Saturday, October 31, 2009
SPLASH MAP ON THE FIVE COMPETITIVE FORCES
I am sure most readers are probably familiar with Prof Michael Porter's Five Forces Model, which slices the competitive environment into the following five areas:
1. Bargaing power of Suppliers;
2. Threat of New Entrants (& the attendant barriers to entry);
3. Bargaining power of Customers;
4. Threat of Substitutes;
5. Competitive Rivalry within an Industry;
To recap in a nut shell, an industry's profit potential is largely determined by the intensity of competitive forces within the industry.
According to Prof Porter, a good understanding of the industry's competitive forces & their underlying causes is a crucial component of strategy formulation, which is the building of defences against the competitive forces, or finding a viable position in an industry where the forces are weaker.
The foregoing Splash Map by Dilip Mukerjea captures the model of the five competitive forces as conceived originally by Prof Michael Porter.