Porter’s Five Forces Model

Porter’s five forces model is a simple tool that is often used in a large company or small company to easily understand where our company’s strengths lie and our company’s weaknesses in facing competitive situations in doing business so that our business is not inferior to other businessmen. Using this Five Forces Analysis, we can understand the strength of the current competitive position and the strength of the competitive position in the planned business. 

Michael Porter is an expert and a professor who discovered Porter’s Five Forces Analysis Concept from Harvard University in England in 1979. this invention is porter’s Five forces is an analysis that is often used in the Strategic Management of a company. 

As we know the Porter Five Forces Model uses 5 forces to determine the intensity of competition in an industry. each part has a value that represents a factor. to find out the weaknesses and strengths of the company and to support a company. each of these aspects will be rated by the company in high, low and medium units. And this is the path of each section of Porters five forces model. 

• Bargaining power of suppliers  

in this case, the buyer will certainly hold a large role in buying and selling activities, market bargaining power determines the profits that the company gets, the more expensive the price we give than the price in the market, we will experience a loss because there is no consumer attraction to buy. our products, so these are low buyers. But if we sell at a lower price than the market price, Lita will get an attraction to customers that makes us get a lot of profit, this can be called high buyers. 

• Threat of new entrants  

Threat of new entrants, in this strength we can analyze from what company is run and determine how easy (or difficult) to enter a certain industry. In essence, what is meant by a new enterant is an individual or group that makes a business like this existing one. if there is a condition where the business is easy for others to do to make this business, then the profit or profit we get will decrease due to the many new competitors, this illustrates the High Thread of New Entrants. but if the business is run by only a few people and not everyone cannot run the business we will benefit from the lack of new competitors and few competitors, this is called the Low Thread of New Entrants. 

• Bargaining Power of Suppliers 

Bargaining Power of Suppliers in this section analyzes income, every company definitely wants to get a big profit by making customers happy so that customers have confidence in companies that are profitable for the company, companies must get cheap supplies with high quality in order to get profits, but conversely, if we get a high price with low quality, it will make the company lose. There are raw materials that may be purchased from any supplier, this is called as it describes Low Supplier ‘Power, there are also raw materials that can only be purchased by certain suppliers, or in the context of large companies, this is called High Supplier’ Power. 

• Threat of substitutes  

in this case we are talking about whether our product will be replaced with a new product? Therefore the company must make an innovation and see weaknesses in its products so that their products cannot be replaced. 

• Rivalry among existing competitors 

in this part the company must compete aggressively for a large share of the market. if our company is strong and our competitors ‘markets are low then we are very profitable, but on the other hand, if our company is weak and our competitors’ markets are strong, then we will suffer losses and our company can go bankrupt. hence strengthening the company in facing competitors is very important. 

Sources: 

https://ilmumanajemenindustri.com/analisis-lima-kekuatan-porter-porters-five-forces-analysis/ 

https://sis.binus.ac.id/2018/02/21/porters-5-forces-model/ 

https://en.wikipedia.org/wiki/Porter%27s_five_forces_analysis 

https://www.linovhr.com/porter-5-forces/ 

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