Today’s COVID world is forcing many businesses to think about reinventing themselves and spreading their risk - possibly through moving into new sectors or markets. If this is something you’re considering, Porter’s Five Forces is a simple yet powerful tool for understanding the competitiveness of your business environment, and for identifying your strategy’s potential profitability. It will allow you to see the issues clearly and adjust your strategy accordingly. The tool was created by Harvard Business School professor Michael Porter, to analyze an industry's attractiveness and likely profitability. Since its publication in 1979, it has become one of the most popular and highly regarded business strategy tools.
As Michael Porter is quoted as saying in the Harvard Business Review managers often define competition too narrowly as if it occurred only among today’s direct competitors. Yet competition for profits goes beyond established industry rivals to include four other competitive forces as well: potential entrants, suppliers, customers, and substitute products. The extended rivalry that results from all five forces defines an industry’s structure and shapes the nature of competitive interaction within an industry.
So what are each of Porter’s Five Forces - and how can they help you to analyze the strengths and weaknesses of your market position and impact your long-term profitability? Here’s a quick look:-
If you’re looking to diversify and grow your business, it’s essential that you understand and continuously monitor any changes in these five forces - and adjust your strategy accordingly. Ultimately this market analysis and insight will help you boost your profits and safeguard your long-term growth.
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