Using Porter’s Five Forces to Defeat Unseen Threats

When we think about competition in business, we usually refer to other businesses who directly fight with us for customers. After all, it’s these companies who are the biggest barriers in the way between you and world domination. However, helping your company to reach its potential isn’t as simple as having a better product or message than your competitors. In fact, the biggest threats to many companies are the ones that they’re simply not thinking about.

The Marketing Myopia

Theodore Levitt’s marketing myopia highlighted a very basic, but powerful point. Companies don’t just compete with other companies – instead, they compete with other industries. Levitt cites the case of railroad executives, who in reality must compete with transportation companies of all types – automobiles, taxis, airplanes — in addition to other railroads, and it speaks to the real dilemma in marketing. People only have so much money, and in order to market effectively, you have to show them why they should purchase your product instead of some unknown, unrelated item.

Rethinking the Porter Model

Remember Porter’s five forces?It’s a big deal in marketing classes because it’s a big deal in real life. Basically, there are five outside factors you must consider at all times – suppliers, buyers, substitutes, existing rivals and potential entrants – and each of these can dramatically impact your business.

To take the Levitt example even further, the railroad executive has far more to worry about than other transportation companies. There are suppliers that can literally take the trains off the tracks if they raise their prices or prove themselves unreliable. There are other means of getting around that we don’t even know about that can someday destroy train transport. So, then, the job of the railroad executive isn’t merely to ensure a positive train experience. He or she must also future-proof the company and make sure to properly attend to all of the details behind the scenes.

Think Profit Ahead of Customers

Consider the plight of gas station owners, many of whom entered the industry because gas is an item with inelastic demand. When gas prices dramatically increased throughout the 2000s and 2010s, some gas stations were forced to sell gas at a price lower than their suppliers charged. Although customer flow remained high, these stations lost money on every sale.

The goal of any business is to make money. In most cases, the best way to make money is to deliver a great product that appeals to a large number of people. Unfortunately, if one of those five forces get in the way, profits can be lessened or even eliminated altogether. One dispute with a supplier, or the entry of a tough competitor, can turn a great company into one that bleeds money.

It’s essential to think outside the box and examine the full marketing picture. You’re not just competing against the companies in your industry. In a sense, you’re competing against every company in every industry, suppliers and buyers, and companies and technologies that haven’t even been conceived yet. Being a successful marketer means pleasing many different masters, but none comes before the almighty dollar. It’ll be your job to make sure nothing gets in the way of your company’s profits.