Porter’s Five Forces Model

Porter’s Five Forces model was developed in 1979. The model summarizes the 5 factors, which affect the performance of a company by five forces. These 5 forces are as follows:

1. Bargaining power of customers;
2. The threat of potential entrants;
3. Bargaining power of suppliers;
4. Threat of substitute products;
5. The intensity of intra-industry competition.

The weight of Porter’s Five Forces determines the ability of firms involved to make a profit. If all forces are high, profits will be limited. Conversely, if the forces are weak, it is theoretically possible to generate a significant profit. The essential point is therefore to prioritize these forces so as to identify the key success factors in the industry, that is to say, the strategic elements that must be mastered to gain a competitive advantage.

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