The Tale of Two Michaels

Jackson Five - Blame it on the Boogie 1979

In Week 2 of MIST  7500 class we discussed business models and strategy.  Instead of the Jackson 5, one the strategies we discussed was The Porter 5… Porter’s 5 Forces that is.

Porter’s 5 Forces

While MICHAEL JACKSON and the Jackson 5 were busy “Blaming it on the Boogie” in 1979, MICHAEL PORTER was at Harvard Business School busy developing the concept of the 5 Forces. Porter’s  5 Forces Analysis assumes that there are five important forces that determine competitive power in a business situation. Three of his forces referred to the competition from external sources and the other two were internal threats.

Five forces

1. Threat of new competition
 - Is it very easy to enter this business and will I have an abundance of competitors
 - The easier it is to enter leads to more competition and less profits OR The harder it is to enter  leads to less competition and more profits 

2. Threat of substitute products or services
- Will there be a product that will come out on the market that will take the place of mine and lower profits

3 Bargaining power of customers (buyers)
- Do the customers have a the power to demand lower prices
- Bargaining with customers with lower prices may reduce profits

4 Bargaining power of suppliers
- Suppliers may be able to able to raise their prices
- If suppliers raise their price and we don’t raise ours we loose profits

5 Intensity of competitive rivalry
- Do we have an existing competitor that we are constantly having prices was with to gain or retain customers?
- Fierce competition may reduce profits