Six Forces Model

AAA

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

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  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. Enterprise Resource Planning - ...

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

    Named after Michael E. Porter, this model identifies and analyzes ...
  5. Business Model

    The plan implemented by a company to generate revenue and make ...
  6. Policyholder Surplus

    The assets of a mutual insurance company minus its liabilities. ...
Related Articles
  1. Small Business: It's All About Relationships
    Entrepreneurship

    Small Business: It's All About Relationships

  2. 10 Breakout Ideas For Small Businesses ...
    Entrepreneurship

    10 Breakout Ideas For Small Businesses ...

  3. The Marketing Director's Pitch
    Professionals

    The Marketing Director's Pitch

  4. The Lucrative World Of Third-Party Marketing
    Professionals

    The Lucrative World Of Third-Party Marketing

comments powered by Disqus
Hot Definitions
  1. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  2. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  3. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  4. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  5. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  6. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
Trading Center