Michael Porter's Five Forces analyze the external and internal environment of a company to increase the awareness of threats and structure of the industry that company competes within. Thus, the Five Forces is an ideal tool which can help companies to maintain their competitiveness with a higher profitability.
Porter’s Five Forces is defined as threats of new entrants, bargaining power of suppliers, power of buyers, the threat of substitutes and rivalry among existing competitors. New entrants into the industry aim to gain market share from rivals, so the intensity of competition may require to make changes on current strategy of marketing to maintain existing market share. The bargaining power of suppliers is one of the threats on the industry where price changes or product quality by suppliers can impact the profitability. Therefore, it is important for the companies to keep alternate suppliers or a contract to ensure prices, quality and quantity of the product so to avoid the company's supply from falling behind. The power of buyers can force the companies to lower the prices and offer different type products and service. Buyer can threaten the company with the competitors which may cause a negative impact on the bottom line to the companies. Thus, it is important to create a loyalty market share to avoid this threat. The threat of substitutes increases when another industry offers a similar product or services to customers within the same industry with a lower price. In this case, the industry profitability sinks since the product is available at a better price. This threat forces most competitors to price match or better performance. Rivalry among existing competitors ...
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About Lowe's. (n.d.). Lowes Newsroom. Retrieved January 19, 2014, from http://media.lowes.com/about-lowes/
Bishop, A. (2013, February 1). Lowe's Blog. : Porter's Five Forces. Retrieved January 19, 2014, from http://lowesanalysis.blogspot.com/2013/02/porters-five-forces.html
HubPages. (n.d.). The Home Depot Inc.: A Home Improvement Retailing Business, Industry, and Economic Trends Analysis. HubPages. Retrieved January 19, 2014, from http://dreadefoe.hubpages.com/hub/The-Home-Depot-Inc-A-Business-and-Industry-Analysis
Lowe's Companies Inc.. (n.d.). Yahoo Finance. Retrieved January 19, 2014, from http://finance.yahoo.com/q/co?s=LOW+Competitors
Porter, M. (n.d.). January 2008. Harvard Business Review. Retrieved January 19, 2014, from http://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy/
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