Porter’s Five Forces Analysis

By John Dudovskiy
June 6, 2013

Porter’s Five Forces analysis framework comprises five individual forces that shape the overall level of competition in the industry. These forces are threat of new entrants, threat of substitute products, bargaining power of buyers, bargaining power of suppliers, and the extent of rivalry among existing competitors

Porter’s Five Forces Analysis

Threat of new entrants to the industry depends on a range of factors such as the level of capital requirements, the extent of profitability of the industry, possible barriers to enter the industry etc.

Threat of substitute products for the company depend on the level of standardisation of products, the level of depreciation, direct and indirect substitution and a range of other factors

Bargaining power of buyers as a factor impacting the level of competition within an industry depend on the levels of switching costs for buyers, the extent of customer sensitivity to changes in prices, the nature of the product etc.

Bargaining power of suppliers along a wide range of factors depend on the variety of substitute raw materials, the costs associated with changing the supplier, the type of supply-chain management and other factors

Extent of rivalry among existing competitors depend on sustainability of competitive edge, the efficiency of advertising, the level of utilisation of critical success factors for the industry etc.