What is Porter Five Forces Analysis and PESTLE Analysis?


What is Porter Five Forces Analysis?

Knowing and evaluating the business competition is a huge aspect of business success in the current marketing position. The Porter Five Force Analysis highlights the process of evaluating the competition to understand the threats and using the knowledge to create huge success for the company.

The elements of Porter Five Forces Analysis are:

  1. Evaluating existing Competition
  2. The Threat of Substitutes
  3. The threat of New Entrants
  4. Bargaining Power of Customers
  5. Bargaining Power of Suppliers

#1 Evaluating existing competition

The first step of this situational analysis is to establish the number of competitors that a company have and how strong these competitors are.

The number of competitors and the size of the competitor’s business determine how strong and powerful they are within the market.

#2 The threat of substitutes

It refers to the ability to recreate a company’s product. A company has more power in the market if it does not have any other substitutes or any other company cannot create different substitutes for the same product.

#3 The threat of new entrants

A Company’s market position is also determined of how easily the competitors can enter into the similar field in the near future. If the competitors can enter hassle free without any restrictions in the market, the power of existing business will weaken, as it will have threats of new entrants invading the existing market.

#4 Bargaining power of customers

Small business or start-ups are more affected with the bargaining power of customers. This aspect highlights how influential a customer can be in order to drive a product’s price up or down.

If the customers are more, the business will have less individual power to control the pricing of a product.

#5 Bargaining power of suppliers

The bargaining power of suppliers completes the competition picture. If there are many suppliers available, each one has less bargaining power. Businesses with fewer suppliers have more control over the costs.

What is PESTLE Analysis?

The PESTLE analysis provides insights to the external situation of an organization from various angles. It focuses on political, economic, social, technological, legal, and environmental factors.

The PESTLE Analysis includes:

  1. Political factors: It focuses on government policies, trading policies, and elections
  2. Economic factors: It focuses on economic trends, taxes, and import/export ratios
  3. Social factors: It focuses on demographics, lifestyles, and ethnic issues.
  4. Technological factors: It focuses on advancing technology or technological legislations.
  5. Legal factors: It focuses on employment laws or health and safety regulations
  6. Environmental factors: It focuses on climate change or environmental regulations.

How to complete situational analysis?

If any business is confused on how to have a correct procedure for situational analysis, let’s dive into its different steps:

#1 Choose a dedicated method of situational analysis:

If you want to carry out situational analysis, first you need to choose a dedicated method, which will be used for detailed evaluation.

Much business will choose SWOT Analysis that provides a comprehensive picture about a company’s current market standing and determines a business about its improvements and threats.

#2 Complete the method guidelines:

The second step is to follow a simple direction and complete the chosen method with proper guidelines available.

#3 Reproduce with different method of analysis:

The final step is to reproduce the situational analysis with different methods. Run the existing methods with complete steps. It is best to use all the above-mentioned methods in conjunction with one another to provide the best results and strategy formulation.

What’s your approach of situational analysis?

One can be the master of the market by performing the situational analysis. We have covered the most important aspects and methods of carrying out situational analysis along with its features and qualities.

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