The Five Forces Model is a tool that can be used to analyze the opportunities and overall competitive advantage of you, your organization, or your project. It is comprised of five forces that can assist in determining the competitive intensity and potential attractiveness within a specific area. This can be developed to assist in analyzing a specific project and the strategic opportunities for this project, as well as the strategic opportunities, effectiveness and profitability of your organization as a whole.
Within the Five Forces Model the following forces are identified:
The five forces were originally identified and developed by Michael E. Porter while working for the Harvard Business School and the Boston Consulting group. Both were looking for a new and updated version for developing strategies in the area of competitive advantage. He applied the principles of microeconomics and business strategy to analyze requirements in individual sectors. Developing the five forces in line with the business goals of utilizing an organizations / projects limited resources on its greatest potential opportunities.
In the 1990's after criticism the five forces model was augmented by several different individuals in order to include a sixth force effectively completing the model. The overall consensus was that the model was lacking an external factor, while exactly what factor has been extensively debated and discussed the three main possibilities are: Complementary products/ The government/ The public.
The Five Forces Model is important for organizations to develop concise evaluations within a specific area. This will allow you to analyze your organization or project by looking at the specific internal and external forces and how they can potentially affect effectiveness and attractiveness.
The first three of the forces are external factors while the last two are internal factors that could affect you, your organization and /or project. For each factor you must look at exactly who, what, why and how these factors could potentially effect you, your organization and/or your project.
2. New entrants
3. End users/Buyers
It is commonly used as a starting point or “checklist” that one can then develop into a strategic plan in conjunction with other analysis tools such as: The Sixth Force (from the Six Forces Model), SWOT, PEST, SLEPT, STEER.
Here are some questions to think about when developing your Five Forces analysis.
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Development, SWOT, Change, Project, evaluation, problem solving, strategic planning, method, analysis
Nohea Reveley-Mahan (nohea.reveleymahan[at] fao.org)