Michael Porter's Five Forces Analysis

Michael Porter's Five Forces Analysis

Industry x Competitive Position = Profitability.

Two things determine your company's profitability-the industry in which it competes and its strategic position in the industry. Some industries have inherently low profit potential while others are highly profitable. The most profitable companies have a strong competitive position in a highly profitable industry. The poorest companies have weak positions in weak industries.

Five Competitive Forces: Michael Porter's Five Forces have become a yardstick for assessing industry profitability. They are...

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* Buyers'/customers' power

* Suppliers' power

* Rivalry among competitors

* Threat of new entrants

* Threat of substitute products

The more powerful these forces in an industry, the lower its profit potential. The strength of each force differs by industry and changes over time. You'll find a summary of Porter's Five Forces model in our Resource Library.

Industry Analysis: You can use industry analysis in several ways to guide your strategic