![]() If all the forces work to undermine profits, then the profit potential is very weak. To do so, five forces analysis considers the interactions among the competitors in an industry, potential new entrants to the industry, substitutes for the industry’s offerings, suppliers to the industry, and the industry’s buyers (Porter, 1979). If none of these five forces works to undermine profits in the industry, then the profit potential is very strong. The purpose of five forces analysis is to identify how much profit potential exists in an industry. ![]() Introduced more than thirty years ago by Professor Michael Porter of the Harvard Business School, five forces analysis has long been and remains perhaps the most popular analytical tool in the business world ( Figure 3.13 “Industry Analysis”). Visit the executive suite of any company and the chances are very high that the chief executive officer and the vice presidents are relying on five forces analysis to understand their industry. Be able to offer an example of each of the five forces.įigure 3.13: Industry Analysis The Purpose of Five Forces Analysis.Explain how five forces analysis is useful to organizations.
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