The Porter Analysis

Essay by pchanyyCollege, UndergraduateB, April 2006

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To perform the Industry Analysis it is better to follow Michael Porter's five forces model. This analysis framework was created so that it helps managers in their task to analyze competitive forces to the company. (Hill & Jones 80) This model is only one of the models that can be used for this task but it is one of the more popular models. The five forces that we will have to look at for this model are (1) the risk of new and potential competitors; (2) the bargaining power of suppliers; (3) the threat of substitute products; (4) the bargaining power of buyers; and (5) the degree of rivalry among established companies within an industry. (Hill & Jones 80)

Barriers to Entry

The first force in Porter's Five Forces Model is Entry Barriers. These factors are those that make it harder or easier for another company to enter into the industry.

High barriers to entry will keep potential competitors out of the industry and low barriers to entry will give an opening for competitors to enter into the industry if the industry returns are high enough. (Hill & Jones 82) The fewer competitors in an industry the more the existing companies can take advantage of higher prices and better returns.

One barrier to entry is brand loyalty. Brand loyalty is very important for the sales of IBM. When personal computers first came out you had to choose from IBM or Apple. Both computers were great machines but when IBM became a better-known computer the name was very recognizable. Today your choice in computers is much more extensive. Even though there are many more brands to choose from IBM is still a popular name. If not for it's own products it is for their platform it has. IBM...