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Six Forces Model
The Six Forces Model refers to a strategy instrument or tool of the business. We can call six forces model in short as SFM. Six forces model is used primarily in the form of a model of industry for assessing market competitiveness.
Michael Porter developed 5 Forces Model. This model was not that effective and for its improvement Six Forces Model was introduced. SWOT is also not that efficient as SFM and that is why six forces model is used often as substitute of SWOT.
6 areas of the marketplace analyzed by SFM
In the market-place there are 6 areas which are analyzed by the six forces model. These areas are mentioned below:
- Competition – Does a lot of competition exist in the commercial place? Is there the presence of prevalent players in the market?
- New Starters – Can a new person easily enter into the market & compete with the existing ones?
- Buyers – To what extend a buyer can easily affect the market price? Can the buyer and price act together? To what degree is the position of the buyer strong in the market?
- Suppliers – The power of supplier is reverse to that of buyers. The power of the supplier is high in that case where brand name is strong e.g. Microsoft, Pizza-hut etc. Does the supplier enjoys monopoly or there exist many other suppliers?
- Substitutes – What is the degree to which a service and product be easily substituted?
- Complementary – What is the influence or impact of the complementary services and products on the commercial area?
Uses of Six Forces Model
Six forces models are used especially for doing analysis in detail regarding the company's strategy-position in a market-place & for calculating the market efficiency with respect to profitability and competition. This calculation is mandatory before investigating the resources & deploying the measures of strategy, if there is too much competition in the market. It's also important to give a look at the substitute markets to achieve more revenue.
The market is not same all the time, it keeps on changing. Therefore, SFM requires strategy's re-assessment in the prevailing market. A business unit should make SFM as a strategy-planning procedure's part and should review it at least once in a year.
5 forces model's criticism
- Suppliers, competitors & buyers are not related & therefore don't collude and interact.
- That the Value's source is considered as structural-advantage.
- That there is low uncertainty, allowing the participants to make strategies for & react to the competitive-behavior.
Conclusion
Therefore, we can make a conclusion that six forces model is better than 5 forces model and SWOT. It is an advanced model developed specially to overcome the drawbacks of 5 forces model and SWOT.
About the Author
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