The Porter 's Five Forces

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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 a recommended defensive strategy for ABC. The matrix is categorize as; stars (growing market, high share), Cash Cows (stable or decreasing market), Question marks (risky innovations, growing market), and Dogs (low growth and market share) (Kinicki, 2016). This strategy can help as it evaluate which products ABC would want to defend. The competitive of new entrants is not the only threat to ABC Company but also the intensity of the rivalry amongst competitors. The company currently has no competition. ... ... middle of paper ... ...d steady relationship with both suppliers. They provide the raw material that is needed for the business. There are several factors that affect how the five forces operate. The industry is steady innovating itself causing businesses to evolve or get wiped out of the market. Disruptive technology and innovations is a factor. It is a new product or service that reshape an industry from technology advances. (Wallace, 2015) Government policies and actions is another factor. It can reconstruct how a business operate. Complementary services and products in the Ecosystem is a third factor that impact the five forces. One product can impact another product because they complement one another. Environmental events and wildcards is a factor that comes about each year. Hurricanes, snowstorms, earthquakes, and other natural disasters can have tremendous effects on the industry.

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