The Five Forces Model

The Five Forces Model, developed by Michael Porter, helps analyze the competitiveness of an industry by examining five key factors: the threat of new competitors entering, the bargaining power of suppliers, the bargaining power of buyers, the threat of substitute products, and industry rivalry. These forces influence profitability and market dynamics. For example, if new competitors can easily enter, profits decrease. If suppliers have strong power, they can demand higher prices. Understanding these forces helps businesses develop strategies to improve their position and sustain profitability in a competitive environment.