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Porter's 5 Forces Model and Industry

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Using Porter's 5 Forces Model analyze the industry in which your specific business unit resides.

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Solution Summary

This solution discusses an industry with reference to Porter's 5 Forces Model.

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I can explain this in terms of an advertising firm, as I work in an advertising agency. The industry is that of marketing / advertising, and these forces apply to the general advertising industry.

Let's first look at the Porter's 5 Forces Model. Essentially, this model explains that there are 5 forces that influence a firm, and this model can help a manager better understand their industry and gain a competitive advantage over their competition. There are the 5 forces:

Supplier power
Barrier to entry
Threat of substitutes
Buyer power
Degree of rivalry

Let's look at them in terms of advertising:

Barrier to entry

This is essentially how hard it is for a person to set up a business. Some industries have very high barriers to entry. An airline would be one for example. It firstly costs a great deal to set up an airline, you need a lot of capital to buy planes, you need to follow strict government regulations, and you need to hire top talent. Therefore, there is not a lot of competition in this industry, and profit margins are high.

In the world of advertising, barrier to entry would be ...

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