Some industries like tobacco, alcohol and pharma have managed to do this to some extent.
The best case scenario from a business prosperity perspective would be to produce a product that’s habit forming, consumed frequently, hard to move away from, price insensitive, difficult to understand the true cost of and that there are few substitutes for. Generally speaking the more control you have over these factors, the more prosperous your business is likely to be. When you’re looking to assess purchaser power, what you’re really trying to do is to understand how much control you have over the price and sales volumes for the product that you’re looking to sell. Labor supply and power is an important factor for business prosperity. We explore some of the factors that you might consider below. To use Porter’s five forces as an analysis tool you need to consider each of the five forces in turn for the specific business, division or product that you’re assessing. These forces can be considered to operate across two dimensions, horizontal competition factors and vertical supply chain factors. Porter’s five forces are supplier power, purchaser power, substitute products, new entrants to the market and existing industry rivals. Porter’s model focuses on what he calls the “micro-environment”, the factors close to the company, and he makes clear that other macro factors exist that affect profitability but which he has chosen to ignore such as socio-political and regulatory changes (to assess macro factors you might consider using the PEST or PESTLE models (which we’ve yet to write about)).
It considers both how many units a business will sell (substitute products, new competitors and existing competitors) and how much profit a business makes from each item it does sell (sales price and cost of production).Ī competitive business landscape looks nothing like this, though it too may be rather barren It does this by capturing the main market factors that affect the ability of a business to generate profit. Explore Harappa Diaries to understand how these Porter’s Five Forces model examples can help you determine whether a product or service will be profitable for you or not. Michael Porter’s classic model assesses the competitive landscape that a business operates within. An example of Porter's Five Forces Model shows how Porter’s framework helps in analyzing the level of competition in a certain market.
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