The Five Forces by Michael Porter Essay Example | Topics and Well Written Essays - 2500 words

The Five Forces by Michael Porter - Essay Example This model distinguished the strength of rivalry and hence the revenues and attractiveness of an industry. Five Forces Model can be utilized as an instrument to enhance a strategic edge over the rivalry of companies inside an industry in a competitive manner. The Five Forces Model is as follow (Bowers et al, 1990): The characteristics of these forces provide the companies the appropriate framework to give them the ability to create the necessary strategies in order to be successful in the industry (Thurby, 1998). To provide an in-depth review of the industry where a company dwells, the researcher will use Porter's five forces model (Campbell et al, 2002). The model of pure competition implies that risk-adjusted rates of return should be constant across firms and industries. However, numerous economic studies have affirmed that different industries can sustain different levels of profitability; part of this difference is explained by industry structure. Michael Porter provided a framework that models an industry as being influenced by five forces (Cemal and Keskin, 2003). The strategic business manager seeking to develop an edge over rival firms can use this model to better understand the industry context in which the firm operates. The discussion will be initially covered by the description of the buyer's power over the industry followed by the depiction of the power of suppliers over the companies (David, 1999). Another attribute of the industry that will be taken into account is the intens ity of competition among companies as well as the level of potency of new companies who have recently entered the market of retail. And finally, the ability of substitute product to affect the business disposition of a company will also be taken into consideration (David, 2001). Buyer's Power Based on Porter's five forces analysis, companies in the industry sell to a few large customers/buyers (Downes, 1999). Likewise, the industry also displays an apparent impracticality for customers/buyers to switch from one source of supply to another. This is reflected by the cost of raw materials as well as the costs of operations. Moreover, the products offered by companies in the industry are essentially interchangeable and indistinguishable (Gratton, 1999). The product