Competitive Advantage with Porter’s Five Force Model

IT600-1603A-01

Colorado Technical University

Competitive Advantage with Porter’s Five Force Model
An important element in managing an organization today is maintaining a competitive advantage in the industry. A company faces many challenges in today’s market and being informed is key in order to maintain a competitive advantage. Conducting an informative and in-depth business analysis is an important element for an organization in order to understand the challenges and competitive markets of the industry. The company is considering buying another smaller firm, but needs to assess the competitive advantage the firm will bring to the company. Utilizing Michael Porter’s Five Forces model will help to analyze the firm’s competitive advantage.
Porter’s Five Force Model
In order to assess some of the benefits of procuring the small firm, the utilization of the business analysis model of Porter’s Five Forces is a simple, but important tool for analysis (see figure 1). An analysis potential threat of new entrants is one part of Porter’s model. Existing companies often will try to reduce the threat of new competition by creating barriers in the market or the industry (Pearlson, Saunders, 2013). In regards to the current firm, an analysis of threats would be new competition that has similar benefits, products, or services as the smaller firm. Another force in Porter’s model is the bargaining power of buyers. The bargaining power of buyers references to the industry’s customers that have bargaining power and can affect the competitive environment, such as reducing profit margins (“Porter’s five forces”, 2016). For example, if the smaller firm has the same resources or services as others in the competitive market, then the consumers have choices when it comes to services. The consumer has the advantage of going to