Week 4: Muddy: Porter's Five Forces

As I was watching the video, it was hard to distinguish what exactly Porter's Five Forces were.  The lesson was rather hard to follow.  I actually had to look it up on Wikipedia to figure them out and they seem more like what I heard in Micro/Macroeconomics while I was at Santa Fe College:

The Threat of New Competition
Threat of Substitute Products and/or Services
Bargaining Power of Customers (Buyers)
Bargaining Power of Suppliers
Intensity of Competitive Rivalry

These five things are rather simple to understand, I suppose.  The threat of new competition is that things that are highly profitable will create high demand and open up new businesses that wish to jump on the bandwagon.

The threat of substitute products and/or services can be rather difficult to understand.  It's not products that are similar to your product, but products that can replace your product.  For instance, the ability to order your plane tickets online has negated the need for a travel agent.

Bargaining power of buyers is another that can be simplified.  It's the ability of the customer to put pressure on the company to change prices.  How could this happen?  Well, we've just seen it with the Stop Online Piracy Act (SOPA).  People believed that it was an unfair act and let their Senators know and the act was placed on the back burner to be re-reviewed.

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Bargaining power of suppliers is pretty much the opposite of bargaining power of buyers in that the suppliers of the raw goods/services needed for your product can affect the price of your product.  Say you're a plumber, if the price of PVC pipe increases, it causes your service price to increase so that you may pay for the PVC pipe in order to fix your customers' plumbing.

Finally, intensity of competitive rivalry is another one that I had to delve a little deeper to get a better understanding.  I suppose the best example, though, are any type of political campaigns that you see online.  They attack people's character and want you to NOT vote for that person and vote for them.  This area of business has a high intensity of competitive rivalry.

So, in the end, I had to teach myself this instance, but it wasn't too difficult to understand.  The videos that I watched in the lectures were good, but they didn't seem to delve too deeply into the definitions of the separate factors.