This analysis identifies five forces that control the market(s) that you operate within. Central to this analysis is the rivalry of market competitors that exist to serve and react to the other four forces. Five Forces Analysis complements the identification of the product life cycle by providing the ability to see how the market may change during each phase:
"We are not fit to lead an army on the march unless we are familiar with the face of the country—its mountains and forests, its pitfalls and precipices, its marshes and swamps." | ||
| --Sun Tzu, The Art of War | ||
Figure 3.4: The five forces that exist in all markets affecting the balance of negotiating power.
The central element that allows for the existence of the other four forces is the presence in the market of other entities competing for the same business. More competition provides buyers (customer segments) with more bargaining power and can eventually lead to the market becoming saturated...