One of the crucial steps in an external analysis is to analyze the six competitive forces - intensity of industry rivalry, threat of potential entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitute goods/services, and power of complementary goods/services. Using this competitive forces model, you can neatly outline the key elements of each of the six forces and have a clear picture of where a company is standing among its rivals.
The competitive forces model (Porter's five forces template) is an important tool used in strategic analysis to analyze the competitiveness in an industry. This model is more commonly referred to as Porter’s Five Forces Model, which includes five forces — intensity of rivalry, threat of potential new entrants, bargaining power of buyers, bargaining power of suppliers, and threat of substitute goods and/or services. In our competitive forces model, we include a sixth force, power of complementary goods and/or services providers. This model helps a company understand the risks in the industry it is operating in and decide how it wants to execute its strategies in response to competition.
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