Fundamentals of Business

Michael Eugene Porter

Michael Eugene Porter is an American academic focused on management and economics. He has made important contributions to strategic management and strategy theory, Porter's main academic objectives focus on how a firm or a region can build a competitive advantage and develop competitive strategy.

Porter's strategic system consists primarily of:
1. 5 forces analysis
2. Strategic groups (also called strategic sets)
3. The value chain
4. The generic strategies of cost leadership, product differentiation, and focus
the market positioning strategies of variety based, needs based, and access based market positions.
5. Porter's clusters of competence for regional economic development

Porter 5 forces analysis

The Porter 5 forces analysis is a framework for industry analysis and business strategy development developed by [Michael E. Porter] in 1979. It uses concepts developed in Industrial Organization (IO) economics to derive 5 forces that determine the competitive intensity and therefore attractiveness of a market. They consist of those forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally requires a company to re-assess the marketplace. Strategy consultants use Porter's five forces framework often to evaluate a company's strategic position.

Five forces
The supplier power, buyer power, the threat of new entrants, and barriers to entry/exit and industry rivalry. Each of these forces has several determinants: The collective strength of these forces determines the ultimate profit potential.

Supplier power
The importance of suppliers depe depends on the extent an enterprise needs their services; nds Structure of Industry

If a enterprise can get supplies from elsewhere, it will have more bargaining power and vice versa. Product differentiationif alternatives are not good, there is no point to switch other than sticking with the same supplier. Collaboration by suppliers suppose suppliers are numerous, they still may collaborate to push up prices.

Ease of Switching
If is costly or difficult there is no point switching even if an enterprise wish to, also if there are contracts tying an enterprise to suppliers.