Porter's Five Forces

Michael Porter's five forces are an extremely good measure of evaluating the structural attractiveness of a market segment. Competitive rivalry within an industry is one of the forces. For example, Gillette Mach 3 Turbo does not faces the type of strong competition which other products may face in other industries. This may be due to the fact that its brand image is far more powerful compared to its competitors. Gillette's differentiation strategy has allowed it to maintain its competitive advantage. For example, recently Gillette has introduced the Gillette Fusion brand which has further cemented Gillette's reputation of being a true differentiator.

Gillette's ability to charge a fairly high price for Mach 3 Turbo clearly indicates that its customers does not have that amount of bargaining power which they may have in other industries. The recent hike in sugar prices also shows that customer bargaining power is extremely low in Pakistan. If this sugar cartel would have known that the consumers may stop buying their sugar, they would not had indulged in such an activity. Furthermore, this price hike also shows that this sugar cartel has no threat of substitute products. If they knew that consumers will start buying alternative types of sweeteners, again they will never increase the price of their product.

Another force to be reckoned is that of the threat of new entrants. There are some industries where a single or a couple of large companies have emerged which are charging high prices and still they are not providing satisfactory service to its customers. This may happen due to a massive initial investment required to enter that industry. KESC (Karachi Electric Supply Company) is an example of such a company. Any new entrant will have to install all that infrastructure which is essential for an electric company but which is extremely expensive.

There are some industries where the bargaining power of suppliers is quite strong. For example, the textile mills are a constant victim of this force. When yarn producers demand high prices just because they are protected by the government from foriegn yarn producers, textile mills have to pay that price in order to meet their export orders, otherwise risk maligning their reputation in the foriegn markets. Guys, check out this information on Porter's Five Forces and do give feedback.

http://en.wikipedia.org/wiki/Porter_five_forces_analysis