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Sunday, May 2, 2010

Strategic Planning - Porter's 5 Forces - Industry Analysis (Part 2 of 5)

Michael Porter provides a framework that industry is being influenced by five forces.  A Strategic Financial Leader can utilize this model to better understand industry and develop an edge over the competition.

"The competition is alive and hungry - continue to relentlessly move the business forward!"


The five forces are the following:
I.   Rivalry
II. Threat of Substitutes
III. Buyer Power
IV. Supplier Power
V.  Barriers to Entry / Threat of Entry



The threat of substitutes refers to products in other industries.  The threat exists when the prices change of a substitute product affects the demand.  A product's price elasticity is affected by substitute products - as more substitutes become available, the demand becomes more elastic since customers have more alternatives.  Substitutes constrain the ability to raise prices.

      "If the power to do hard work is not a skill, it's the best possible substitute for it." - James A. Garfield

Reference additional Strategic writings:
Strategic Planning - Porter's 5 Forces - Industry Analysis (Part 1 of 5)