Porter’s Five Forces


Porter’s Five Forces analytical framework developed by Michael Porter (1979)[1] represents five individual forces that shape an overall extent of competition in the industry. WeWork Porter’s Five Forces is illustrated in figure below: Porter’s Five Forces   Threat of new entrants in WeWork Porter’s Five Forces Analysis Threat of new entrants into the flexible workspace industry is significant. The following are the major factors that affect the threat of new entrants into the flexible workspace industry. 1. Time of entry. Increasing numbers of start-ups and solopreneurs are increasing demand for flexible workspace. Furthermore, COVID-19 pandemic has proved the inefficiency of committing to long-term traditional real estate lease agreements for many businesses. Instead, companies of all sizes increasingly prefer to flexible workspace to accommodate their changing needs for desks throughout the year. This tendency may motivate new players to enter the industry. 2. Massive capital requirements. Leasing real estate and furnishing them into creative open space is expensive. Investors may not be keen to finance such business proposals due to low profit margins and long payback periods of their investment. Massive capital requirement is a serious barrier for new entrants.  WeWork’s co-founder and former CEO Adam Neumann was able to raise billions of dollars for the business by positioning the company as an internet technology company, rather than real estate company it is. 3. Lack of technological barrier. Unlike technological and manufacturing businesses there are no know-how barriers to enter the flexible workspace industry. There is no secret formula or advanced software a company needs to develop to enter the industry.  Massive capital requirement is the only barrier and the absence of other barriers may attract new players into the industry.   Bargaining power of buyers in WeWork Porter’s Five Forces Analysis The bargaining power of buyers in flexible workspace sector…


February 23, 2023
By John Dudovskiy
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Porter’s Five Forces analytical framework developed by Michael Porter (1979)[1] represents five individual forces that shape the overall extent of competition in the industry. Starbucks Porter’s Five Forces are represented in figure below: Porters Five Forces   Threat of new entrants in Starbucks Porter’s Five Forces Analysis Threat of new entrants in international coffee chain industry is low. The following factors reduce the threat of new entrants for Starbuck’s industry within Porter’s Five Forces. 1. Market saturation. Coffee chain market is highly saturated and more so in developed countries. Market saturation implies an increase of a market share for a specific coffee house at the expense of a competitor. New entrants into the coffee house chain business find such a reality discouraging to enter the business and achieve long-term growth. 2. Access to distribution channels. New market entrants are going to face significant issues to access distribution channels because potentially attractive locations for coffee stores are already occupied by coffee chains, restaurants and retail outlets. It took Starbucks 36 years to reach its current status that comprises total more than 33800 company operated and licensed stores.[2] Similarly, other major players such as Costa, Caribou Coffee,McDonald’s, Dunkin Donuts, Pret-a-Manger have secured thousands of advantageous locations during the decades of operations. 3. Economies of scale. Establishing coffee house chains requires massive capital investments. It can prove to be highly challenging to secure investment to establish new business in this industry unless the business plan is based on previously untapped value proposition.   Bargaining power of buyers in Starbucks Porter’s Five Forces Analysis Bargaining power of Starbucks buyers is significant. The following considerations need to be taken into account in this regard: 1. Abundance of choice. Customers can choose from a wide range of established coffee chains as well as local specialty coffee…


October 7, 2022
By John Dudovskiy
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Porter’s Five Forces model is “a generic framework that deconstructs industry structure into five underlying competitive forces or variables”[1]. IKEA Porter’s Five Forces are represented in figure below: Porter’s Five Forces   Threat of new entrants in Porter’s Five Forces Analysis Threat of new entrants to furniture and home appliances manufacturing industry in general is significant. The following set of factors, among others affects the intensity of threat of new entrants into the industry. 1. Lack of regulatory or technological entry barriers. There are no legal or regulatory barriers to enter the furniture industry. Moreover, knowledge barriers are not substantial as well because furniture producing processes do not involve advanced know-how that is difficult to replicate. 2. Economies of scale. IKEA benefits from the economies of scale to a great extent internationally and this advantage allows the Swedish furniture chain to maintain highly competitive prices. No new market entrant would be able to utilize economies of scale to IKEA’s extent and thus, competing with IKEA on price level remains as a highly challenging, if not impossible task. Such a situation discourages potential new players to enter the industry. 3. Distribution channel barriers. Although there are no regulatory or technological entry barriers as discussed above, distribution channel entry barrier exists. It took more than seven decades for the Swedish furniture chain to establish its global distribution network that comprises more than 500 locations in 63 countries. Without such an extensive distribution network it will be hard for new market entrants to present any real threat for IKEA.   Bargaining power of buyers in Porter’s Five Forces Analysis Bargaining power of buyers in furniture and home appliances manufacturing industry is huge. The following factors increase buyer bargaining power: 1. Absence of switching costs for customers. Currently IKEA lacks an ecosystem of products…


August 16, 2022
By John Dudovskiy
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Porter’s Five Forces analytical framework developed by Michael Porter (1979)[1] represents five individual forces that shape the overall extent of competition in the industry. McDonald’s Porter’s Five Forces are represented in figure below: Porter’s Five Forces   Threat of new entrants in McDonald’s Porter’s Five Forces Analysis Threat of new entrants into fast food chain industry is moderate. Potential entrants into fast food chain industry have to deal with the following factors. 1. Massive capital investment requirements. Establishing a fast food chain requires huge financial investments to create an infrastructure, secure leases for locations, purchasing equipments and recruiting staff, among others. Securing funding for a new fast food venture can prove to be challenging taking into account high level of market saturation internationally. 2. Economies of scale. Major market players such as McDonald’s, Starbucks Coffee, Burger King, KFC and Subway substantially benefit from the economies of scale with positive implications on their cost structure. New market entrants, on the other hand, cannot benefit from the economies of scale to similar extend and this may prove to be a significant industry entry barrier. 3. Creativity and innovation. Despite fast food industry entry barriers such as huge capital requirements and economies of scale mentioned above, there is still a chance for new companies to successfully enter the industry. They can do so by innovating in terms of foods to offer, as well, as achieving greater technological integration into various business processes.   Bargaining power of buyers in McDonald’s Porter’s Five Forces Analysis Bargaining power of McDonald’s buyers is immense. The following set of factors, among others determines customer bargaining power in fast food industry: 1. No switching costs to competition. Customers can switch from McDonald’s to any other fast food chain such as KFC, Pizza Hut, Starbucks and Burger King with no…


June 22, 2022
By John Dudovskiy
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Porter’s Five Forces analytical framework developed by Michael Porter (1979)[1] represents five individual forces that shape the overall extent of competition in the industry. The essence of Amazon Porter’s Five Forces is represented in figure below: Porter’s Five Forces   Threat of new entrants in Amazon Porter’s Five Forces Analysis Threat of new entrants into online retail business is significant. The following sets of factors determine the threat of new entrants for Amazon’s industry. 1. Economies of scale. Amazon is the largest internet retailer and internet company by revenue in the world. The e-commerce giant operates more than 175 fulfilment centres worldwide in more than 150 million square feet of space.[2] Although potential new market entrants can copy Amazon business model, they cannot benefit from the economies of scale at the same extent as Amazon. Therefore, economies of scale can be specified as substantial barrier for new entrants. 2. Time of entry. The global market size for online shopping nearly reached USD 4 billion in 2020.[3] It has been estimated that e-commerce sales will surpass USD 740 billion by 2023 in the US alone.[4] Such an increasing popularity of internet shopping naturally attracts new entrants that will attempt to find new niches and competitive advantages. In other words, time of entry is an important factor that increases the threat of new entrants in global e-commerce. 3. Product differentiation. Amazon was able to reach its current position partly because it found an opportunity in online sales in 1994, when other companies didn’t notice or utilise such an opportunities. Likewise, other companies can find new previously unnoticed opportunities in e-retail to threaten the position of established market players such as Amazon, eBay, Alibaba and others. In other words, global e-commerce can be disrupted by start-ups that may find new sustainable sources of competitive advantage.…


March 25, 2022
By John Dudovskiy
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Porter’s Five Forces analytical framework developed by Michael Porter (1979)[1] represents five individual forces that shape an overall extent of competition in the industry. Square Porters Five Forces are illustrated in figure 1 below: Figure 1 Porter’s Five Forces   Threat of new entrants in Square Porter’s Five Forces Analysis Threat of new entrants into the fintech sector is considerable. The following points affect the formation of the threat of new entrants into Square’s industry. 1. Time of entry. Banking and finance is already being disrupted globally and Square has been at the forefront of changes. Nowadays it has become evident that the old ways of conducting financial affairs where businesses had to wait for days, if not weeks to get their loan applications reviewed and employees have to wait for several days to get their cheques cashed will become history soon. Accordingly, some entrepreneurs, as well as, many established financial institutions are currently realizing their own projects to claim their piece of pie in the formation of the new global financial landscape. 2. Expected retaliation from current market players. While there are many entities interested in participating in the formation of new financial systems, any new market entrant will face retaliation from Square. It has to be noted that Square even stood up against deep-pocketed behemoth called Amazon. In 2014 Amazon copied Square’s main product, card reader, undercut its price by 30% and offered free two-day shipping and live customer support.[2] In response Square increased its focus on the quality of its products and customer services. By the end of 2015, Amazon had to discontinue its Register card reader. 3. Legal and regulatory barriers. Finance and banking is one of the most heavily regulated industries worldwide. There are consumer protection laws, anti-money laundering laws, broker-dealer regulations, virtual currency regulations,…


September 29, 2021
By John Dudovskiy

Uber Porter’s Five Forces analytical framework analyses five individual forces that shape an overall extent of competition in the industry. These forces are illustrated in figure below: Uber Porter’s Five Forces   Threat of new entrants in Uber Porter’s Five Forces analysis Threat of new entrants into internet-based ride-hailing sector is significant. The following factors play role in the formation and extent of the threat of new entrants into mobility platform sector: 1. Simplicity of the business model. Nothing about Uber business model or its app is secret. In other words, Uber business model and its app can be replicated by any other company without massive amounts of capital requirements. Thanks to internet-based nature of the business model, new entrants to the market will not have issue to access distribution channels. Furthermore, due to low entry barriers into the ride-hailing industry, the numbers of local and global competitors for Uber have been consistently increasing during the past few years. 2. Scaling issues. While addressing technical aspects of the business such as developing ride-haling app and website may not be difficult, achieving necessary scale in operations is challenging for new entrants. In other words, mobility platform has to attract substantial amount of drivers in order to be successful and this requires time and massive capital investments. 3. Expected retaliation from existing market players. Current market leaders such as Uber, Lyft and Curb defend their territories fiercely and they are expected to retaliate against new entrants to the market.   Bargaining power of buyers in Uber Porter’s Five Forces analysis The bargaining power of buyers in taxi industry is great. Buyer bargaining power depends on the following: 1. Abundance of offers. Buyer bargaining power is mainly fuelled by the abundance of competition in the industry. Uber customers are highly price sensitive. If…


July 21, 2021
By John Dudovskiy
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Porter’s Five Forces analytical framework developed by Michael Porter (1979)[1] represents five individual forces that shape an overall extent of competition in the industry. Tesla Porter’s Five Forces Analysis below contains the application of these factors to analyse the competitive environment for the alternative fuel vehicles manufacturer. Figure 1 Porter’s Five Forces Threat of new entrants in Tesla Porter’s Five Forces Analysis The threat of new entrants into alternative fuel vehicles manufacturing industry is moderate. The following factors play an instrumental role in the formation of threat of new entrants into electric vehicles industry: 1. Compromise between performance and cost of electric vehicles. One of the major challenges for electric vehicles is the bargain or compromise between their performance and cost. On one hand, almost all major automakers such as General Motors, Ford, Toyota, BMW and others have built electric cars that are not very expensive, but performance of these cars are compromised. Specifically, electric cars were known for being slower compared to traditional cars and their batteries did not last for long. On the other hand, Tesla has been able to develop its Model S, Model X and Model 3 cars that are fully electric and boasts with advanced technical characteristics such as high speed and long milage in a single charge. However, such fully electric advanced vehicles are technically challenging and expensive to produce. Any potential new market entrant is going to face the same set of challenges as General Motors, Ford, Toyota, as well as, Tesla. Taking into account the fact that established market players are yet to find solutions to these challenges, it can be argued that unless they find innovative solutions, the new market entrants are going to be overwhelmed by the same set of issues as well. 2. Economies of scale. Established market players…


April 28, 2021
By John Dudovskiy
Category: Marketing
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Porter’s Five Forces analytical framework developed by Michael Porter (1979)[1] represents five individual forces that shape the overall extent of competition in the industry. Apple Porter’s Five Forces are represented in Figure 1 below: Figure 1 Porter’s Five Forces   Threat of new entrants in Apple Porter’s Five Forces Analysis Threat of new entrants into consumer electronics industry is not substantial. The following factors, among others, determine the threat of new entrants into the industry to compete with Apple: 1. Massive capital requirements. Manufacturing technological devices and producing operating systems require massive capital investments. As illustrated in Figure 2 below, the top players in the market invest billions of dollars in R&D in order to keep the pipeline of new products and services active. New market entrants will have to produce new products and services that will have to compete with products and services of top players that invest billions of dollars every year in R&D. Figure 2 R&D spending of top 15 companies in 2018 in USD billions Moreover, capital is needed to obtain resources in general and to attract human resources and talented employees in particular. Accordingly, it is safe to argue that access to capital can prove to be a substantial entry barrier for new businesses. 2. Economies of scale. Economies of scale are substantial entry barrier into consumer electronics and tech industry. New players will find it difficult to compete with established global brands such as Apple, Samsung, Google and HTC that are able to gain cost advantage via economies of scale. In other words, top established market players are able to procure resources at highly competitive prices and run operations at low costs due to the large scope of their operations. New market players, on the other hand, are not able to benefit from the…


February 23, 2021
By John Dudovskiy
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Porter’s Five Forces is a strategic analytical framework developed by Michael Porter (1979)[1]. The framework consists of five individual forces that shape an overall extent of competition in an industry. W.W. Grainger Porter’s Five Forces are illustrated in figure below: Porter’s Five Forces    Threat of new entrants in W.W. Grainger Porter’s Five Forces Threat of new entrants into traditional B2B distribution is not significant. Inter-relationships of the following factors determine the extent of threat of new entrants into industrial distribution: 1. Economies of scale. Economies of scale is a critical success factor in B2B distribution. Grainger purchases more than 1,7 million types of products from approximately 5000 suppliers worldwide.[2] Accordingly, Grainger benefits from the economies of scale to a great extent with positive implications on the cost structure of the business. However, new market entrants are not able to benefit from the economies of scale to a similar extent and therefore, economies of scale emerges as an important entry barrier to the B2B distribution industry. 2. Capital requirements. Industrial distribution is a highly capital-intensive business. In order to be successful and challenge established market players, new entrants need to have wide range of products stored in warehouses and distribution centres. Substantial capital investments are needed to achieve all of these and unless new market entrants do not come up with innovative business models to disrupt the industry, capital requirements are likely to persist as an important entry barrier to the industry. 3. Expected retaliation from existing businesses. Current market players in B2B distribution are likely to retaliate against any new entrants that possess a considerable threat to their market share. This is a noteworthy entry barrier for potential new entrants to the industry. For example, once Amazon Business started to become a formidable player in the global market of…


August 20, 2020
By John Dudovskiy
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