Halden Zimmermann: Five Forces

2

Click here to load reader

description

The Five forces are crucial for any business to understand. They let you know if you're doing the right things in terms of differentiation as well as several other guidelines.

Transcript of Halden Zimmermann: Five Forces

Page 1: Halden Zimmermann: Five Forces

Five Forces by Halden Zimmermann The Five Competitive Forces model is a framework created by Michael E. Porter in 1980. He included it in his book, “Competitive Strategy: Techniques for Analyzing Industries and Competitors.” This model is a tool used frequently in organizing an analysis of a company's positioning and risks associated with entering to remaining in a specific market.

Thinking through the five forces, I wanted to address a few things with this model so that is can be effective, instead of a fill in the blank framework people discuss in meetings and then walk away. For each of the forces there should be a specific understanding of the risk potential associated with each of the categorized responses. The risk metering should then be met with a specific action to offset or reduce this risk. A great tool for analyzing this is a PFMEA tool set which is typically used in process design and the risk of having a particular failure mode. The risk priority number (RPN) on the PFMEA tool would be the metric used to understand the potential of a failure occurring and then action surrounding those high potential problems would result in a recalculating of the RPN number. Using the PFMEA tool set you have a tool that not only captures potential risk factors but also puts a metric around level of risk and tracks actions to improve upon your position. Another thing to consider is to completely sidestep the positioning in your market. If you are spending a lot of time trying to tactically address specific problems associated with weak barriers to the five forces, i would estimate your margin is in great risk for your business. This is because 80% of your time

Page 2: Halden Zimmermann: Five Forces

should be focused on creating new markets or "blue oceans" to be specific. Creating a new market starts at the customer and does not rely on how competitors and suppliers would respond as a priority.