Porter'S 5 Competitive Forces

The attractiveness of an economic branch refers to its potential to generate profits and attract investment, this being analyzed considering the following factors: economic structure, market conditions, competition and last but not least government regulations and policies. The purpose of the article is to highlight some aspects related to the main competitive forces of an economic branch, respectively: the entry of new competitors, the threat of substitute products, the bargaining power of buyers, the bargaining power of suppliers and the rivalry between existing competitors. Cooperation, as well as the manner of action of companies in the competitive environment, influence the behavior and results of the activities in the competitive sphere. The five competitive forces form Porter's model, which is a strategic analysis tool that helps assess the competitiveness of an industry. A well-founded analysis of these forces helps to understand the dynamics of the market in which the company operates and leads it to adopt effective strategies to obtain a competitive advantage. The collective intensity of these five competitive forces determines the ability of firms in an industry to achieve, on average, rates of return on investment above the cost of capital. The five forces determine the profitability of the branch because they influence, within it, the prices, the costs and the investment that the firms have to make - i.e. The elements of return on investment.