Porter's Five Forces of Analysis: How to Determine the Attractiveness of an Industry - Essay Example

Porters Five Forces of Analysis - Determining the Attractiveness of an Industry al affiliation Porters Five Forces of Analysis - Determining the Attractiveness of an Industry Part1 The five forces as described by Porter are useful in the application of External Audit/Industry analysis. Through an analysis of the five competitive forces, it is possible to get the exact picture of what factors influence profitability of the industry in question and even assess the factors that need to be changed for a complete success of the company.

The five forces determine the kind of competition in the industry since they aid in strategy formation as UNC-Chapel Hill (2014) reports. One of the forces is a determination of any threats that may result in the market, for instance threats from new competitors (Walder, 2013). This will help the industry re-strategize so as to counter the new entry into the market. The other force touches on the bargaining ability of the suppliers that is influential in determining the pricing of the products that the industry adopts, and ultimately shapes the company’s survival (Walder, 2013).

The bargaining ability of the buyer is yet another force that also shapes competition in the industry. If the industry is able to discover that there exists rivalry between the competitors in the market, the industry can manipulate this force to their advantage by filling the niches left by the “fighting” competitors (Walder, 2013). The last force is the risk of using substitute products or services in the course of production (Walder, 2013). This may affect the Industry’s productivity especially if the product or services are not of the quality that has been in existence.

From an analysis of the five forces of Porter, it is evident that an industry can easily evaluate the existing trends and even decide on which aspects to change so as their industry can survive or even beat the other companies. The industry may also apply the five forces to exploit its abilities so as they can profit twofold. An industry may also restructure the forces in a way that can favor its status in the industry (UNC-Chapel Hill, 2014). The business can easily decide what is worth for them, and then determine what needs to be applied for successful business such manipulating the consumers and even the suppliers.

The business can also deal with all the barriers that may hamper entry into the market through manipulation of its distribution channels and even assess any threats that may derail the company’s progress. Part 2 In as much the Porters Five Forces aid in improving the industrial performance, it has its shortcomings. I am not assured that the model is inclusive and that it incorporates all the forces that determine the success of a company. For instance as Walder (2013) writes, the model focuses on the competitive ability of the company and does not focus on other forces that might influence the success of a company such as the value chains of a company or even strategic alliances.

In the case of diversified businesses, the model may be applied in the course making appropriate strategies for the business (UNC-Chapel Hill, 2014). References UNC-Chapel Hill (2014 February 14). ECON 125 | Lecture 24: Michael Porter – Strategy.  [Video             file].Retrieved from https://www.youtube.com/watch?v=KvYwKM5bY0s Walder, J. (2013). A critical evaluation of Michael Porter’s five forces framework. NY:GRIN Verlag.