Porter's 5 forces

1
Porter's 5 forces
Threat of new entrants
Industry rivalry
Bargaining power of suppliers
Bargaining power of customers
Threat of substitutes
2
Porter's 5 forces

• Rivalry is about the competition among existing
  players in the market
• Bargaining power of suppliers includes their
  power to set delivery schedules, quantities,
  prices and standards
• Bargaining power of buyers also includes their
  power to set delivery schedules, quantities,
  prices and standards
• Threat of new entrants covers the possibility of
  companies entering your market
• Threat of substitutes is about the possibility of
  a new technology, product or service making your
  product or service obsolete

3
Rivalry
Determinants of Rivalry

• Industry growth
• Fixed (or storage) costs
• Intermittent overcapacity
• Product differences and brand loyalty
• Switching costs for customers
• Number of organizations and their size
• Diversity of competitors
• Corporate stakes
• Exit barriers

4
Suppliers and customers
Power of Suppliers
Power of Customers

• Brand loyalty and differentiation
• Impact of the product on their product
• Customers own profitability
• Decision makers incentives
• Buyer concentration and volume
• Buyer switching costs
• Buyer information
• Threat of backward integration by buyers
• Existence of substitutes

• Switching costs of changing to an alternative
  supplier
• Availability of substitute inputs
• Supplier concentration
• The importance of volume to suppliers
• Cost relative to the purchasing industry's total
  costs
• The impact of the product on cost or
  differentiation
• The threat of forward integration by suppliers

The Business
5
New entrants and substitutes

• Government policy
• Expected retaliation
• Absolute cost advantages
• Access to distribution channels
• Switching costs for buyers
• Economies of scale
• Product differentiation and brand loyalty
• Capital requirements

Threats of New Entrants
The Business

• Relative price and performance of substitutes
• Switching costs for customers
• Buyers' propensity to substitute

Threats of Substitutes