Using a model such as Porter's Five Forces goes well beyond simply searching for trends within an industry in that it can help one to develop marketing strategies that are quite effective. "In the Five Forces Model, Porter explains that in any industry there are five forces that influence what happens within the industry: 1. Existing companies, 2. potential new companies, 3. substitutes for products offered, 4. the suppliers, and 5. the customers" (Website Marketing Plan, 2007, p. 1).
The overall business environment is constructed from the combination of these five forces. Improvement's to a company's marketing strategies can be made when management studies these five forces and how they relate to each other within their particular industry or even a specific niche within their industry (Website Marketing Plan 2007).
One example of a company who may utilize this model includes EBay, which lies within the online auction industry. Their competitive force would include competitors such as UBid and WeBidz, as they offer the same services as EBay. There are a wide variety of potential new entrants, but they hold a great deal of market share due to their vast popularity, so it would take quite a sharp company to overtake EBay in this particular market. EBay's customers would include those who visit the website, whether they partake in auctioning and, therefore, pay fees or merely contribute to the income of EBay through visiting its sponsors' advertisement banners. The supplier's in this market are unique in that they are actually other consumers, as it is a consumer-to-consumer environment. Substitutes for EBay could include things such as variety and thrift stores, yard sales, discount stores, and classified ads.
Another popular company that can analyze its marketing strategies using Porter's Five Forces Model would be Wal-Mart, whose main competitors include companies such as Target and Kmart. Their competitors can exist either on ground or online, such as Target.com. Potential new entrants to the market include up-and-coming discount stores of other varieties that carry a wide range of products at low prices. Customers include those who visit Wal-Mart's physical stores, as well as those who visit their website. Wal-Mart has a wide array of suppliers. Whereas they used to proudly sell products that were made in America, marketplace pressures pushed them to find cheaper suppliers, such as companies located in China. Due to recent conflict with imports from China, this could be a large problem for them in the future if they do not adjust that particular strategy to suit the desires of their customers. People can visit a variety of other stores to obtain the same types of products that they could obtain from Wal-Mart, such as mom and pop stores, but the downside would be that they may have to visit several of these types of stores to get what they could get in one trip to Wal-Mart.
Competitiveness, Generic Strategy, Effectiveness, and Profit
Consumers have many choices today when they go to