In model of the five forces of Porter

The model of the five forces of Porter is a tool of management that allows to realize an external analysis of a company, through analysis of the industry or sector to which it belongs.

This tool considers the existence of five forces within an industry:

• Rivalry between competitors
• Threat of the entrance of new competitors
• Threat of the product entrance substitutes
• To be able of negotiation of the suppliers
• To be able of negotiation of the consumers

Classifying these forces of this form allows to obtain a better analysis of the surroundings of the company or the industry to which it belongs and, that way, on the basis of this analysis, power to design strategies that allow to take the opportunities and to do against the threats.

1. Rivalry between competitors

It makes reference to the companies that compete directly in a same industry, offering the same type of product.

The degree of rivalry between the competitors will increase as the amount of these rises, is equaled in size and capacity, diminishes the demand of products, are reduced the prices, etc.

The analysis of the rivalry between competitors allows us to compare our competitive strategies or advantages with those of other rival companies and, that way, to know, for example, if we must improve or redesign our strategies.

2. Threat of the entrance of new competitors

It makes reference to the potential entrance of companies that sell the same type of product.

When trying to enter a new company an industry, this one could have barriers of entrances such as the lack of experience, loyalty of the client, numerous required capital, lacking of channels of distribution, lack of access to consumptions, saturation of the market, etc. But also could easily enter if it tells on products of quality superior the existing ones, or lower prices.

The analysis of the threat of the entrance of new competitors allows us to establish entrance barriers that prevent the entrance of these competitors, such as the search of scale economies or the specialized obtaining of technologies and knowledge; or, in any case, it allows us to design strategies that do against those of these competitors.

3. Threat of the product entrance substitutes

It makes reference to the potential entrance of companies that sell products alternative substitutes or to those of the industry.

A product example substitutes would be the gaseous drinks that could be substitutes or competition of mineral water.

The product entrance substitutes puts a top to the price that can be received before the consumers decide on a product substitute.

In analysis of the threat of the product entrance substitutes it allows us to design strategies destined to prevent the penetration of the companies that sell these products or, in any case, strategies that allow us to compete with them.

4. To be able of negotiation of the suppliers

It makes reference to the capacity of negotiation whereupon they count the suppliers, for example, while smaller amount of suppliers exists, major will be its capacity of negotiation, since to not having as much supply of consumptions, these can easily increase their prices.

Besides the amount of suppliers that exist, the power of negotiation of the suppliers also could depend on the volume of purchase, the amount of raw materials substitutes that exist, the cost that imply to change of raw materials, etc.

The analysis of the power of negotiation of the suppliers, allows us to design strategies destined to obtain better agreements with our suppliers or, in any case, strategies that allow us to acquire them or to have a greater control exceed they.

5. To be able of negotiation of the consumers

It makes reference to the capacity of negotiation whereupon the consumers or buyers tell, for example, while smaller amount of buyers exists, major will be its capacity of negotiation, since to not having as much demand of products, these can protest by lower prices.

Besides the amount of buyers that exist, the power of negotiation of the buyers also could depend on the volume of purchase, the shortage of the product, the specialization of the product, etc.

Any that is the industry, the usual thing is that the buyers always have a major to be able of negotiation in front of the salesmen.

The analysis of the power of negotiation of the consumers or buyers, allows us to design strategies destined to catch a greater number of clients either to obtain a greater fidelity or loyalty of these, for example, strategies such as to increase the publicity or to offer majors services or guarantees.