1. Porter's Five Forces Model is a one of common tools used in industry to analyze and develop competitive advantages. List and describe each of the five forces in Porter's Five Forces Model.
- It is high when buyers have many choices of whom they want to buy from and it is low when their choices are few. In order to reduce buyer power and create a competitive advantage, an organization must make it more attractive to attract customer to buy from them and not from their competitors. For example, by promoting a loyalty program.
- It is high when buyers have only a few choices of whom they want to buy from and it is low when the buyers have many choices to buy from. In order to attract more customer they have to do many strategy and promoting such as B2B marketplace where a private exchange allow a single buyer to posts it needs and then open the bidding to any supplier who would care to bid and a reverse auction where the auction format is whoever bid in increasingly lower bids will win.
- Threat of substitute products and services
- It is high when there are many alternatives to a products or services and it is low when there are a few alternatives to choose from. Threat of substitute exist when the customers can use different product s in order to fulfill the same need. For example, the electronic product which has the same function even though they are from different brands. In order to reduce threat of new product the company will use the switching cost method to maintain it sale. That is a cost that can make the customer to feel reluctant to switch to another product or services.
- It is high when it is easy for new competitors to enter a market and it is low when there are significant entry barriers to entering a market.. Because of this threat the top management have to monitor the trends, especially in technology, that might give rises in new competitors. For example new bank.
- Rivalry Among Existence competitors.
- It is high when competition is fierce in market and low when the competition is more complacent. For example, the airline industry faces serious threats from airline operating in bankruptcy, who do not pay on the debts while slashing fares against those healthy airlines who do pay on debt.
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