Six Forces Model


DEFINITION of 'Six Forces Model'

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

BREAKING DOWN 'Six Forces Model'

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.

  1. Porter Diamond

    A model that attempts to explain the competitive advantage some ...
  2. Gantt Chart

    A Gantt chart is a visual representation of a project schedule. ...
  3. Business Model

    The plan implemented by a company to generate revenue and make ...
  4. Enterprise Resource Planning - ...

    A process by which a company (often a manufacturer) manages and ...
  5. Porter's 5 Forces

    Named after Michael E. Porter, this model identifies and analyzes ...
  6. Rule Of 72

    A shortcut to estimate the number of years required to double ...
Related Articles
  1. Entrepreneurship

    10 Breakout Ideas For Small Businesses

    If your business has hit a wall, we've got the answer to break through and increase sales and earnings.
  2. Entrepreneurship

    Small Business: It's All About Relationships

    Rather than be a jack-of-all-trades, an owner should rely on a network of trusted experts.
  3. Professionals

    The Lucrative World Of Third-Party Marketing

    Hedge funds don't sell themselves. Marketing experts reel in the big fish.
  4. Professionals

    The Marketing Director's Pitch

    Are your shoulder's wide enough to carry a company's reputation?
  5. Investing

    Time to Bring Active Back into a Portfolio?

    While stocks have rallied since the economic recovery in 2009, many active portfolio managers have struggled to deliver investor returns in excess.
  6. Investing

    What a Family Tradition Taught Me About Investing

    We share some lessons from friends and family on saving money and planning for retirement.
  7. Investing

    Where the Price is Right for Dividends

    There are two broad schools of thought for equity income investing: The first pays the highest dividend yields and the second focuses on healthy yields.
  8. Economics

    Investing Opportunities as Central Banks Diverge

    After the Paris attacks investors are focusing on central bank policy and its potential for divergence: tightened by the Fed while the ECB pursues easing.
  9. Stock Analysis

    The Biggest Risks of Investing in Pfizer Stock

    Learn the biggest potential risks that may affect the price of Pfizer's stock, complete with a fundamental analysis and review of other external factors.
  10. Entrepreneurship

    4 Things to Know About Your Company To Make a Successful Pitch to Investors

    Learn how to make a successful pitch to investors. Regardless of your industry, size or market, there are some questions all investors need to have answered.
  1. Besides Porter's 5 forces, what other forces shape industry in the 21st century?

    Competition, potential new competition, supplier power, buyer power and the threat of new substitute products, also known ... Read Full Answer >>
  2. What does low working capital say about a company's financial prospects?

    When a company has low working capital, it can mean one of two things. In most cases, low working capital means the business ... Read Full Answer >>
  3. Do nonprofit organizations have working capital?

    Nonprofit organizations continuously face debate over how much money they bring in that is kept in reserve. These financial ... Read Full Answer >>
  4. Can a company's working capital turnover ratio be negative?

    A company's working capital turnover ratio can be negative when a company's current liabilities exceed its current assets. ... Read Full Answer >>
  5. Does working capital measure liquidity?

    Working capital is a commonly used metric, not only for a company’s liquidity but also for its operational efficiency and ... Read Full Answer >>
  6. How do I read and analyze an income statement?

    The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center