What is it: Michael Porter has established a model that makes it possible to do a market analysis, in which explains the factors that influence the market and that affect the buying behavior.
Why do: The main objectives of a company are related to the competitive environment, as well as in the identification of strategies and future actions to obtain advantage. In addition, this model developed by Porter constitutes the structural determinants of competition, which is often intense.
Porter's marketing analysis model
Porter's model establishes five types of strength: rivalry among competitors, threat of new ventures, threats of substitute products and services, supplier power, and buyer power. Let's talk a little about each one of them soon:
1. Competitiveness of competition
This occurs in disputes over tactical positions involving prices, advertising, introduction of new products, improvement in distribution programs, among other factors.
2. Risk of new entrants
It sets new conditions in the market, since the threat of a new competitor depends on the presence of barriers and the reaction of companies that are already in the market. In this context, the threat is high when economies of scale are low, the capital required is low, product differentiation is small, among others.
3. Threat of substitutes
Products can limit a market's potential for return because they set a ceiling on prices. Moreover, if they can achieve a cost-effectiveness gain, when compared to current products, they can pose a major threat to the market.
4. Power of suppliers
They provide bargaining power over market participants when they threaten to raise prices or diminish the quality that exists in products. Thus, the bargaining power of suppliers is high when the availability of substitute products is low, the exchange costs of purchased are high, the buyer's importance to the supplier is low, among others.
5. Power of buyers (customers)
They influence the market because by forcing the price down, demand a higher quality or more services. Because of this, buyers are able to have the ability to increase competition within a specific market.
The model develops some conclusions as, for example, when forces are large, the analyzed market is less attractive and profitable. But when the forces are not so intense, the market is more profitable and attractive.
Did you see how 5 Porter's competitive forces can help your company analyze the market? LUZ.vc has developed a Porn 5 Competitive Forces especially to help your business! Get this tool now and watch your strategy take off!