 So in this video, we're going to be talking about Porter's five forces framework who was produced by Michael Porter Who is a Harvard professor and this is a good framework to actually analyze the market environment? And we're going to go through the introduction right now of what I'll be talking about within this video So this video is going to cover the marketing environment Discussion about each of the forces the importance of congruence between the forces Examples how this analysis can form strategy and then the conclusion So it's important to mention. What is the market environment? Well, the market environment is basically Anything surrounding the industry in terms of competitiveness in terms of what they what's going on within the market environment? I mean, it's quite self-explanatory the market environment, but there is a lot of variables to it And it's also ever-changing. So what that means is the market environment is always changing So from one month these these porters five forces one of them might be more significant than the other One month and then in another month another porters five forces Force is more significant than that one. So it's always changing So what that means is you always need to reevaluate the industry you're in So if you're looking to start a business, this is a good framework to use to actually analyze what's out there already What is the environment like? What is the market environment? But also if you are within an industry, it's important to always reevaluate this process Because it might change the industry changes. So you have to do competitor analysis and all the rest of it and and industry analysis and and market environment analysis Every single month or every sort of few months and it's important to make sure you use these sort of frameworks to Inform your strategy. So the first force to mention which is actually interlinked with every other force And it's the central one is the rivalry among existing competitors Now what that basically means is how much? Competition is within an industry because if you've got a load of Competition then this can affect all of the other forces around it and it can affect it has huge emphasis on the market Environment and a huge emphasis on many different variables. So it's important to figure out how competitive is an industry We'll talk about an example. So you think about the chocolate industry There is a lot of chocolate bars out there a lot of brands A lot to choose from so that means that the environment is Competitive now what it doesn't mention in this software work is the demands, you know, you may think all that industry is competitive So it's less attractive And it's less profitable. However, what you need to understand is obviously there's a lot of demand for Chocolate etc. So even though it might be less profitable and less attractive in that sense It can still be a good industry to go into because there is still a lot of demand for that particular produce So you've also got to keep that in mind and use sort of independent for When applying this theory, so you don't just sort of got list things You don't just take this free and I can say this this done You know, you got to look at things in context within the actual industry So it is about the competitors within an industry How many competitors they are and these affect all the other forces and one particular force that is going to really really affect out of all these is The bargaining power of The buyers. So what does that mean? It basically means how much can a Customer demand from you if you are the only competitor within an industry Then essentially You have the power because you're not competing against others Customers don't have a choice. They've got to go to you for that particular product for that particular service So what that means is you Can provide just an okay service and an okay product wouldn't advise any business to do that It needs to be amazing remarkable But if you're the only competitor within that industry, you're the only person within that industry You're not competing there. It can only go to you. Whereas if it's within industry where there's Loads of competitors like you think of the chocolate industry. What do people buy chocolate on? What what what is the main factors of chocolate in terms of when people make that decision? Okay, you think about price You think about maybe quality Depending on the segment, you know, you might think about gift wrapping because it's often used for gifts So you got to think about all these different variables. What that means is within that industry is competitors are actually competing on many different levels Okay, and the bargaining power of buyers means that they can go to a different Competitor if they've got better quality or if they've got a better price or a few they don't feel satisfied enough as a customer So if an industry is extremely competitive It means that meeting the needs of consumers is the most crucial part otherwise Customers will go elsewhere and this affects the profitability and the attractiveness of the industry If there's more competitors then there's going to be price wars is going to be Improvement in quality, which means the unit cost of that their actual product is going to go up And then they're going to have to lower the price as well and then the margins just squeeze basically So the bargaining power of buys is probably an extremely crucial part within this framework I would argue probably one of the most prominent areas I think customer centric approaches meeting customer needs is Important within any any industry and that is why it's become becoming more important You think about relationship marketing meeting the needs of customers Just helping customers and Having a more longer-term approach with that It's actually become more prominent and the reason why that those sort things have become more prominent is because there's more and more Competition going on there's more people start in businesses, you know making a business is he most industries is very easy You know we're living a technological world now, so There's more competition So there's more needs to fulfill customer need another factor is the threat of substitute products Now what that basically means is if there is something very similar to what your product is within an industry Then they'll choose there. So for example You they may not be many competitors, but they may be other substitutes So you have to ensure that your product or your service is actually good enough so that they don't go to the Substitutes if there isn't a substitute there then obviously that's going to be attractive for you Another crucial point is the bargaining power of suppliers. What that basically means is How much leverage leverage? Does the supplier have so if they are the only supplier of a commodity or? Or piece of machinery or whatever there might have a pattern on it And you're trying to make a business around sort of this element then they're going to have so much power over you They can demand a high price for what they're doing. They can demand They can possibly provide a lower service if that's the only person you can go to just like customers Just like bargaining power of customers So it depends so in terms of the chocolate industry you think of what what sort of things need to be supplied You think you need like cocoa you need like sugar and things like that to make the ingredients now all those things are widely Produced by many different suppliers So what that means it puts the power in the hands of the company to negotiate a better price if there was only one supplier of sugar then They're going to have the upper hand and they're going to be able to negotiate a higher price with the company So it depends how many suppliers there is the more suppliers they are Then the more attractiveness and competitiveness and the more profitability You could get within a particular it market in industry and another important factor is the threat of new Entrance now this could be linked with how hard it is To get into an industry So what are the barriers you think of this you think it's knowledge and innovation Like do you have the staff to actually get within that industry and have the knowledge innovation to do that? Another aspect is Regulation, okay, how difficult is it to get into an industry in terms of legality? And another issue is is the financial aspect? Do you have the money is it feasible financially to get into an industry? Does it cost a lot is there a lot of? Expenditure just even trying to get into that industry to compete now again. You think about maybe the chocolate industry It is relatively I'd say medium to get into the industry because you do need a lot of finance to get into that industry And you do need to have some sort of knowledge of creating good chocolate, right? So you got to have those two things But it also varies within segments. So you think of maybe online It's much easier to say get your own store running a website. It takes Just a day you can create a website in like a day and sell chocolate online sell your own chocolate But if you want to try and get into a supermarket and get on the supermarket shelves That is going to be increasingly hard to do that because there is so many people Trying to get their product on a supermarket shelf. So it also depends upon the avenue You're trying to actually sell your products. What method you're trying to take with that? So the threat of new entrances very important and as I've said, I've already actually give some examples of chocolate Etc. I don't want to go over that again But it's important that all of these factors are congruent with each other Of course some different forces are going to be more important than others within specific industries But it's important to try and create a Analysis that you can actually make strategic decisions from so you need to actually figure out what are the problems? What are the pros and cons within each factor? And then you also need to go further with that is in how can you solve these problems? What can you do to mitigate these problems and Make positive strategic decisions So this is the Porter's five forces framework I'll maybe do some more discussions about this in the future. Hope you've enjoyed the video Don't forget to give the video a like and also subscribe I'll be covering a lot of about marketing frameworks models and Theories and anything sort of to do with business just discussions etc So if you're interested in that sort of stuff do subscribe and I'll see you guys in the next video