Competitive Rivalry within an Industry: All companies have competitors, and each company strives to be the best. There has to be some kind of competitive edge to this race to be number 1. A business has to ask themselves, how can we ensure our customers are more satisfied? How can we make our products better? How can we make the lives of our customers easier? How can we make the lives of our staff easier? Competition is not a bad thing, especially between companies.
Bargaining Power of Suppliers: The ability of the workforce and what is needed to create new products must be taken into account. If the products needs employees with specialist qualifications to complete it, or the materials that they are using will be scarce, then supplier power will be increased. This is called Supply and Demand.
Bargaining Power of Customers: Buyer Power must be taken account for. Buyer power can put a firm under pressure to complete new products quickly. This can also affect the customer’s sensitivity to price changes.
Threat of New Entrants: If one specific market is very profitable and is making lots of money, it is then going to attract more people to begin working in this field. This means there are more competitors to deal with. This could eventually decreased profit-making within the company.
Threat of Substitute Products: Will our customers switch to a different product? If we sell fairy washing up liquid, could our customers start to buy a different brand? A company must consider how many alternative products there are in their niche market and use innovation to try and come up with ideas on how to keep their customers interested in that one product.
Follow this link to find a YouTube video of an interview with Michael E Porter himself, talking about his model.
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