Porter’s 5 Forces Model: Understanding the Data Analysis Model for Industry Research

 The post-2019 business environment has been challenging for various industries, especially the retail and hospitality industries. First, the Covid-19 pandemic curtailed global supply chains and now the Russia-Ukraine war and economic recession are affecting business in several economies. The industries are forced to overhaul their existing strategies and SOPs for customer retention, balance the demand-supply chains, and explore new geographies for resources. To deal with such dynamic challenges, businesses can leverage the proven potential of industry research given the actionable insights derived from it. Among the various data analysis models for industry research, in this blog, we will learn about the steps involved in the Porter’s 5 forces model. 

Porter’s 5 Forces

Introduced by Micheal Porter, the Porter's Five Forces Framework is a tool that helps to identify competition and profitability in an industry. In this approach, you evaluate the five forces/factors that influence/shape the industry. 

Industry Rivalry

This is the driving force at the core of the model, which can provide information on the strength and USPs of industry rivals. Factors such as the number of competitors, product/service quality, costs, and customer loyalty is studied in this step of the industry analysis.

Threat of Entry

The study of Threat of Entry tries to gauge how conveniently new enterprises can access a market. Herein costs, technological protections, timing, economies of scale, etc are studied.

Threat of Substitutes

Almost every industry faces the threat of substitutes and in case the substitutes are not available, competitors within the industry become the threat. Customers, in case of any minor inconvenience readily switch to other firms even with the same price range and this is why an analysis of substitutes in the industry is crucial.

Bargaining power of suppliers

The bargaining power of suppliers is directly influenced by the demand-supply equation. The more the number of suppliers in the market the less will be their bargaining power. Other factors to be studied include quality of service/product and uniqueness.

Bargaining power of buyers

The bargaining power of the customers in any industry is dependent on the number of buyers/customers, price sensitivity, differences between competitors, and ability to substitute. Information on these factors can help plan better.

For a comprehensive analysis of such factors, industry consulting companies can be very helpful for businesses, as they do all the heavy lifting on data analysis and provide meaningful insights to help you reach a wider audience. Whether it is about customer acquisition in new geographies or retaining the loyal ones in the retail industry, you can always count on an experienced retail management consulting firm to provide you with actionable insights.

Final Word

With the right knowledge about the industry’s ins and outs, highs and lows, strengths and weaknesses, and methods to overcome these challenges, it is possible to expedite your business growth despite stiff competition. Rather than taking the challenge upon yourself, you can tie up with a leading industrial consulting firm to make your research endeavors easier. Partner with a retail research firm that understands your requirements and deploys cutting-edge methodologies to provide valuable insights to help you gain an edge over your competitors.