The Explainer: The 5 Forces That Make Companies Successful

The existence of competition in the market allows for companies to become motivated to increase their profits. It may feel like playing the game of tug of war, however, it is much more complex than that.

It's not about being the biggest company, but rather, profitability.

In order to become a profitable company, we must consider the forces that influence profits:

1. Buyers who'd like to pay less but get more
2. Suppliers who'd like to earn more but ship less
3. Substitutes who don't seem like competition but are
4. New entrants who come into the market with competitive pricing making rivals spend more; and
5. Existing rivals

These five forces define every industry's structure and shape companies' future. By understanding how these five forces work, you'll be able to create more competitive strategies and increase your profits.