Analysis tool used is Porter 5 Forces. Porter Five Forces tool is a simple but powerful tool for understanding where power lies in a business situation. This is helpfull, because it helps the company to understanding either strength of their current competitive position, and the strength of the position was considering moving into. With a clear understanding of where power lies, the company can take advantage of the strength of justice, general weakness, and avoid taking wrong steps. This makes it an important part of their planning. Typically, the tools used to identify whether new products, services or businesses have the potential to be profitable. However it can be very enlightening when used to understand the balance of power in other situations.
First, for threats of new entrants it easier for new companies to enter the industry, competition will be more brutal. Factors that may limit the threat of new ...view middle of the document...
Addition, its the same principle that applies to jobs. It because people are attracted to higher-paying jobs, provided that they can meet or acquire the criteria for thath job. In order to gain the market share, the new entrants typically sell at lower prices or offer some incentive. This force also refers to the strength of the barriers to entry an industry, which is how easy it is to enter an industry. The threat of entry is lower when existing company that have IS that are difficult to duplicate or very expensive. Those IS create barries to entry that reduce th threat of entry.
Second, its about the bargaining power of suppliers, here the company assesses how easy for suppliers to raise prices. This is driven by a number of suppliers of each key input, the uniqueness of their product or service in the business, their strength and control over the company, the cost of switching from one to another, and so on. The fewer the supplier choices that it have, and the more it need suppliers help, the more powerful the suppliers are. In addition, it appears how much pressure suppliers can place on a business. If a provider has an impact big enough to have an impact on margins and the company, then it holds great power. Company also need to find a serious supplier in the business and be cooperation when do a business.
Third is threats of substitutes. This is influenced by the company, customers want ability of to find different ways of doing what the company did, for example, if the company provides unique software products that automate key processes, people may substitute by doing the process manually or by outsourcing. If substitution is easy and substitution is viable, then this weakens the power of company. Therefore, companies need to think about the best way to ensure the success of their company. In addition, where a close substitute products exist in the market, it increases the likelihood of customers to switch to alternatives in response to the increase in the price of an item. This reduces both the power suppliers and market attractiveness.