Michael Porter is an American academic known for his economic theories. Specifically, for being the author of a famous article published in the Harvard Business Review: “The five competitive forces that shape strategy.”
This article maintains that there are five key elements to analyze a business sector, for example, the tourism sector, the entertainment sector, etc. In this article we will talk about Michael Porter’s five forces and their usefulness in carrying out a business strategy.
- What are Porter’s forces
- What are Porter’s forces for?
- Example of analysis of the digital marketing sector
- Conclusions
What are Porter’s five forces?
The analytical framework developed by Professor Michael Porter is known as Porter’s Five Forces: industry competition, bargaining power of suppliers, bargaining power of customers, substitute products or services, and new competitors in the industry.
What are Porter’s forces for?
Porter’s forces are a strategic analysis tool used to evaluate the competitiveness and attractiveness of a specific industry or market. This model helps companies better understand their competitive environment and make informed decisions about their business strategy.
Example of analysis of the digital marketing sector
- The fight between already existing competitors. In digital marketing there are many competitors. In the COVID-19 pandemic, there was a boom in these services.
- The threat of new competitors. There are constantly new competitors that offer digital marketing services and advertise on platforms such as Google Ads or social networks.
- The bargaining power of customers. Since there is so much offer of digital marketing services, clients have high bargaining power.
- The threat of substitute products. With the rise of artificial intelligence like ChatGPT, it is difficult to determine to what extent digital marketing will continue to be performed by humans, as more and more tasks can be automated.
- The power of provider’s negociation. The cost of licenses to carry out digital marketing analysis or to automate processes or tasks is high in this sector.
Conclusions
- Michael Porter designed a model that allows us to analyze any business sector.
- This model is very useful in strategic planning and can be applied in marketing.
- We could say that this analysis is limited to the company’s microenvironment, since it analyzes elements close and immediate to it such as the relationship with customers, suppliers and competitors.
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