Porter’s Five Forces Model to determine the market ecosystem when developing a business plan.
It is important to understand that there is a balance of powers and threats that exist within the competitive landscape of a market, the Porter’s Five Forces model serves to help understand that ecosystem.
– Supplier Power is the power that suppliers have upon your business and others within a market. How much impact can a shift in a relationship with a supplier have upon your business?
– Buyers power is the power that buyers have. Do you have a lot of small buyers, or one big one? Could a single buyer, perhaps a distributor affect your business?
– Competitive Rivalry, how will competitors within your market impact your business? How will a change in their behavior or presence impact your business?
– Threat of substitution, how likely is it that customers will be able to have a similar experience with a similar product in the market?
– Threat of new entry, how difficult is it for other businesses to enter the market to compete with yours?
Don’t get trapped in “analysis paralysis” spend some time thinking about all this, but never forget the value of executing.
Last piece of info, when building a business plan, separate your personal/owner goals from your business goals. If you as the owner plan to build the business up and sell it in a few years. That is not a part of the business plan. Because that is your activity, not that of the business. Something to think about.
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