What is the primary purpose of Porter's Five Forces model?

The primary purpose of Porter's Five Forces model is to determine potential profitability in an industry, which is essential for understanding the competitive dynamics within that industry. This strategic management framework assesses the intensity of competition and the profitability potential by analyzing five key forces: the threat of new entrants, the bargaining power of suppliers, the bargaining power of buyers, the threat of substitute products or services, and the rivalry among existing competitors. By examining these forces, businesses can identify the factors that influence industry competitiveness and profitability, which helps in making informed strategic decisions.

Given the context of the other options, evaluating employee performance focuses on human resource management and does not pertain to industry competitiveness. Creating marketing strategies involves examining market opportunities and consumer behavior rather than the broader industry landscape. Performing financial audits is related to assessing the accuracy of financial statements and compliance, which is distinct from analyzing industry profitability. The Five Forces model is specifically designed to provide insights into market dynamics and potential profitability, making it a vital tool for strategic planning and competitive analysis.