Here the diagram of Porter's Five Forces Model that i have found :
Porter's Five Forces Model consist of
1) Threat of new entrants
2) Bargaining power of customers
3) Treat of substitutes
4) Bargaining power of suppliers
5) Rivalry among competitors
The first one is a new entry of a competitor into your market also weakens your power. Threat of new entry depends upon entry and exit barriers. Threat of new entry is high when capital requirements to start the business are less, a few economies of scale are in place, customers can easily switch (low switching cost), your key technology is not hard to acquire or isn’t protected well, and your product is not differentiated. Some new firms enter into industry and low performing companies leave the market easily. When both entry and exit barriers are high then profit margin is also high but companies face more risk because poor performance companies stay in and fight it out. When these barriers are low then firms easily enter and exit the industry, profit is low. The worst condition is when entry barriers are low and exit barriers are high then in good times firms enter and it become very difficult to exit in bad times.
Secondly are bargaining Power of customer. It is means, How much control the buyers have to drive down your products price, Can they work together in ordering large volumes. Buyers or customers have more bargaining power when few buyers chasing too many goods, buyer purchases in bulk quantities, product is not differentiated, buyer’s cost of switching to a competitors’ product is low, Shopping cost is low, buyers are price sensitive, credible Threat of integration.
Buyer’s bargaining power may be lowered down by offering differentiated product. If you’re serving a few but huge quantity ordering buyers, then they have the power to dictate you.
Thirdly are threat of substitute products. Threat of substitutes are means how easily your customers can switch to your competitors product. Threat of substitute is high when there are many substitute products available and the customer can easily find the product or service that you’re offering at the same or less price. The substitutes are a threat to your company. When there are actual and potential substitute products available then segment is unattractive. Profits and prices are effected by substitutes so, there is need to closely monitor price trends. In substitute industries, and if competition rises or technology modernizes then prices and profits decline.
Next are bargaining Power of suppliers. It is means how strong is the position of a seller. How much your supplier have control over increasing the Price of supplies. Suppliers are more powerful when the suppliers are concentrated and well organized, and a few substitutes available to supplies. When suppliers have more control over supplies and its prices that segment is less attractive. It is best way to make win-win relation with suppliers. It’s good idea to have multi-sources of supply.
The last forces model are rivalry among competitors. It means the intensity of competition among the existing competitors in the market. Intensity of rivalry depends on the number of competitors and their capabilities. Industry rivalry is high when here are number of small or equal competitors and less when there’s a clear market leader, customers have low switching costs, industry is growing, and exit barriers are high and rivals stay and compete.
That all i had learn for this chapter , InsyaAllah we'll meet again . xiexie, zaijian.
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