- The economic structure of an industry is not arbitrary. It is the result of higher order social trends and economic forces.
- Nonetheless, the effects of these indirect forces on your business are immediate. They affect both the choice and execution of your competitive strategies in your task environment.
- Taking the economic structure of your industry into account will provide important inputs for the design of your competitive strategy.
- Sustainable competitive advantage can only be achieved with due regard for these forces.
Michael Porter has identified five market forces that are commonly used to determine the economic structure of any industry. Porter’s five forces are:
- Bargaining power of suppliers
- Bargaining power of buyers
- Threat of new entrants
- Threat of substitutes
- Rivalry among competitors
The relative combination of these five forces determines the attractiveness of an industry. Together, they influence prices, costs, and required investments that directly affect your bottom line.
Modeste & Partners perform industry research to ascertain the relative strength of these five forces. Thereby, we help you identify the key factors that you can leverage for strategic success. |
