Why do we use it?This analysis was originally developed by Michael Porter, a Harvard professor and a noted authorityon strategy. While all firms operate in a broad socioeconomic environment that includes legal,social, environmental, and economic factors, firms also operate in a more immediate competitiveenvironment. The structure of this competitive environment determines both the overall attractivenessof an industry and helps identify opportunities to favorably position a firm within an industry.Porter identified five primary forces that determine the competitive environment: (1) rivalry amongcurrent competitors, (2) threat of new entrants, (3) substitutes and complements, (4) power of suppliers,and (5) power of buyers.1. Rivalry. Among the direct and obvious forces in the industry, existing competitors mustfirst deal with one another. When organizations compete for the same customers and tryto win market share at the others’ expense, all must react to and anticipate their competitors’actions.2. Treat of Entrants. New entrants into an industry compete with established companiesplacing downward pressure on prices and ultimately profits. In the last century, Japaneseautomobile manufacturers Toyota, Honda, and Nissan represented formidable new entrants
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