A New Set of Forces
Department of Defense Washington United States
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Michael E. Porters Five Forces model offers a visual depiction of the five forces that determine the competitive intensity and therefore attractiveness of a market. The elements of his model for this discussion are not relevant, but the underlying principle of the model isforces can be self-correcting. Any imbalance in one element tends to motivate businesses to take some action to take advantage of the imbalancee.g., entering or leaving the market or raising or lowering prices. The result is that eventually, the industry will approach a state of equilibrium pure competition where profits are minimal. A more simplistic example of self-correcting forces is the venerable law of supply and demand. Changes in the aggregate supply or demand of a product tend to affect the price demanded or the amount of the product offered for sale. The ultimate example of self-correcting forces is the free market itself.