This is a simple “How to Report” to show you what it is you will need to know when starting your new business. In this passage we are going to be reviewing 4 different business models to help you make better decision when starting your new business. Let’s start with Porters five forces model.
Figure 1
Figure 1
Porter’s five forces model (Figure 1) is a business strategy tool that helps a person analyze all the different strengths, weaknesses, pros and cons of the industry and your business. Let’s begging by looking at Potential Entrants, in here we study how hard it is to enter, if you need any knowledge, and if there are any barriers to enter. If entering the market is very easy then this becomes a bad thing because it will lead to lots of competition which means lower income to stay competitive. Next, let’s examine the buyers, is there a high demand for the product, is it price sensitive, easy to switch to another brand. By having a high price sensitive product you won’t have much control over your selling price. If the competition brings down their price so will you because with high price sensitive products the customer is looking for the better price. To continue, we have threat of substitution, can the customer substitute your product or service by doing it themselves if they can what is the ease of them doing it. The easier your product/service is to substitute the least of the need/worth for it. Also, Porter identified Supplier Power, is there a number of suppliers, how unique is the product/service, is it easy to switch from suppliers, and is it costly to switch from supplier. Here you analyze how much power the supplier has over you or how much power you have over the supplier; if the industry doesn’t have many suppliers then they could be a factor in driving up prices. Last, Porter identified Industry Rivalry, is there a lot of competition in the