Five Forces and Product Life Cycle Analysis

Market is the place where demand push and pull of goods or services occur and where business transactions happen. While, industry is the people or companies selling similar goods or services to the same target market. Lastly, sector is the smaller part of industry with different segment.

In creating new business, we have to make a wise decision in which market, industry or segment where we want to operate. This decision requires many factors (both internal and external) to be analyzed carefully so that we can make the right decision. We don't want to enter a market with too intense competition because the chance of winning will be small but an unexploited market with lesser competition will open up chances. There are basically 2 methods that we learned today that can help us analyzing market competitiveness, Five Forces and Product Life Cycle Analysis.

Five Forces Analysis takes into account the external factors that affect sector competitiveness, they are threat of new entrants, bargaining power of buyers, threat of substitute products or services, bargaining power of suppliers and rivalry among existing competitors. We have to understand these five factors in the sector that we want to enter and decide whether they give us opportunities or threats. If more opportunities than threats are presented then we can enter this market easily, but if the result is the contrary then entering this sector may not be possible.

Product Life Cycle represents the stages a product in the market will go through before it should be drawn back and replaced by another product. These stages include introduction, growth, maturity and decline. For us, it is recommended to enter a market with a product in the growth stage because the competition is not as intense as in the maturity stage so that we will not need to make a major innovation in the product, but just a minor alteration of the currently existing product in the market.

These two analysis are very useful for us when we are deciding on setting up a new business. They will help us determine the competitiveness of a certain market, setting up other marketing strategies, allocate resources and deciding on the product innovation that we have to make.