Product Management: Porter's Five Forces

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Our team has curated a list of the most important product management frameworks asked in interviews such as Google, Deloitte, McKinsey, Microsoft, EY, ZS and many more. The frameworks are created from the best practices adopted by previous year candidates.

It is a business analysis model that can help identify the main competitors in the industry. Once the affecting sources are identified, they can be addressed and worked upon. This will help build up a better and more efficient product that can sustain itself in the market.

Michael Porter, a Harvard Business School professor, created this tool to understand a company's potential in attracting users as well as profitability.

Porter's five forces are as follows:-
 

The first force concentrates on how many potential rivals are already in the market. It analyzes their strengths and weaknesses. More the number of rivals, less the potential of the company.

If it takes less time and resources to begin a similar project, it will become a barrier when it comes to sustainability in the market. It depends on how hard the rivals find it to get into the same market.

If the problem which was solved by a company can now be solved by another rival in fewer resources or in less time, it can become a huge threat to the founding company's authenticity. Companies that have products that cannot be easily replaced can sustain quite easily.

This refers to the power suppliers have when providing inputs to a company. The more unique the input is, the more power a supplier has since he can change the pricing according to his own profits. If the input is not that uncommon and there are a lot of suppliers, the company can buy whatever fits its best needs.

This refers to the power that users have over the company. If a company has a small user base, the users can drive the company to lower the prices. If the company has a huge independent user base, it can change the prices according to its own benefits.

The tactical understanding and implementation of Porter's five forces can help a company adjust its business strategy to use its resources in a better way and produce even more revenue.