Name: Elisabet Novelia

NIM: 2440078014

Major: Management

Porter Five Forces

Porter Five Forces is an analysis tools that uses five competitive forces to know the position
of the company industry. Porter Five Forces helps entrepreneurs to understand the right
strategy when starting a business so that it can behave and grow. This analysis is to
understand the competitiveness of the business environment, and to identify the potential
benefits of a business strategy. The concept was intoduced by Michael Porter in 1979.
Components of Porter Five Forces:
1. Buyers power
 High: when buyer moves to another company or product easily.
Example: food, taxi retail
 Low: high switching cost for the buyer.
Example: laptop, luxury things

2. Suppliers Power
Supplier power: depedency by the company to supplier. Business is influenced by
suppliers. Many businesses choose suppliers to reduce logistics costs, availability of
raw materials.
 Low when there are a lot of choices for Supplier
Example: Common Raw Materials (Food, Paper, Yarn for retail clothing, etc)
 High when only severall suppliers, and Company is difficult to move to other
Supplier
Example : Airline Machine and Equipment, Sparepart, etc

3. Threat of Substitute Product

The existence of substitute products cannot be controlled and the price is cheaper. An
entrepreneur needs to build a strategy, such as providing offers and promotions
 High when there are a lot of choices for Substitute Product,
Example: Food (Bread with Rice or Potatoes), Transportation (Car with Train)
 Low when there it’s quite difficult to find right substitute product
Example : Smartphone with telephone

4. Threats of New Entrants

The more new businessmen emerge, the business competition will increase. An
entrepreneur can determine whether the business to be run is a business that is easy to
set up or a business that requires consideration.
 High when New Entrants are easy to enter the Industry
Example : Enter Retail Industry (food and Beverage, Clothing)
 Low when New Entrants are difficult to enter the industry
 Example : Airline Industry, Education

5. Rivalry among Existing Firm high/low

An entrepreneur can determine the selling value of products and analyze business
competitors by providing competitive advantages, providing promotions, improving
quality and service, increasing marketing.
 High when There are a lot of Competitors in the Industry
Example : Retail Industry (food and Beverage, clothing)
 Low when There are only a little bit competitors, or difficult to compete
Example : Luxury Products

Referensi: https://binus.ac.id/entrepreneur/2019/05/29/5-kekuatan-porter-dalam-anilisis-nilai-
jual-produk/