Six Forces Model
Categories: Company Management
Before opening up into a new market, businesses (the smart ones) will take an honest look at the market. One way is the six forces model. Each of the six forces is like its own Power Ranger...ready to power up the business, if news is good.
First force up: competition. You need to know if the market is highly competitive, or if there’s some room to compete.
Second: entrance. Even if there is room to compete, the reason there might not be more businesses in the space is because of high startup costs to enter the market.
Third: buyers. Are they easygoing, or picky pricks? How could they affect prices? If buyers have a lot of say over price, it might be a risky market to get into.
Fourth: suppliers. For instance, if you were starting a bakery, who would supply all of your flour, eggs, and sugar? How do firms work with suppliers in that industry? How do they affect prices? Is there a monopoly-type situation with suppliers and firms in the industry?
Fifth: substitutes, a.k.a. your other competitors. Who are they? What do their markets look like with the six-force model? Yep, getting meta here. How easily could they replace you if you entered the market for consumers?
Sixth: complementary goods, a.k.a. your friends. What goes hand-in-hand with your product? The PB to your J? The Morty to your Rick? Besides maybe teaming up with these guys, it’s important to know how they’ll affect your potential biz otherwise.
If all six of these are good to go, then it’s time for a power-up moment to enter a new market. Powerrrr Uppp.
