to the intensity of competition among the current rivalries and competitors in the market in the prevailing industry.

This force depends upon the number of competitors in the market and their capabilities and core competencies.