Six Forces Model - Definition
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What is the Six Forces Model?
The six forces model is a business tool used in conducting a comprehensive evaluation of a market regarding competitiveness and profitability. There six key areas of the six forces model are:
- Competition - The present competition in the market
- New Entrants - How new competition could or are allowed to enter the market
- End Users - How buyers influence price
- Vendors/Suppliers - Types of sellers or suppliers and their number
- Substitutes - How easily a product can be changed for another
- Complementary Products - The role of similar products and services in the market.
This model is an extension of the Porters Five Forces Model.
Limitations of Porter's Five Forces Model
The limitations of the Porters model include the following;
- The Porter model is only applicable to small, simple and static markets and large ad dynamic ones.
- The model gives no regard for other external factors that influence the market.
- It gives no account for the emergence of new businesses and variance in patterns of businesses.
- The Porters model does not account for market growth that are not attributable to the respective markets.
Despite the limitations of Porters model, the six force model later included the tendency of complementary products to the available in the market in the mid-1990s. The model is helpful is examining the position of a business or firm in the market and other strategies that can be used to improve such position.