ACCA SBL Complete Practice Exam 2026

The purpose of Porter's Five Forces model is to understand the attractiveness of an industry. This framework helps businesses assess the competitive intensity and, therefore, the overall profitability potential within an industry. It considers five key forces that shape how competition operates: the threat of new entrants, the bargaining power of suppliers, the bargaining power of buyers, the threat of substitute products, and the intensity of competitive rivalry.

By analyzing these forces, companies can identify the dynamics that influence their market positioning and develop strategies to enhance their competitive advantage. Understanding the industry's attractiveness allows firms to make informed decisions about entering a market, investing resources, or leveraging strengths to exploit opportunities while mitigating threats.

Evaluating a company's internal resources focuses on its capabilities and assets, which is a different analytical approach. Similarly, analyzing the financial stability of a business pertains to its fiscal health and operations rather than industry competitiveness. Determining the effectiveness of a marketing strategy is concerned with how well a company communicates its value proposition and reaches its customers, rather than the competitive forces affecting the industry as a whole. Therefore, only by comprehensively understanding the attractiveness of an industry can a company position itself effectively for success.