Competitive and Value Chain Models

676 Words3 Pages
PORTER’S COMPETITIVE FORCES MODEL Michael Porter's famous Five Forces of Competitive Position model provides a simple perspective for assessing and analyzing the competitive strength and position of a corporation or business organization. There are five major forces that can affect an organization’s competitiveness in a market. First is the threat of entry of new competitors. Significant entry barriers will allow no easy entry for the competitors. Entry barrier is a product or service feature that customer have learned from organizations in a certain industry such as a license to serve liquor in bar and nightclub business. For most firms, the web increases the threat that new competitors will enter the market because it sharply reduces traditional barriers to entry. In some cases, the web increases barriers to entry. For example, the first company to offer web-based package tracking gained a competitive advantage from that service. Competitors then are forced to follow. The threat power of suppliers is the second force. Supplier power is high when buyers have few choices from whom to buy and low when buyers have many choices. The Internet’s impact on suppliers is mixed. It enables buyers to find alternatives suppliers and to compare prices more easily while on the others, participating suppliers prosper by locking in customers. Next is the bargaining power of customers (buyers). Buyers power is high when buyers have many choices whom to buy and low when buyers have few choices. The web today provides students with access to multitude of potential suppliers as well as detailed information about textbooks. As a result, student buyer power has increased dramatically. The fourth major force is the threat of substitute products or services. New technologies substitute product very rapidly. For instance, wireless telephone substitute land-line telephone and internet

More about Competitive and Value Chain Models

Open Document