Porter's Five (5) Competitive Forces Template for Word
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The Porter's Five Competitive Forces tool is a simple but powerful tool for understanding the power of the different competitive forces in the macro environment for any market or industry. Different industries have different levels of competitiveness and profitability.
Michael Porter’s model identified the Five Competitive Forces which affect industry profitability and his model/diagram helps to identify the profitability potential and attractiveness of an industry.
It allows you to analyse and evaluate the current strengthand intensity of any of the generic competitive sources in any particular market or industry under consideration.
Our Porter's Five Competitive Forces template for MS-Word:
- Provides you with a Porter's Five Competitive Forces diagram ready to go.
- You get two different designs and layouts, to allow you to use either or both, your choice!
- You also get a Radar Chart which allows you to plot the relative competitive intensity of the five forces, on a scale of 1 to 10.
- While the Radar Chart is not part of the formal Five Competitive Forces analysis, it does provide additional granularity and insights into the results
- Click on the images above to see an enlarged view.
- Just type in your text into the relevant boxes and you have a professional-looking completed Five Competitive Forces Diagram.
- You can now copy and paste the completed Porter's Five Competitive Forces diagram into any Word document or report.
- Generate your Radar Chart as follows: (1) right-mouse click on the diagram (2) select Edit Data and (3) enter your rating for each of the Five Forces on a scale of 1 to 10, where 1 is the least intense and 10 is extremely intense in the associated table. Your radar chart is automatically updated.
Porter's Five Competitive Forces Model Overview and interpretation
Porter’s model of competitive forces assumes that there are five generic competitive forces that influence the competitive power of the key players in the relevant business environment.
The key players are customers, suppliers, existing competitors, potential new entrants and substitute products all of which impact the competitive environment.
Accordingly, the five competitive forces identified by the Michael Porter are:
Bargaining power of Suppliers
Bargaining power of Buyers
Intensity of rivalry among Existing Competitors
Threat of Substitute Products
Threat of New Entrants
Supplier Power: Where suppliers are in a strong position they tend to drive up prices and make the sector less attractive. Suppliers tend to be in a strong position where the products are unique or highly differentiated, where there are a limited number of suppliers, where there is single sourcing or switching costs are high or where there is no threat from substitute products.
Buyer Power: In situations where buyers exert power they tend to drive prices down. The power of the buyer is typically influenced by the volumes they purchase, how differentiated the products are and the switching costs, the number of buyers, the importance of each individual buyer to your business.
Competitive Rivalry: Competitive rivalry tends to be intense and it is difficult to establish a strong position where there is a large number of equally sized competitors and no one is able to establish a sustainable advantage. Rivalry is particularly intense where there is very little overall market growth and increased sales can only be achieved by “stealing” competitor’s customers.
Threat of Substitution: Where the customer can substitute alternative products that can provide the same benefits and the cost of switching is low it will tend to weaken your position, drive down prices and make the sector less attractive.
Threat of New Entry: If the barriers to entry for new competitors are low, and there are no significant fixed costs and few economies of scale, then new competitors will tend to quickly enter the market and weaken your position.
By thinking about how each force affects you, and by identifying the strength and direction of each force, you can quickly assess the strength of your position and your ability to make a sustained profit in the industry.
You can then look at how you can strategize and modify your position, taking into account each of the forces, to move the balance of power more in your direction.
The competitive macro-environment analysis can be complemented by a PEST analysis of the macro external environment.
A clear understanding of the macro-external and competitive environment provides an ideal background for a SWOT analysis.
We provide tools for both PEST and SWOT analysis.
This makes the Five Competitive Forces model a useful part of your planning process to use alongside other strategic planning models.
Check out our comprehensive User Guide for more details
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