You Have Many Competitors
We typically think of “the competition” as those companies who sell goods and services identical or similar to our own.
However, competition can take many forms.
A simple but powerful tool for understanding where power lies in a business situation is using Porter’s Five Forces. It’s useful because it helps you understand both the strength of your current competitive situation as well as the strength of a position you’re considering moving into.
Porter’s Five Forces says there are five important forces that determine competitive power in a business situation:
1. Direct Rivalry: What we typically think of as competitors.
2. Threat of New Entry: Determined by the ease with which new competitors can enter the market.
3. Substitutes: Ability of customers to find a different way of doing what you do.
4. Supplier Power: Ease with which your suppliers can drive up prices they charge you.
5. Customer Power: Ease with which customers can drive down your prices.
Knowing how these five forces affect your business can help you create and execute an effective growth strategy.