The Porter\’s Five Forces is the management tool used for strategic analysis of the business environment within the given market. It can help with development of marketing strategies, business decisions and planning and organization of the Company, depending of the actual situation in the market.

Porter\’s Five Forces, as the analytical model, explains that in any industry branch there are five forces that influence particular market segment. Those forces or market factors are:

1. Existing Companies in the market

2. Potential new Companies that may enter the market in the near future

3. Substitutes for products offered, that can give relevant replacement to the consumer

4. The Suppliers, who are strong contributor to the cost structure and efficiency

5. The customers or consumers, the beneficiary of the provided product

Porter\’s Five Forces combined together are creating the specific business environment. Analysis of the structure of these forces, it is possible to recognize the opportunities for improving the marketing strategies. Porter\’s model can to be applied to an entire industry. The same analytical method can also be used to examine a specific branch of the industry. The tool is used for analyzing:

Competitors: Those Companies that offer the same product, service, or information.

Potential new entrants: Companies that could potentially enter the market and change current market conditions.

Customers: Customers, Shoppers and Consumers that buy, re-sell or consume products.

Suppliers: Those companies that supply the company with the products, raw materials and services.

Substitutes: Products of other companies that are not having the same characteristics as your product, but they could eventually be purchased and used instead, due to similarities that address the same needs of consumers..

Using Porter\’s Five Forces analysis, it is possible to obtain a better picture of the business environment in which the Company operates. Of course this tool is effective proportionally to time and effort invested for analysis.

Porter\’s Five Forces is a useful tool used to scan the Company\’s environment, and is often used in conjunction with SWOT analysis, for internal scanning. The outcomes of the Porter\’s analysis should be the guidance for further development of the marketing strategy. The whole marketing mix strategy can not be designed without proper understanding of the market background.

For example, the price, as the element of the marketing mix is the important aspect for the approach to the market. If the price is set without proper assessment of the competitor’s position in the market, than the product can be destined to failure. On the other hand the product itself should be designed in order to satisfy the consumer\’s needs. If the product is designed without precise scan of the consumer needs, it is very likely that it will not find sustainable position in the market.

Also, the best strategy of the marketing mix can not be relevant in case that there is problem with supplier. If there is no proper supplier available, who can supply the strategic raw materials in demanded quantities, than the product can not be supplied in requested quantities.

Obviously, the Porter\’s 5 forces are very relevant method of assessing the market climate from various positions. The Porter\’s analysis can give the proper estimation about existing companies, potential new companies in the market, substitutes for products offered, the suppliers and finally the consumers.

Porter\’s 5 Forces analysis is used in conjunction with SWOT analysis in order to design the best Marketing Mix approach. More on biz-development.com

Check http://www.biz-development.com/Marketing/5.1.MarketingMix.htm for Marketing Mix info. Also check http://www.biz-development.com/StrategicManagement/1.7Porter5.htm for info about Porter\’s 5 Forces

Author Bio: Porter\’s 5 Forces analysis is used in conjunction with SWOT analysis in order to design the best Marketing Mix approach. More on biz-development.com

Category: Business Management
Keywords: porter 5 forces, marketing mix, swot, management tool, strategic analysis