what is porter's five forces???

Answer 1

They show how an organization can be affected by other organizations through different forces.

Supplier Power, Barriers to Entry, Buyers Power, Rivalry, Threats of Substitutions.

Walmart is a good example. Walmart is a gigantic retail business that is very difficult (almost impossible) to copy.
They have all the right contacts to keep prices low. Their most powerful tool is logistics. Their very complex information system tracks data from all sorts, like sales data, inventory levels, employee turnovers,........................too much
Their suppliers knows instantiously when and which product is sold. Whatever items needs replenishing, then that is what gets ordered and sent to Wal-Mart. (Suppliers Power)

People go to Wal-Mart because Wal-Mart has built a smart business that keeps prices very low through the extensive use of technology. Since prices are low, they pass on the savings to their customers, which generates them more money (Buying Power).

Threats of Substitution is one that all businesses have to worry about. Even though Wal-Mart sells at very low prices, they can still lose customers to other business. If millions of people decides they are going to start shopping at Target, then Wal-Mart is going to have to find out why millions of people made this decision. There has to be a reason.

Rivalry is where an industry is set. You couldn't open up an oil company and drill for oil (even if you could afford it) and compete with the already established businesses. They been in the industry longer and have already establish a named that everyone can identify with. No one will buy from you, they will buy from the one that they have bought from since they were young.

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michelle… is a top contributor for copying and pasting (from wiki). You could have just provided a link. Would have been a lot faster on your part.

Answer 2

The Porter 5 forces analysis is a framework for business management developed by Michael Porter in 1979. It uses concepts developed in Industrial Organization (IO) economics to derive 5 forces that determine the attractiveness of a market. It is also known as FFF (Fullerton's Five Forces). Porter referred to these forces as the microenvironment, to contrast it with the more general term macroenvironment. They consist of those forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally requires a company to re-assess the marketplace.


Four forces -- bargaining power of customers, the bargaining power of suppliers, the threat of new entrants, and the threat of substitute products -- combined with other variables to influence a fifth force, the level of competition in an industry. Each of these forces has several determinants:


A graphical representation of Porters Five ForcesThe bargaining power of customers
buyer concentration to firm concentration ratio
bargaining leverage
buyer volume
buyer switching costs relative to firm switching costs
buyer information availability
ability to backward integrate
availability of existing substitute products
buyer price sensitivity
price of total purchase
The bargaining power of suppliers
supplier switching costs relative to firm switching costs
degree of differentiation of inputs
presence of substitute inputs
supplier concentration to firm concentration ratio
threat of forward integration by suppliers relative to the threat of backward integration by firms
cost of inputs relative to selling price of the product
importance of volume to supplier
The threat of new entrants
the existence of barriers to entry
economies of product differences
brand equity
switching costs
capital requirements
access to distribution
absolute cost advantages
learning curve advantages
expected retaliation
government policies
The threat of substitute products
buyer propensity to substitute
relative price performance of substitutes
buyer switching costs
perceived level of product differentiation
The intensity of competitive rivalry
number of competitors
rate of industry growth
intermittent industry overcapacity
exit barriers
diversity of competitors
informational complexity and asymmetry
brand equity
fixed cost allocation per value added
level of advertising expense
Though not supported by all, some argue that a 6th force should be added to Porter's list to include a variety of stakeholder groups from the task environment. This force is referred to as "Relative Power of Other Stakeholders". Some examples of these stakeholders are governments, local communities, creditors, and shareholders. such as employees, & so on. This 5 forces analysis is just one part of the complete Porter strategic models. The other elements are the value chain and the generic strategies