Six Forces Model

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DEFINITION

A strategic business tool that helps businesses evaluate the competitiveness and attractiveness of a market. The six force model provides an industry-view and analyzes six key areas:

Competition - Information regarding present competition
New Entrants - Information regarding the ease with which new competition could enter the market
End Users/Buyers - Information regarding the buyers' abilities to affect price
Suppliers - The number and type of sellers
Substitutes - The ease by which a product or service can be substituted
Complementary Products - The impact of related products and services already in the market



INVESTOPEDIA EXPLAINS

The five forces model was originally developed by Michael E. Porter of Harvard Business School. The six force model later came in the mid-1990s and added complementary products. It is used to evaluate a firm's strategic position in a particular marketplace. The Six Force Model can also be used to determine the market's overall attractiveness in relation to profitability and competition.


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