The five elements of Porter\'s five forces are: 1. Threat of substitutes 2. Thre
ID: 374010 • Letter: T
Question
The five elements of Porter's five forces are:
1. Threat of substitutes
2. Threat of new entrants.
3. Bargaining power of buyers.
4. Bargaining power of suppliers.
5. competition rivalry
These vital forces determine the company's position in the market.
1. Threat of substitutes gives the information of the new/existing products/services that might create their own space by occupying out market products/services.
2. Threat of new entrants - With the advent of new competition the profitability might decrease because of they gaining market share where we might incur a loss of our share, generally most of the profitable industries attract new entrants widely.
3. Bargaining power of buyer - The buyer's power will limit the profitability of the company, we need to understand the position and the command he has in our product/service lifecycle.
4. Bargaining power of supplier - Like buyers, suppliers plays a vital role in the product lifecycle. If we limit the powers of them, the real power rests with the company in handling the product better.
5. Competition rivalry - The information about the competition in the market helps in redesigning our strategy for a better growth of our product/service. And it also gives detailed information about the main market players.
Yes, Porter's five forces help in understanding the competitive behavior of different firms. It gives information about the areas where they are strong and the areas where we can improve or excel them. It gives a better idea of launching new products by analyzing the market existing products. By knowing the weak links in the competitor's product journey, we can excel or safeguard in those areas.
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Explanation / Answer
Q4. Outline Porter’s Five-Forces Model. Does it help to explain competitive behaviour between firms?