•   Compendent
  • Business
  • Home & Garden
  • Wellness
  • Nonprofit
  • Life
  • Blogs We ♥
  • Contact
  • Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Hide Search

Porter’s Five Forces Model for Small Business

by Compendent ·  3 min read  ·  June 23, 2021

Porter’s Five Forces Model for Small Business

If you’re looking to form a business plan, then perhaps you’ve heard of Porter’s Five Forces, as it’s typically used as a model to help businesses cover every corner of their plan. These five forces help act as a foundation upon which you can then build your business plan. But one needs to understand them to use them.

By using these five forces, you will see higher success rates and an increase in sales for your products or services. The five forces are as follows:

  • Buyer power
  • Barriers to entry
  • Rivalry
  • Supplier power
  • Threats of substitutes

Below, you will read through the five forces, one by one, so that you have a better understanding to be able to build your company’s business plan.

Porter’s Five Forces

Porter believed if you’re going to develop a strategy that’s going to work against your competition, and for you, then you need to come up with an effective strategical plan. To do this, you need to understand the industry structure at and as well as the competitive forces that you will be up against.

Therefore, he created the Five Forces, which will discuss below.

Purchasing Power

Understanding how much money your customers have is essential, as if they have low purchasing power, your sales will suffer. On the other hand, if they have high purchasing power, you will see a sales increase.

Barriers to Entry

An example of a barrier to entry would be a specific product. Let’s say that you sell workout equipment, and you crafted dumbbells. Since there are so many different companies offering your product, it’s going to be hard to move unless you made it unique.

Rivalry

When you get into the market, it’s crucial for you to understand the competition that you will be up against. You will have to more or less differentiate between the competition and the business so that you gain an advantage to increase profits.

Supplier Power

One of the significant indicators of whether your business is going to be successful or not is how well you can rely on your suppliers. For example, if you have a supplier who keeps increasing their prices for certain materials, this is going to make it harder for you to gather the materials needed to create your products.

To compensate for the material price increase, you will need to increase your product’s price, which will affect your consumers. If your consumers can’t depend on you to keep things steady, you’ll start losing buyers quickly.

Threat of Substitution

Something else that can affect the sales you get for your business is other companies substituting your service or product. For instance, say that you build a company that specializes in creating custom trim for homes. If a competitor starts offering the same thing but with cheaper materials and prices, this is called substitution.

This is why it’s important to ensure you use quality materials yet have reasonable prices so that other companies can’t come and steal your products or services to sell.

Filed Under: Business Tagged With: small business

Primary Sidebar

RECENT POSTS

Top 5 Myths You Still Believe About Real Estate Agents

March 9, 2023

Emergency or Sinking Fund – What’s First In A Church Budget?

March 3, 2023

Church Budget Checklist Essentials

March 3, 2023

Top 8 Tips for Church Budgeting

February 24, 2023

Communicating The Church Budget

February 24, 2023

Recent Posts

How A Real Estate Agent Can Help You Find the Best Deal

5 Ways to Boost Your Retirement Savings

7 Bathroom Trends to Avoid in 2023

Church Budget: Living Document or Stone Tablet

Why Church Budgets Are Not Based on Tithing

Related Articles


6 Ways Entrepreneurs Can Be Better Teachers

6 Ways Entrepreneurs Can Be Better Teachers

4 Cybersecurity Tips for Small Businesses

4 Cybersecurity Tips for Small Businesses

How to Search for a Mentor

How to Search for a Mentor

Three Methods to Consider that can help you Grow your Small Business

Three Methods to Consider that can help you Grow your Small Business

Should Small Businesses Start Accepting Cryptocurrency

Should Small Businesses Start Accepting Cryptocurrency

7 Amazing Profit-Making Ideas to Help Your Business Grow

7 Amazing Profit-Making Ideas to Help Your Business Grow

Is Google Translate Sufficient for Business, or Should You Hire a Professional Translator?

Is Google Translate Sufficient for Business, or Should You Hire a Professional T...

5 Experienced Business Owners Provide Startup Entrepreneurs Their Best Business Advice

5 Experienced Business Owners Provide Startup Entrepreneurs Their Best Business ...

How to Make Your Skincare Line Become a Reality

How to Make Your Skincare Line Become a Reality

Founding Sponsors
AV Programming Associates Christina DeBusk Greenlock Capital Long Beach Architect Ms Sparky Electric San Diego House Painters Purrfect Serving Canned Cat Food Cutters Smith Farms Custom Furniture VitalChurch Ministry
Scroll

© 2023 Compendent.com. All Rights Reserved.
Web Design by Modmacro℠

Sitemap  |  Advertising