Porter's Five Forces

Threat of New Entrants
1. Greatest where there are low barriers to entry
2. New entrants may already be active in a similar market sector, but in a different geographic market. The threat becomes a reality if they try and expand into your geographic market
  1. E.g. Budget airlines expanding into new bases and therefore taking over existing routes
3. New entrants may arrive from outside the industry
Threat of Substitute Products
1. Likely to emerge from alternative technologies
2. Substitutes may change the whole economics of an industry and threaten the survival of manufacturers of the traditional product
3. E.g. typewriters taken over by PCs. Almost non-existant now
4. E.g. sugar manufacturers threatened by new artificial sweeteners
Intensity of Rivalry between Competing Firms
1. May be high if two or more firms are fighting for dominance in a fast-growing market
  1. E.g. early mobile phone market
2. May be a fight to establish dominant technology
  1. E.g. Blu-ray Vs HD-DVD
3. Companies are likely to engage heavily in promotional activity involving advertising and promotional incentives to buy
4. In mature industries (especially with fixed costs and excess capacity), the intensity of competitive rivalry may be very high
The Power of Suppliers
1. Likely to be high if the number of suppliers is small and/or the materials, components, and services they offer are in short supply
The Power of Buyers
1. Likely to be high if there are relatively few buyers, if there are many alternative sources of supply, and if buyers incur only low costs in switching between suppliers
  1. E.g. grocery shopping

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Porter's Five Forces

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