Porter’s Five Forces can be used by managers to understand the influence of a firms micro environment. Apply and evaluate this tool as it relates to a grocery store in your local area
Porter’s Five Forces is a model that identifies and analyzes five competitive forces that shape every industry and helps determine an industry’s weaknesses and strengths. The five forces are:
Competition in the industry: This refers to the number and intensity of competitors in the market, which may affect the profitability and market share of a firm.
Potential of new entrants into the industry: This refers to the threat posed by new or potential competitors, which may force existing firms to lower prices or increase quality to retain customers.
Power of suppliers: This refers to the bargaining power of suppliers, who may affect the cost and quality of inputs for a firm. Suppliers may have more power if they are few, have differentiated products, or can switch to other industries easily.
Power of customers: This refers to the bargaining power of customers, who may affect the price and quality of outputs for a firm. Customers may have more power if they are many, have low switching costs, or can substitute products easily.
Threat of substitute products: This refers to the extent to which alternative products or services can replace the existing ones, which may reduce the demand and profitability of a firm.
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