What Is The Porter’s Five Forces Model of Competition?

In this time period of globalization where there is a lot of competition in the business market, and Porter’s five forces model of competition is one way through which you may easily analyze the competition level in the market. There are a lot of new challenges that are faced by today’s organizations.

For the solution of such diversified challenges, a helpful model is available to the organization that is known as Porter’s five forces model, which examines the different organizations for the sake of solutions to these challenges, especially the competition among the organizations.

Porter’s Five Forces Model of Competition

Porter’s five forces model of competition, five forces that always impact the whole market, especially the competition level.

1. Threats of New Entrants:

The first force of Porter’s five forces model of competition is the entrance of new competitors in the market. The new entrants entering into a certain industry increases the level of competition among the Business Organizations of that industry.

2. Bargaining Power of Customers:

The buying power of customers is influenced by the level of competition. When there are relatively large numbers of producers than the customers have more options to make the selection of the products. So, this increases the second force of the porter model which is the bargaining power of the customers.

3. Threats of Substitutes:

The third force of Porter’s five forces model of competition is the threats of substitutes. When there is a higher degree of threat of new entrants in a certain industry, then this would result in an increase in the competition which would further cause the increasing number of substitute products.

4. Bargaining Power of Suppliers:

When there are more suppliers in a specific industry, then this would result in an increase in the bargaining power of producers/customers and vice versa.

5. Rivalry among Competing Organizations:

The last and fifth force of Porter five forces model of competition is rivaled exist int the market. When there are large numbers of manufacturers and variety of different products, then the rivalry among the organizations of same industry increases, which concentrates more on manufacturing & provision of higher quality products that can satisfy all the demands of the customers in an effective way so that the competition can be properly managed. So the rivalry among competing organizations is said to be the fifth force of Porter five force model of competition.

Revolution of Information Technology

The science of marketing is revolutionized by the advancement in the field of information technology, particularly the Internet. Now the information is flowing in the digital form through the connections of Extranets, Intranets and the Internet.

• Connection Technologies:

Technology is the major force behind the advanced connections. The boom in the telecommunications, computer and information technology & the merger of these technologies strongly influence the method of bringing value to the customers.

The marketers of today’s organizations develop detailed databases related to the customers and employ this useful information to prepare such attractive offers for the customers on an individual basis and that can easily satisfy the requirement & demands of the customers.

There are certain tools for connecting with customers like fax machines, cell phones, TV and CD-ROM.  Moreover, customers have now much convenience in buying different products through online shopping sites without leaving their houses.

Virtual shopping, virtual salespeople & virtual reality displays are some of the changes that are embracing for the customers. The Internet is a combination of different networks across the world, which has taken the central importance in connection with customers, suppliers and other entities of the business environment.

• Connection with Customers:

In recent age, the markers do not rely only on the connection with the customers. They target potential customers, which are mostly a few in numbers. The marketing fragmentation increases with the advancement in the connections with customers & diversity.

The marketers are moving towards segmented marketing by targeting specific segments or submarkets even on an individual basis. The organizations are also analyzing the worth of the customers so their main aim is to have a connection with the potential customers for a long time.

So the marketers try to keep current customers satisfied by making long term relationships with them. The customer ratio is more important than the market share held by the organization and long-run profits are more focused than the short-run profits.

The customers are connected through mail-order catalogs, telephone, electronic commerce & kiosks. The business to business marketing is also taking place with the help of Internet technology. A different combination of selling methods is employed by the organizations to connect with the customers in an effective way.

The customers are also taking part in reshaping the marketing offers and processes. There are certain organizations that permit their customers to develop their own products online.

• Connection with Marketing’s Partners:

The role of markers is to perform the intermediary function by understanding the needs of the customers and presenting those needs of customers to certain departments of the organization in an effective manner. The departments than do their jobs according to the available information on the needs of the customers.

The markers are not only responsible for the interactions of the customers. Every employee in the organization should perform his duties in light of the needs of the customers. Moreover, team activities are organized by many organizations for delivering value to the customers through their useful products.

The organizations are also making useful connections with the partners that are present outside the environment of the organization like network with other organizations.

Supply chain management is one form of such useful networking of different organizations in which a channel develops that focus the raw material acquisition to the delivery of finished products to the final customers through a number of successive partners. Each member of the supply chain puts its relative portion of value to the processing product.

The relationships of the members of supply chain management are strongly formal. Strategic alliances are also formed by many organizations in such a way that either an organization permits the other partner organization to produce its goods or two or more organizations to market their complementary products jointly. In fact, the alliance helps the organization to offset its weakness & complement its strengths.