Porter's Five Forces Model is a one of common tools used in industry to analyze and develop competitive advantages. List and describe each of the five (5) forces in Porters's Five Forces Model.
Buyer Power
It is high when buyers have many choices of whom to buy whereas it is low when their choices are few. To reduce buyer power (and create competitive advantage), an organization must make it more attractive to buy from the company not from the competitors such as loyalty program in travel industry.
Supplier Power
It is high when buyers have few choices of whom to buy from whereas it is low when their choices are many. For an example is B2B marketplace which is a private exchange allow a single buyer to posts it needs and then open the bidding to any supplier who would care to bid. Reverse auction is an auction format in which increasingly lower bids.
Threat of Substitute Products & Services
It is high when there are many alternatives to a product or service whereas it is low when there are few alternatives from which to choose. Ideally, an organization would like to be on a market in which there are few substitutes of their product or services such as electronic product which same function but different product.
Threat of New Entrants
High when it is easy for new competitors to enter a market whereas it is low when there are significant entry barriers to entering a market. Entry barriers is a product or service feature that customers have come to expect from organizations and must be offered by entering organization to compete and survive such as new bank must offers online paying bills, acc monitoring to compete.
Rivalry among Existence Competitors
It is high when competition is fierce in a market whereas it is low when competition is more complacent. For an example is wal-mart and its suppliers using IT-enabled system for communication and track product at aisles by effective tagging system.
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