The model of the five forces To carry was worked out by the professor of strategy Michael Porter in 1979.

It synthesizes the factors influencing the performance of a company by five forces:

• capacity of negotiation of the customers;
• the threat of entering potential;
• capacity of negotiation of the suppliers;
• the threat of the substitute products;
• intensity of intrasectorielle competition.

The weight of these five forces makes it possible to determine the capacity of the involved firms to release a profit. If all the forces are high, the possible profit will be limited. Contrary, if the forces are weak, it is theoretically possible to release an important profit. The essential point thus consists in treating on a hierarchical basis these forces so as to determine which are the key success factors in industry, i.e. the strategic elements which it is advisable to control to obtain an competitive advantage.

Capacity of negotiation of the customers

The principal influence of the Client S on a market appears through their capacity to negotiate . Their influence on the price and the conditions of sale (terms of payment, associated services) determines the Rentabilité market. The level of concentration of the customers grants capacity more or less to them; customers very few facing producing S multiples have greater possibilities of Négociation (ex: the Large distribution). The capacity of the customers is all the more large as the products are standardized or that there exist substitute products easily available (cost of change of low supplier).

Capacity of negotiation of the suppliers

The capacity of the Supplier S to impose their conditions on a market (in terms of cost or quality) directly impacts the room for maneuver and the profitability of the companies engaged on this one. This capacity is generally inversely proportional to those of the customers. A low number of suppliers, a strong mark, very differentiated products are as many factors which increase the cost of change of supplier and thus the capacity of those.

The threat of the substitute products

The substitute products do not form part of the market, but represent an alternative to the offer. They can be different products meeting the same need (ex: remote loading MP3/Compact disk S), is products influencing the request (electric vehicles/containing hydrocarbon fossils). The substitute products are characterized by a cross elasticity which is positive. In the facts, the increase in the Prix of a well consequently causes the increase in the quantity sold of the other.

Intensity of intrasectorielle competition

The competitors fight within the sector to increase or simply maintain their position. There exists between the firms of the more or less intense power struggles, according to the strategic nature of the sector, the attraction of the market, its developmental perspectives, the existence of “barriers at the entry and the exit”, of the number, the size and the diversity of the candidates, the importance of the standing fixed overheads, the possibility of carrying out, banal or perishable nature economies of scale of the products, etc…

The threat of entering potential

The arrival of new competitors is influenced by the barriers at the entry, the initial investments necessary, the tickets of entry, the patents already in places, the standards, measurements Protectionniste S, the image of industry and of the already established companies, the cultural barriers, the technical standards, etc All these means make the entry more difficult for a new firm. Behavior of the actors in the sector (ex: Large distribution, car - the entered last is Tucker, in the years 1930).

The role of the public authorities

Although public authorities (State, European commission, local government agencies, etc) does not appear explicitly in the model suggested by Mr. Porter, its influence is taken into account and can affect each of the five forces. The Political and the legislation implemented indeed condition the way in which each force is exerted on the market. For example, the entry on the market can be subjected to an approval or contrary being the object of subsidies.

Use concretes model of the five forces in company

The objective of this model is to identify the key success factors of the environment, i.e. the element strategic which it is advisable to control in order to obtain an competitive advantage. For that, it is necessary to treat on a hierarchical basis the 5 forces, in order to determine which strategic actions must be carried out in priority.

Critics of the model of the five forces

The model of the five forces is the fundamental tool of the analysis of the environment in strategy. It is however criticizable for several reasons:

- It is founded on a rhetoric of the confrontation (forces, capacity, etc) which is focused more on the threats than on opportunities and leaves only little place to the strategies of collaboration.

- It implies that the strategy primarily consists in adapting to the conditions of the environment, which excludes the approaches based on the resources and competences, which privilege an endogenous vision of success.

- It can be supplemented: certain authors (in particular in continental Europe) add a sixth force, the influence of the public authorities. One speaks then about model of the 5 (+1) forces. To carry itself added in more recent writings the role of the complements (for example software publishers for the industry of the microcomputer).