Competition is the biggest threat to a business, no matter how big or small the company is. Businesses should always ask themselves who their competitors are and how the competition will affect their profits. To answer these questions it is necessary to analyze the competition. Porter's Five Forces Model was developed in 1979 by Michael E. Porter of Harvard University. The five categories are designed to infer a company's profitability, based on activities in the local market. The source of profitability is “the same regardless of the sector”. Competition and profitability are driven by the structure of an industry, as opposed to what the industry produces. According to Porter, companies like software companies are profitable when forces are favorable. Airlines and hotel companies are less profitable when the forces are intense. Porter's Five Forces model helps companies analyze their competition using five categories. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an Original Essay The first force in Porter's model is competitive rivalry. This force analyzes the intensity of competition in the market. This is determined by how many competitors exist and what they are capable of doing. Competition is high when a customer can switch between a handful of companies selling a similar product or service at a cheaper price. Competition can create advertising and price wars between competitors. In turn, this can hurt a company's bottom line. For example, Under Armour's competitors Nike and Adidas have large resources that help them gain market share in the apparel category. The second force in Porter's model is the bargaining power of supplies. This evaluates the power and control a supplier has over the ability to increase their prices. When a company's supplier raises prices, the company's profit decreases. This strength also considers the number of available suppliers. Suppliers have the upper hand when there are fewer of them. Suppliers lose power when there are many of them. Under Armor has many suppliers that produce their products and are located in multiple countries. The third force is the bargaining power of customers. This force examines how customers can influence prices and quality. Consumer purchasing power is high when there are few customers. The power of the seller increases when there are many customers. Under Armor has customers ranging from wholesale customers to end customers. Their wholesale customers like Dick's Sporting Goods have bargaining power over Under Armor because they could replace their products with those of competitors for higher margins. The fourth force is the threat of new entrants. This force examines how new competitors entering the market can affect the company's position. The risk is greatest when a competitor can easily enter the market. If there are strong barriers to entry into the market, then a company can maintain the upper hand and benefit from it. The threat of new competitors is low for Under Armor because there are large costs associated with branding, advertising, and demand for the products. However, existing sportswear companies can enter the sportswear industry in the future. The last and final force is the threat of substitute products or services. This force analyzes how easy it is for a customer to switch from purchasing a company's products or services to that of the competition. Cheaper substitute products can weaken a company's position and reduce its profitability. The risk of.