5 Forces of Porter

In this class: one of the most famous strategic planning tools.
American accent / sotaque americano.

Vocabulary list:

  • Tug of war: cabo de guerra.
  • Profitable: lucrativo / rentável.
  • Fierce: feroz.
  • Cheapest: o mais barato (de todos).
  • Clout: poder, influência / peso.
  • Toughest competitors: os concorrentes mais duros.
  • Retain: reter
  • Narrow: estreito(a)
  • Exit row: fileira da saída de emergência.
  • Shape: moldar (no sentido do vídeo)

Now, watch the video:

We recommend you watch the video at least twice.

In the first time, pay attention to the use of the vocabulary presented above.

Before playing it for the second time, take a look at the questions below. After watching it, try to answer them correctly. 

1. According to Porter competition is not about who is the biggest, it is about who is the most…
(a) famous
(b) rich
(c) profitable
(d) cheapest

2. What are Porter’s 5 Forces?
(a) Buyers / Suppliers / Substitutes / New Entrants / Rivals
(b) 
Buyers / Suppliers / Substitutes / Carriers / Rivals
(c) 
Buyers / Retailers / Substitutes / Carriers / Rivals 
(d) 
Buyers / Wholesalers / Substitutes / Carriers / Rival

3. Which airline was mentioned as an example of “New Entrant”.

(a) Southeast Airlines
(b) United Airlines
(c) American Airlines
(d) Southwest Airlines

Check the answers at the end of the page.

Practice Your Listening Comprehension and Writing

Explain with your own words the 5 Forces of Porter.

28 respostas para “5 Forces of Porter”

  1. The 5 forces of Porter shows which market forces the profit, the number of clients, the expenses and competition during the lifetime that a company can be impacted. Which means that each vector can result in different ways and reflecting inside company’s sector. For that reason is relevant taking this business strategy for granted.

    1. Hello, Pedro!

      Thanks for your comment.
      It is a bit confusing though, would you mind rephrasing it or if you prefer, you can write in Portuguese so I can help you build the sentences in English! 😉

  2. Competition is about who is the most profitable and for that the company needs to understand the 5 forces of Porter that together define the company’s profitability.
    Buyers (1) want to pay less and get more; Suppliers (2) want to be paid more and deliver less; Substitutes (3) and New Entrants (4) can be challenge and threat the company’s segment. Moreover, they push the company to think out side the box and spend more than expected to retain its clients. The last but not the least, a huge amount of Rivals (5) can make the competition environment even more fierce.

    1. Hello, Larissa!
      Excellent summary!!

      Just a few points:
      – Substitutes (3) and New Entrants (4) can be a challenge and a threat to the company’s segment.

      notice that THREAT: ameaça (noun) so you need to add “A threat TO…”
      Another way is to use a verb: THREATEN (ameaçar): “and threaten the company’s segment”

  3. According to Harvard Business School professor Michael Porter, business competition is more than a tug of war between rivals. It`s not about who is the biggest, but who is the most profitable.
    For him, profitability is defined by five competitive forces, as we can see bellow:
    1. BUYERS: or costumers are always be happier to pay less and and get more. In the airline industry, price competition is fierce, because everybody want the cheapest prices.
    2. SUPPLIERS: usually, suppliers ideally like to be paid more and deliver less. Powerful suppliers will use their cout to raise prices.
    3. SUBSTITUTES: this source of competition comes from substitute products or services that meet the same basic need you do. These aren`t always rivals, but the toughest competitors come from different industries.
    4. NEW ENTRANTS: professor Taylor cites the example of Southwest Airlines, that challenged the industry flying just with one kind of airplane, reducing costs and allowing it to offer better ticket deals.
    5. EXISTING RIVALS: the competitors have to fight their existing rivals and intense competition reduces everyone`s profitability. The major airlines have been in this position for years, forcing them to defend increasingly narrow profit margins.
    Finally, if you understand these five forces, you can make better prognostics, create more competitive strategies, and increase considerably your profits.

    1. Hello, Debora!

      Excellent summary. Great job, keep it up!!
      And remember to practice the pronunciation exercise: repeat what the narrator is saying. 🙂

  4. The 5 Forces is a strategic analisys model that identifies and analyses five competitive forces and is applicable in any industry or segment. This model allows us to determine the strengths and weaknesses of the analyzed industry.

  5. Excellent and I will use this video with my teams rsrsr…. Today, its realy necessary to make the business more and more profitable using different tools and having a 360° view.

  6. According to Porter, to have more profitability ia necessary to pay attetion at five competitive force to leverage the profitable; When the industry know and understant the 5 force it is easier to crente a prediction.

    1. Exactly! Good summary, Priscila.

      PS:
      – to have more profitability it’s…
      – pay attention to…
      – five competitive forces to leverage the profitability (or the profit)
      – when the industry knows and understands
      – easier to create

  7. Competition is not about being the biggest company, but being the most profitable.
    According to Porter, profitability is defined by 5 competitive forces:
    1) Buyers/Clients: want to pay less and get more
    2) Suppliers: want to be paid more and deliver less
    3) Substitute products or services: they meet the basic needs that you do and they are not obvious rivals; they can be from other industries
    4) New Entrants: can create tension in the market
    5) Existing Rivals: the intense competion reduces everyone’s profitability

    These 5 forces define the industry structure and shape the company’s future. If you understand the concept, you can make better predictions, be more strategic and increase your company’s profitability

  8. Porter wrote in five forces what the company in general needs to do for a better future.
    The company in general needs to change their form of work (product and service) for to survive in the future.

    We have a example in the car industry, where one company – Tesla – it has a major value than a group of tradicional car company, like GM, Toyota, Ford, Fiat… and others.

    Ho / Augusto, the word ” who’d = who would ” ? It is in time 0:40 in the video.

    1. Hello, Alexandre.
      Great analysis!
      Yes: who’d in this case is who would.

      PS:
      – …needs to change their form of work (product and service) TO survive in the future.
      (there’s no need to write FOR TO. Only TO is enough here)

      – an example
      – where one company – Tesla – has a higher value
      – traditional

  9. The 5 forces of Potter relate to main topics a company must understand and to pay close attention in order to suceed.
    Here they are:
    1) Buyers: or costumers, always looking for the best deal, in other words: to pay less and to get more
    2) Suppliers: they are always looking for to receive more and to deliver less and/or having other contract benefits
    3) Substitutes: companies that meet the same needs but offering innovative or different kind of services or products.
    4) New Entrants: companies that offer the same service or product but cheaper or with other benefits
    5) Existing Rivals: companies are always looking for innovation in a competitive scenario and if your rival find strategies that can offer best prices, services, innovation or a mix of all of them it can be a serious threat for your company.

    I am reading an excellent book named “Think and Grow Rich” from Napoleon Hill and there´s something I found very interesting: Napoleon says if you run a company you must keep asking all the time: “What could destroy my businness?” and when you have any answer, you must to antecipate any actions in order to protect your business because your competitors will be constantly asking the same question but the question will be not be directed to their business but yours so you must ask yourself before them and take actions in advance.

  10. Five forces is a scheme created by Michael Porter to improve the comprehension about the competition in any kind of industry. According Porter, profitability is more important than market share or how big the company is. The Five Forces can show how competitive a segment of industry is. A full comprehension of that can help companies to predict the market, being useful to create more effective strategies to compete, impacting profits positively.

  11. The Five Competitive Forces that shape strategy;

    According to Porter, competition is more complex than we believe, is often looked at too narrowly by managers.

    It is not about who is the biggest but it is about who is the most profitable.

    To achieve profitability companies have to handle the 5 Forces, that define every industry structure and shape the company’s future.

    Buyers/Customers always want to pay less and get more, bargaining powers.

    Suppliers would like to be paid more and deliver less.

    Substitutes for Products or Services that even meet the same basic need we do, which aren’t obvious rivals, the toughest competitors come from different industries and certainly kind of grab a piece of the market.

    New Entries can also create tension, pushing us to spend more to retain our customers and place a constraint or a cap on our profit and growth

    Existing Rivals in which intense competition reduces everyone’s profitability, forcing us to work with narrow profit margins.

    If you try to understand those forces in a kind of holistic way of looking at the industry and the structural underlying drivers of profitability you can change the game in your favor. In order to make better predictions, create more competitive strategies, and increase profits.

  12. Basically the 5 forces shown refers to market strategy for company long life.
    1) Buyers or costumers: It’s necessary a great negociation sense once buyers or customers want to pay less and get more.
    2) Suppliers: Would like that you paid more and that suppliers can deliverie less. And, to force a market to raise prices, they can use some methods or terms to define prices in your benefit.
    3) Substitutes: If the options are not favorable in the market, can you use a substitute product or service similar to original that you chose at the beginning.
    4) New Entrants: Can cause some tension in the market, because they can bring a new business model to serve customers.
    5) Rivals: This last topic I disagree a little. Maybe that exist some changes in the rules due to fierce competition, but the market work better with competition between companies than a monopoly. The customers have more options to chose and more possibilities to negociate.

  13. Buyers want to pay less to the suppliers and get more, it isn’t a fierce tube of war, but it’s necessary to be profitable. Sometimes the thoughest competitors suppliers has the clout to retain more consumers who paid more to these suppliers who want to deliver less.
    In the other hand we have the substitutes products or services that meet the same basic needs you do, these aren’t obvious rivals and competitors may come from different industries, but also new entrants can also create some new products which reduce costs and inovate in their market and finally the existing rivals can’t be forgotten because this intense competitions can reduce their profitability, that’s why it’s very important to know these 5 five forces, to predict and do shape your company future.

  14. Porter is the most importante person in the World. I love his studies for Industrial , then he said that there are Five Forces about competition:
    1- Buyers: Persons or Company that to make Buy something
    2- Suppliers: Are important to make increase process, for example
    3- Substitute: Change, because the market is always changing
    4- New Entrance: It’s a Competition, A Industrial is never alone
    5- Existing Rivals: It’s important to Know how about your Rivals is making, because You can Better to improve

  15. According to the article, competition is not about be the biggest but be the more profitable is what at stake in the business world.
    The profitiability is defined by 5 competitive forces:
    1 Customer, who is always happier to pay less and get more
    2 Suppliers, who wants to be paid more and deliver less
    3 Substitutes products, looking for lower prices.
    4 New Entrants, makes the competition. So the company needs to have a better product with the competitive price to be more interesting than the rivals.
    5 Existing rivals, it´s a market, yes it´s a red ocean!
    So the company has to be read for understand the 5 forces and makes a successful approach with the customers.

  16. These five forces define the structure of each sector. And from these 5 forces they can shape the future of your company and in this way be better organized your profits.
    1 buyers: is always happy a pay less and get more, many travelers just want the cheapest flight
    2 Suppliers: used their clout, to raise price or insist on other more favorable terms.
    3 Substitutes offering the same service are not always rivals. competitor may come from different sectors.
    4 New participants can also create tension. Reduce costs and allow you to offer better. Forcing other operators to spend more to retain their customers.
    5 Rivals: Forces competitors to defend ever-decreasing profit margins with fees, reducing important and even essential services

  17. Buyers: customers that like to pay less and get more;

    Suppliers: customers that want to be more paid but deliver less;

    Substitutes: products that are substituted to cut down expenses and be more effective;

    New entrants: new participants to improve the business;

    Existing rivals: the more competition, the less profitability.

  18. According to Professor Marcos Porter. Competition is more than a tug of war between rivals,
    It is about who is more profitable rather than who is the biggest one , then the professor Marcos Porter created 5 forces of Porter , where profitability is defined by 5 competitive forces, as bellow :
    Buyers
    Costumers always want to pay less and get more, the more the companies offer the more the consumers want. Consequently it has became the disput between competitor , that are on the same market share, as bigger as ever . As a result of the price competition is fierce
    Suppliers
    In some industries, suppliers have used the clout for defining the prices and rules for acquiring products from them. Suppliers in general would like to paid more and delivery less .
    Substitutes
    The 3rd sources of the competition comes from substitute products services that meet the same basic need .The toughest competitor may come from different industries
    New Entrants
    New entrants can be a new threat the company’s segment, then the industries need to spend more to retain their consumer
    Existing Rivals
    The intension competition reduce everyone profitability, then each company have to fight to keep their narrow margin profit
    Summarizing, whatever be industries structure thee 5 forces of Marcos Porter define everyone industries structure, once understand and apply them, it would be possible to take better decision and better prediction and keep the margin profit.

  19. In my opinion the 5 forces of Porter summarize as:
    1. You have to know everything your target audience
    2. How important is the agreement (not only related a price, but all the supply chain) with the suppliers
    3, 4 and 5 – You must analyse the market, the trends, new devellopments, the customers, government policies… every news about your segment.

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Answers:
1-c / 2-a / 3-d