Competitive Strategy: Michael E. Porter's Strategy In Business

The Porter’s five forces is a powerful technique used for understanding where power, profitability, strengths, and weaknesses lies within a business. It is an analysis that Michael E. Porter of Harvard Business School, put together to shape competition in industries. The five forces gives an insight of opportunities and threats in a firm outermost environment. It help to identify where the competitive position lies and where your company can move toward to. It is divided into vertical and horizontal forces. The horizontal forces are threat of substitutes, competitive rivalry, and threat of new entrants. The vertical forces are the power of buyers and suppliers. ABC Custom Wood Furniture should adopt the forces to improve their position in the market.

One important force that porter describes is the threat of new entrants. It can affect any size, big or small. New firms can easily enter if the market has a high return. New firms can impact the wood furniture industry over-night. They can take away customers from the ABC Company. The threat of new entrants into the market can decrease profitability for ABC Company. ABC will need to have a defensive strategy in place for the unexpected upcoming entrepreneurs. The BCG matrix can be

It is exceptionally important to take this into consideration. Buyers can have the control stick if they are important to the company. The power of the buyers have an impact on ABC Company because some customers’ requests special exotic woods. This shows that ABC value their importance. They put the firm under a little pressure because they have to meet their requests on the special woods. ABC Company need low buyer bargaining power so that they can increase profit without being dictated. It is essential that the customers does not hold all of the power. ABC can take control to reduce the buyer power by implementing a loyalty program to keep the relationship