orter’s 5 forces model is a theory that measures a sector or company by identifying these five forces. This theory was developed in the late by Professor Michael Porter, which allowed us to analyze whether the activities of a company were competitive. Next, we explain what the 5 forces of Porter consist of , do not miss it!It may interest you: Postgraduate in Strategic and Product Singapore Business Phone List INDEX OF CONTENTS
What Is Digital Marketing And How Does It Work😲Porter’s 5 forces
Michael Porter argues in his first book “Competitive Strategy” that the profitability potential of a company is defined by five forces.According to Porter, a total of 4 forces were applied to each company ( threat of competitors, threat of new products, bargaining power of suppliers and bargaining power of consumers ). This gave rise to a fifth force: rivalry between competitors . This model makes it possible to measure the competition of an industry , and in the case of companies, to identify better opportunities.
With Porter’s 5 Forces, companies can analyze and measure their resources . From there, they will be in optimal conditions to establish and plan strategies that enhance their opportunities or strengths to face threats and weaknesses.Porter’s 5 Forces Characteristics
Today, the Porter 5 forces model can do much for any company to improve and take advantage of all the opportunities offered by the market. Above all, it helps when starting a marketing plan and launching a business . Next, we explain what the 5 forces of Porter are and how you can take advantage of them.Discover Porter’s 5 forces and how to harness them – porter This force examines the power of the consumer and its effect on prices and quality. Porter believes that the more consumers are organized, the more demands and conditions they will impose on the price, quality or service ratio , therefore, the company will have less margin and the market will then be less attractive.
It is advisable to identify important clients and establish solid long-term relationships , considering that these are most powerful when: They are buying large quantities
The product purchased corresponds to a significant part of the fixed costs of the buyers
The products of the sector are not differentiated, so they can change brand
Using this force you can apply strategies of:Increase investment in marketing and advertising Improve sales channels Increase the quality of the product and / or service or reduce its price Provide new added valueIt is undoubtedly one of the most important powers, since the improvement of supply and demand in the market depends on them . Not only influences the power they exert over sellers, but also the demand that there may be for the products.
The fewer the number Gulf Email List of products that sellers offer, the better prices customers can get.
Your bargaining power can also increase in the following cases:Product purchase volume is high There is a lot of product offer Customers know the prices of the products and their characteristics
Customers know they can switch to other brands
Suppliers see reduced demand A clear example can be given in a company that sells second-hand products online and observe how the high supply makes companies compete for more customers.
Within the Porter analysis, the bargaining power of suppliers occurs when demand is much higher than supply. As there is a high number of raw materials, suppliers will be able to increase the price of the final product . Even so, its negotiating power resides in other aspects, such as that the exchange of raw materials has a high cost, companies do not buy a high volume of products or that there are no substitute materials for existing products.POSTGRADUATE IN STRATEGIC AND PRODUCT MARKETING
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Analyzing the bargaining power of suppliers allows us to know how much influence they exert on the products, and improve the conditions on them. It also looks at how much power a company’s supplier has and how much control it has over the potential to increase its prices. The appearance of competitors in the industry is due to the existence of a greater number of raw materials within that sector, so the increase in supply will be high. Given this, there are numerous protectionist barriers whereby access to a sector that is already consolidated is complex. For example, lack of experience, high tariff rates, difficulty in distribution channels, specialization in work processes or market saturation, among others.
This power allows us to take advantage of our competitors and thus know what services they offer to be able to take initiatives in this regard. For example, we can counteract these forces by reducing the cost of product prices, increasing advertising and distribution channels, and improving sales processes.
In short, this force considers how easy or difficult it is for competitors to join the market . The easier it is for a new competitor to break in, the greater the risk that an established firm’s market share will be exhausted.
4 # THREAT OF ENTRY OF SUBSTITUTE PRODUCTS
This is the appearance of new companies that offer products that can replace ours. The appearance of these products causes the price of the products that we have to be delimited . If these were to increase, we would run the risk that our customers would opt for substitute products.
This strength of the Porter analysis allows us to find out how these companies enter the sector and define strategies to counteract them , such as improving advertising campaigns, sales channels or better offers for customers.
A very common example is usually found in drinks, whether they are water, carbonated soft drinks or isotonic drinks.
5 # RIVALRY BETWEEN COMPETITORS
Porter’s fifth force appears when the number of strategies among our competitors is high. The rivalry is on the rise, as more competitors appear, with greater size and capacity. It also influences that the costs of fixed products are high, the product is perishable, lower prices or even absorption of companies.
Analyzing the rivalry between our competitors allows us to take advantage and find in what aspects we can unseat the competition. Either reducing prices, offering added value to our products or increasing their productions.
For example, we find it as we mentioned in previous sections on drinks. The first case that comes to mind is precisely between Coca Cola and Pepsi.
Apply the five forces of Porter in your business
Once we have studied each of Porter’s 5 forces , we can put in place a strategic marketing plan to be more competitive. In addition, it will allow us to measure competitiveness in a sector and assess whether our company is ready to enter it.
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