One of the critical Business Analysis to be performed is the competitiveness in your business niche. The Michael Porter 5-Forces of Competition is one of the most effective and complete competition Analysis and it must form part of the information in the Marketing Plan Template. It is also one of the most pertinent information as an input to the Marketing Strategy. Below is a brief overview of a 5-Force Competition:-

What is Michael Portal 5-Force of Competition?

Michael Porter’s 5 Forces of competition is a framework of analysis used in as an incorporation of a business strategy. It used to determine five forces that determine the competitiveness of a market  and hence the attractiveness of a market.

Michael Porter referred to these 5 forces as the micro environment which may influence the profitability of a business. Changes to these forces are therefore has a direct impact to the attractiveness of the business for new investor. However, a change to any of the 5 forces normally requires a company to re-evaluate the market and hence the profitability. The 5 forces are briefly illustrated below:-

1)  The threat of substitution

A product existence due to its popularity may forced into higher price and it is one of the cause consumer to look out to alternatives. when this happen, a substitution of the existing product is formed.

2)  The threat of the entry

In a highly profitable markets that yield high returns will attract investor attention. The intensity of such a new entry get higher when the product line is easy to duplicate. These are some of the factors that results in many new entrants that eventually increases its supply. In a long run, it will effectively decrease profitability in the market.

3)  The intensity of competitive rivalry

Due to the competitive nature of a market, the intensity of competitive rivalry getting very apparent during over supply situation. When this occurs, pricing strategy is the major factor used by the major player. Lowering of price to compete each others forces the profitability to drop. In a long run, certain sector may forced into losing situation.

4)   The bargaining power of customers

One of the unrealized factor about customer is there ability to form their own formal or informal group. They have a bargaining power when they approach the market as a whole. The ability of customers to put undue pressure on suppliers cannot be ignored. One example of such pressure is they collectively import products instead of buying locally.

5)   The bargaining power of suppliers

This is one factor that can be quite unique as suppliers are competitors in nature. However, the influence of a formal or informal group can be quite challenging to the manufacturers. However, the bargaining power of suppliers especially in a special raw material to an industry can be quite demanding

In conclusion, the 5-forces of competition if done in details can be used as an input to the SWOT Analysis as the external factors. More detail illustration of the 5-force of competition can be obtained from Wikipedia here