Porter's 5 Force Model

If you failed to find a right company for investing your money or If you failed to get a good return over the period of time or you are confused to select the best company in a list then this Feed will help you to take a calculated decision with the help of "Porter's Five Force Model".

There are many tools available to evaluate the fundamentals of a company for taking better decisions related to investment, growth, etc. If you are an investor and want to park your money in equity then you should learn the analysis on the basis of SWOT and Porter's 5 Force Model.

In this feed, we will discuss about Porter's Five Force Model only. Porter's 5 force model says about 5 parameters which helps you to take a good decision. These 5 parameters are -

1. Bargaining Power of Supplier
2. Bargaining Power of Buyer
3. Threat of New Entrants
4. Threat of Substitutes
5. Industry Rivalry / Competition

You can analyze whether a company is fit or not for the investment based on the above 5 parameters. 

1. If a company has a low bargaining power of supplier, which means the company has control over the raw material supplies and less dependency on a single supplier then this company will never face any issue for the raw material and always have adequate supply at right price.
2. If a company has low bargaining power of buyers then the company can charge such a price from buyers that will help company to maintain a good margin.
3. If the business model or presence of the company is strong then there would be less threat of new entrants in the market and it will help company to sustain without any fear.
4. If the revenue model of the company is unique or products of the company could not easily replaced by other company then it has an advantage and it will help the company to grow continuously. This company has no fear of substitute in the market and can work perfectly for mutual benefits.
5. There should be no monopoly rather there should be a healthy competition which can help all the parties in the economy. Healthy competition helps company to grow and motivates more to do better for becoming the better than the rivals. This will ultimately help the company to grow and to customers.

You can check whether the company is good in all the above 5 parameters or not and if company has a good position then you can invest in such company. Such companies will give you good return over the period of time and will not let you down with your decision.

We will learn SWOT Analysis in later feeds, till than Happy Learning.