Porter’s Competitiveness Analysis Model (Porter 5 Force Analysis) Porter’s Competitiveness Analysis Model was proposed by Michael Porter, a professor at Harvard Business School, for competitive strategy analysis. He summarized competitiveness into five forces, namely the bargaining power of suppliers, the bargaining power of buyers, the ability of potential competitors to enter, the substitution ability of substitutes, and the existing competitive power of competitors in the industry. The combination of Porter’s Competitiveness Analysis Model determines the profit level of the industry. If an enterprise is in an industry where the bargaining power of suppliers is low, the bargaining power of buyers is also low, there are industry barriers that make it difficult for potential competitors to enter, there are no substitutes, and the industry competition is not sufficient, this enterprise must be a high-profit and high-monopoly enterprise.
The content of Porter’s Five Forces Analysis of Traditional Enterprises is as follows.
The bargaining power of suppliers: Whether it is a self-operated chain supermarket or a platform-based department store or shopping center, retailers are basically dominant, and the bargaining power of suppliers is not strong. It belongs to the situation of big stores bullying customers (households), especially electrical appliance chains, and the bargaining power of suppliers is even lower.
Buyers’ bargaining power: The more competitive the market is, the more choices consumers have. Competition between retailers is most obvious in terms of price, which results in customers’ bargaining power gradually increasing.
Potential competitors’ ability to enter: Traditional retail is an industry that requires high investment, long investment cycle, and scale. Potential competitors do not have strong ability to enter directly.
Substitution power of substitutes: Currently, the biggest substitute for traditional retail is e-commerce. The impact of e-commerce on traditional retail is gradually increasing, so the substitution power of substitutes is very large. Of course, no one knows where the boundary of substitution is. Industry competitiveness: Retail is a fully competitive industry. Most high-tier cities are saturated, while there are still some opportunities in low-tier cities. In addition to analyzing the industry as a whole, Porter’s Five Forces Analysis Model can also conduct comparative analysis with specific competitors, and can be quantified through expert scoring.