Table of contents
See also:
Porter’s Five Forces of Competition
Threat of New Entrants
Supplier Power
Buyer Bargaining Power
Threat of Substitutes
Intensity of Rivalry
Porter’s Sixth Force Definition
Complementors, Porter’s sixth force, are companies or entities that sell or offer goods or services that are compatible with, or complementary to, the goods or services produced and sold in a given industry. Complementary goods offer more value to the consumer together than apart. When one product or service complements another there exists a condition called complementarity; a sort of commercial symbiosis. Complementors are often considered the sixth force of Porter’s industry analysis framework. The presence of Porter’s complementors can influence the competitive structure of an industry.
Download the External Analysis whitepaper to gain an advantage over competitors by overcoming obstacles and preparing to react to external forces, such as it being a buyer’s market.
Porter’s Complementors Analysis
Porter’s six forces provide a method for industry analysis. The presence of the sixth force of Porter, complementors, can benefit or hurt the firms competing in an industry, depending on the circ*mstances. If business is booming for the complementors, then this could positively affect the business of the firms in the given industry. On the other hand, if business is slow for the complementors, this could adversely affect the business of the firms in the given industry. So, complementors and complementary goods do not necessarily increase or decrease the competitiveness of an industry, they merely add another layer to the structural complexity of the competitive environment.
Sixth force of Porter’s- Example
According to Porter’s six forces, complementary goods offer more value to the consumer together than apart. When one product or service complements another, there exists a condition called complementarity. For illustrative purposes, please consider the following complement examples.
A very simple example of complementary goods, the sixth force of Porter’s framework, is the hotdog and the hotdog bun. A normal consumer prefers to eat a hotdog in a hotdog bun. Rarely would a consumer purchase hotdogs without also purchasing hotdog buns, and rarely would a consumer purchase hotdog buns without also purchasing hotdogs. Under the six forces model Porter coined, these two products are complementary.
In the six forces of competition, an example of complementary industries is the tourism industry and the airline industry. When a consumer heads to a tourist destination, he or she often gets there on an airplane. Similarly, whenever a consumer travels on an airplane, that consumer is most likely going to visit a destination which is a part of the tourism industry, such as a hotel or a rental car agency. These two industries are proved complementary by the six forces analysis.
Porters sixth force has become a central theory to in business management and is commonly discussed to this day.As you use Porter’s sixthforce of competition to shape profit potential, it’s important to expand analysis by evaluating the entire external environment. Download the free External Analysis whitepaper to overcome obstacles and be prepared to react to external forces.
[box]Strategic CFO Lab Member Extra
Access your Strategic Pricing Model Execution Plan in SCFO Lab. The step-by-step plan to set your prices to maximize profits.
Click hereto access your Execution Plan. Not a Lab Member?
Click hereto learn more about SCFO Labs[/box]
Share This Article
Top Articles
Categories
Related Blogs
August 28, 2023
Coaching the Entrepreneur: Learn how to know what you don’t know. How much should I spend on accounting for my company? I have been in the accounting professionfor 32 years, and for the last 6 years, I’ve owned my own consulting firm to assist companies with accounting challenges. There is one common theme that I
August 2, 2023
In this insightful interview, Dan sheds light on the critical role of accounting in business growth and success. Uncover the common pitfalls business owners face when overlooking accounting and how it can hinder access to loans and financial opportunities. Learn why good financial statements are vital for decision-making and attracting investors. With the NearSourcing model,
July 26, 2023
Is your company maintaining accurate, U.S. GAAP-compliant financial records? Are you relying on a Tax CPA vs managerial accountants? Do you struggle to afford the professional, qualified accountants your company needs? These are some of the most common challenges we see working with companies of all sizes across industries. Art Goetz sits down with the
June 1, 2023
In the wake of the COVID-19 pandemic and escalating tensions with China, American companies are actively seeking alternatives to mitigate their supply chain risks and reduce dependence on Chinese manufacturing. Nearshoring, the process of relocating operations closer to home, has emerged as an explosive opportunity for American and Mexican companies to collaborate like never before.
