Porter`s 5 forces
Porter’s Five Forces – Competitor Analysis
Michael Porter’s five forces is a model used to explore the environment in which a product or company operates to generate competitive advantage.
Porter’s Five forces analysis looks at five key areas mainly the threat of entry, the power of buyers, the power of suppliers, the threat of substitutes, and competitive rivalry (advantage).
Michael Porter’s Five Forces: New Entrants
Suppliers Industry competitors and extent of rivalry & advantage Buyers Substitutes
Overview of Porter’s Five Forces
The Porter’s Five Forces model is an “outside looking in” business unit strategy tool that is used to make an analysis of the attractiveness or value of an industry structure.
The Competitive Forces analysis is made by the identification of 5 fundamental competitive forces:
• The entry of competitors (how easy or difficult is it for new entrants to start to compete, which barriers do exist)
• The threat of substitutes (how easy can our product or service be substituted, especially cheaper)
• The bargaining power of buyers (how strong is the position of buyers, can they work together to order large volumes)
• The bargaining power of suppliers (how strong is the position of sellers, are there many or only few potential suppliers, is there a monopoly)
• The rivalry among the existing players (is there a strong competition between the existing players, is one player very dominant or all all equal in strength/size)
Some academics believe that a sixth force could be included – government.
1) Threat of New Entrants -
The easier it is for new companies to enter the industry, the more cut-throat competition there will be. Factors that can limit the threat of new entrants are known as barriers to entry. Some examples include:
• Existing loyalty to major brands
• Incentives for using a particular buyer (such as frequent shopper programs)
• High fixed costs
• Scarcity of resources
• Government restrictions or
Michael Porter’s five forces is a model used to explore the environment in which a product or company operates to generate competitive advantage.
Porter’s Five forces analysis looks at five key areas mainly the threat of entry, the power of buyers, the power of suppliers, the threat of substitutes, and competitive rivalry (advantage).
Michael Porter’s Five Forces: New Entrants
Suppliers Industry competitors and extent of rivalry & advantage Buyers Substitutes
Overview of Porter’s Five Forces
The Porter’s Five Forces model is an “outside looking in” business unit strategy tool that is used to make an analysis of the attractiveness or value of an industry structure.
The Competitive Forces analysis is made by the identification of 5 fundamental competitive forces:
• The entry of competitors (how easy or difficult is it for new entrants to start to compete, which barriers do exist)
• The threat of substitutes (how easy can our product or service be substituted, especially cheaper)
• The bargaining power of buyers (how strong is the position of buyers, can they work together to order large volumes)
• The bargaining power of suppliers (how strong is the position of sellers, are there many or only few potential suppliers, is there a monopoly)
• The rivalry among the existing players (is there a strong competition between the existing players, is one player very dominant or all all equal in strength/size)
Some academics believe that a sixth force could be included – government.
1) Threat of New Entrants -
The easier it is for new companies to enter the industry, the more cut-throat competition there will be. Factors that can limit the threat of new entrants are known as barriers to entry. Some examples include:
• Existing loyalty to major brands
• Incentives for using a particular buyer (such as frequent shopper programs)
• High fixed costs
• Scarcity of resources
• Government restrictions or