Before entering a new market it is crucial that you have an understanding of the current balance of power. With a clear understanding of where power lies in a particular market, you can leverage a situation of strength, improve a poor situation and avoid any unwanted surprises.
The 5 forces analysis was pioneered by Michael Porter, an academic from Harvard Business School, and is a framework for analysing the major forces that influence the balance of power in a particular market or segment.
By looking at each of these forces and analysing how they might influence the attractiveness of the market, we can make more intelligent decisions when launching new products or expanding into new markets.
The five forces are:
- Buyer power
- Supplier power
- Threat of new entrants
- Threat of substitutes
- Competitive landscape.