Porter's Five Competitive Forces Template
Porter's Five Competitive Forces tool is a simple but powerful tool for understanding the power of the different competitive forces in any market or industry. Different industries have different levels of profitability. The Porter Five Competitive Forces model identified the five generic competitive forces which affect industry profitability and helps to identify the profitability potential and attractiveness of an industry. It allows you to access the current strength of your competitive position and the strength of the position you are considering.
Porter's Five Competitive Forces template for Word provides you with a Porter's Five Competitive Forces diagram ready to go. Click on the image above to see an enlarged image. 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.
Porter's Five Competitive Forces Overview
Porter’s model of competitive forces assumes that there are five competitive forces that influence the competitive power in a business situation. Customers, suppliers, existing competitors, potential new entrants and substitute products all 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 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” competitors 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 affect each of the forces to move the balance of power more in your direction.
With a clear understanding of where power lies, you can take fair advantage of a situation of strength, improve a situation of weakness, and avoid taking wrong steps.
This makes the Five Competitive Forces model a useful part of your planning process.
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