Six Forces Model Definition
The six forces model is a business tool used in conducting a comprehensive evaluation of a market with the bid to identify and analyze competitiveness and profitability in the market. The six forces model a strategy used in businesses to examine how attractive or competitive the market is. There six key areas that the six forces model focuses on, they 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.
A Little More on What is the Six Forces Model
This model is an extension of the Porter’s Five Forces Model, it is regarded as an analysis framework in the Porter’s industry. The initial five forces model was developed by a Professor at Harvard Business School, Michael E. Porter. However, the imperfections of the five forces model gave rise to the development of the six forces model. The six forces model created a business tool with which businesses examined how competitive and attractive the market is. The analysis focuses on six key areas that help to determine the profitability and competitiveness of the market.
Limitations of Porter’s Model
The limitations of the Porter’s 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 Porter’s model does not account for market growth that are not attributable to the respective markets.
Despite the limitations of Porter’s 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.