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. Lean Six Sigma

    Lean Six Sigma is a managerial approach that combines Six Sigma ...
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. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another ...
  2. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  3. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  4. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  5. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  6. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
Trading Center