Analyze the potential of your business with Porter’s diamond model.

This is a model devised by Michael Porter, economist and professor at Harvard Business School, an author recognized for his studies on corporate and competitive strategy.

According to Porter, the potential of a company is given by five external forces that can affect the project. These are five factors that will help you understand the competitive position of the company or business in the global market. Analyzing them will offer you more and better control over your business in the market it operates, so that you will have a better ability to plan the most appropriate strategies.

The more organized the consumer is, the more demanding he will be in relation to the products or services offered by the market. In addition, the client is free to choose any other service or product from the competition. Faced with this threat, various strategies can be used, such as increasing investment in marketing and advertising, improving sales channels, increasing product quality and/or reducing its price or providing new added value.

This point of Porter's analysis tries to measure how easy it is for the supplier to vary prices, delivery times, payment methods... If we have a small supplier base, we will have less bargaining power. Before this possible threat and in order not to depend on a single supplier, you can follow strategies such as increasing your portfolio of suppliers, establishing long-term alliances, manufacturing your own raw material yourself.

How accessible are the barriers to entry in your industry or market? Other companies offering the same products could arrive and become your competition. The most important barriers to preserving our market share are focused on product differentiation, the possibility of capital investments, access to distribution channels, or the legal barriers in each country, such as the type of regulations in force. To face this threat we can improve or increase sales channels, increase investment in marketing and advertising to gain market share, reduce the price of the product or increase its quality. Another strategy could be to offer new services to provide new added value to our client.

Sometimes it is difficult to be able to properly identify substitute products. As substitute products, we must consider not only if they perform the same function as ours, but also how they do it and what is required to do it. A substitute product, for example, could reduce the frequency of its use, its life cycle or recycling. One way to raise barriers to discourage our customers from switching to this new product would be, for example; implementing policies that raise the cost of changing or improving our own product as a preventive response to the new product.

This factor is a combination of the previous 4 and offers us the necessary information to establish our positioning strategy in the market and rivalry increases if the competitors are many and well positioned. If we find ourselves in a market that presents a strong rivalry, the rivalry between competitors, we can carry out the following actions, increase the investment in marketing, increase the quality of the product or, reduce our fixed costs, associate with other organizations, provide added value to customers or improve the user experience.

The five forces that Porter describes are very useful, if you are at the point where you want to analyze and measure the potential of your business, as well as the market in which it operates. When you answer these questions, you will have more than enough data to establish a clear strategy map on all your competitors and see how you can differentiate yourself from them.

If you have any questions or prefer that we help you personally, contact our team. Together we will work on the key points to make the most of the business strategy and adapt it to the sector in which you operate so that you can take advantage of it successfully.