Porter's five forces model

From Microsoft Encarta Encyclopedia, Michael Porter is an American management theorist and expert on competitive strategy. His first book, Competitive Strategy (1980), set out his theory on strategies for competitive advantage and is regarded by many as the definitive work in the field. He applied the same theory to countries in his Competitive Advantage of Nations (1990) to explain why some countries are richer than others.
Porter’s competitive strategy theory is based on an analysis of a company's competitive position within its environment, using the "five forces" that drive competition. These forces are the relative strength of buyers or customers; the relative strength of suppliers; the relative ease with which potential new competitors can enter the market; the potential availability of substitutes; and rivalry between competing firms.
The five forces are:
- Buyer power: good for buyers when they have many choices.
- Supplier power: good for suppliers when buyers have few choices
- Threat of substitute products and services: good for buyers when they have alternatives to products and services.
- Threat to new entrants: good for suppliers when it is easy to enter the marketplace.
- Rivalry among existing competitors: good for buyer when competition is severe in the market.