WHAT ARE PORTER'S FİVE FORCES ?

PORTER'S FİVE FORCES

Porter's 5 forces strategies have been popular since 1979. Porter's Five Forces is a simple yet powerful tool for understanding the competitiveness of your business environment and determining the potential profitability of your strategy. This method is an outsourced form of market analysis. Porter makes a competitive assessment of the market in which the business operates according to 5 variables.These; new entries to the market; customer power, alternative threat, supplier power and competition from competitors.

1- Competitive Rivalry: This force is seen as a challenge by competitors in the current market, by looking at the number of your competitors, their strength, the level of competition, the status of the competitors, the market growth rate and exit barriers, and may cause them to come up with new strategies that can be formed or against them In this strength, your competition should be evaluated both with your business and with each other.

2- Supplier Power: The presence of a small number of suppliers in the market makes the supplier strong. When you need to make choices such as the number of potential suppliers, how different the products and services they provide, and how expensive it is to switch from one supplier to another; It would be easy to switch to a cheaper alternative. But the fewer suppliers there are and the more you need their assistance, the stronger their position and ability to charge you. This possibility affects your operating profit.

3-Threat of Substitute: Substitution products are goods that are generally produced in other sectors and used as an alternative to the products of enterprises. It is the answer to questions such as the ease or difficulty of accessing substitute products and services, how to obtain them, and what alternatives are present as a threat to businesses in products and services. This strength refers to the possibility of finding a different way of what to do for your customers. A substitute that is easy to make and cheap can weaken your position and threaten your profitability.

4- Buyer power: The market is generally controlled by small customer groups. Reaching the customer is important in maintaining the company strategy. Basic evaluations such as the power of buyers, the number of customers offering profitability, the effect of buyers on the price and creating alternatives You ask yourself how easy it is for buyers to lower your prices with this power. The more customers you have, the greater your business power.

5- Threat of New Entry: Your strategy is influenced by the ability of people to enter your market. If it takes little money and effort to enter and compete in your market, if you have little protection for your technology, competitors will quickly enter your market and weaken your position. This is a threat to you. To assess the threat; what kind of risks new entrances create, how easy new beginnings are, what kind of financial strength they need, and how to get the necessary software, entrepreneurship and hardware. If you have strong and solid barriers to enter your market, you can maintain your position and take advantage of it.

When you adjust your strategy accordingly, you take advantage of the strong position, develop the weak position, and step into the future.