Know yourself, Know the Enemy, Know the Industry

“Industry Understanding” is based on Harvard Business School professor Michael Porter’s five-force model (supplier power, buyer power, substitutes, new entrants and competitors) to collect market information, systematically analyze the industry and gain business insight. “2018 China FSMP Industry Report” is an industry report that uses the five-force model to integrate multi-party data and information. 

From the perspective of Industrial Organization Economics, the Five Forces model extracts five factors that determine the intensity of industry competition, which further determines the industry profitability. Five forces include three horizontal competition (substitute, existing competitors and potential new entrants) and two vertical competition (suppliers and buyers). 

With the increase of internet companies, there are more and more examples of synergistic effects of five factors (such as Apple and its applications), thus the competing five-force model is challenged. However, even in Internet companies, the five-force model still the simple and powerful model. Our experience has revealed that to the synergy should be taken into account in addition to competition, which is an improvement of the model with the times.