Porter’s Five Forces
“The goal of competitive strategy for a
business unit in an industry is to find a
position in the industry where the
company can best defend itself
against these competitive forces or
can influence them in its favour.”
Micheal Porter
SUPPLIER POWER
• Supplier concentration.
• Differentiation of inputs.
• Switching costs of suppliers and firms in the
industry.
• Presence of substitute inputs.
• Importance of volume to supplier.
• Impact of inputs on cost or differentiation.
• Threat of forward integration with respect to
threat of backward integration by firms in
the industry.
THREAT OF NEW ENTRANTS
• Barriers to entry.
• Capital requirements.
• Economies of scale.
• Absolute cost advantages: proprietary
learning curve, access to inputs.
• Switching costs.
• Brand identity.
• Proprietary products.
• Government policy.
• Expected retaliation.
RIVALRY
• Industry growth.
• Intermittent overcapacity.
• Fixed costs / value added.
• Product differences.
• Brand identity.
• Switching costs.
• Concentration and balance.
• Diversity of rivals.
• Corporate stakes.
• Exit barriers.
BUYER POWER
• Bargaining leverage.
• Buyer volume.
• Buyer concentration vs. firm concentration.
• Buyer switching costs relative to firm
switching costs.
• Buyer information.
• Threat of backward integration.
• Substitute products availiability.
• Price sensitivity.
• Price / total purchases.
• Product differences.
• Brand identity.
• Impact on quality / performance.
• Buyer profits.
• Decision-makers incentives.
THREAT OF SUBSTITUTE PRODDUCTS OR
SERVICES
• Switching costs.
• Price performance trade-off of substitutes.
• Buyer propensity to substitute.
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