In Porter's 5 Forces, which we reviewed in the Our Place In Market Value Chain, we discussed the main part of what a business does—it's primary activities that generated value for the company, and how these are different than the traditional view of the business as engineering, sales, marketing, etc. In this section, we'll move further into the analysis part of the 5 Forces and look at how each group above affects our market.
We evaluate these forces to make determinations about their ability to impact the business. If things are high risk, we either need to have a strategy to ameliorate that risk.
The primary forces are high when:
Awareness risk
The risk that someone that is the buyer of your product or service will not be aware of your business as a solution to their problem.
Rivalry Risk
The risk of people taking your deal flow by offering solutions and substitutes.
Substitute risk
The risk that someone will use a solution that looks different than ours and rivals.
Supplier risk
The risk that someone that supplies inputs to you will take actions that impact your business negatively.
Buyer risk
The risk that a buyer's power will negatively impact your profitability or deal flow.
New entrant risk
The risk that new rivals will enter your market.