Five Forces Analysis Worksheet

Topics: Barriers to entry, Brand, Substitute good Pages: 7 (1550 words) Published: October 14, 2011

Exhibit III-1 Five Forces Affecting Industry Structure
ENTRY BARRIERS Economies of scale Proprietary product differences Brand identity Switching costs Capital requirements Access to distribution Absolute cost advantages Proprietary learning curve Access to necessary inputs Proprietary low-cost product design Government policy and international treaties Expected retaliation RIVALRY DETERMINANTS Industry Growth Fixed (or storage) costs/value-added Intermittent overcapacity Product differences Brand identity Switching costs Concentration and balance Informational complexity Diversity of competitors Corporate stakes Exit barriers Strategic alliances (domestic & international)

Threat of  New Entrants

Bargaining Power  of Suppliers

Bargaining Power  of Buyer

INDUSTRY COMPETITORS Threat of  Substitutes 


DETERMINANTS OF SUPPLIER POWER Differentiation of inputs Switching costs of suppliers & firms in the industry Presence of substitute inputs Supplier concentration Importance of volume to supplier Cost relative to total purchases in the industry Impact of inputs on costs or differentiation Threat of forward integration relative to threat of Backward integration by firms in industry

DETERMINANTS OF SUBSTITUTION THREAT Relative price performance of substitutes Switching costs Buyer propensity to substitute

DETERMINANTS OF BUYING POWER Bargaining leverage Price Sensitivity Buyer concentration Price/total purchases vs firm concentration Product differences Buyer volume Brand identity Buyer switching costs Impact on quality/ relative to firm performance switching costs Buyer profits Buyer information Decision makers’ Ability to backward incentives integrate Substitute products Pull-through

Exhibit III-2 Force #1: Rivalry
Rivalry Among Players: How intense is the rivalry/competition among firms in your industry? What can you do to protect yourself from this rivalry? If rivalry is intense (e.g., your industry has high capital costs, high switching costs, high corporate stakes and high exit costs, etc.), don’t assign a star. Consider both domestic and international aspects/influences, as well as strategic alliances. Your Rating:

Detailed Analysis of Rivalry
Factor Number of firms in the industry Relative size and power of firms in the industry Industry growth Explanation More firms means more rivals and more rivalry. Firms of equal size and power have equal resources for sustained retaliation. If growth in your industry is slow, it creates fierce competition for market share; thus more rivalry. If your industry has high fixed costs (i.e., expensive plants) this may cause price cutting as firms attempt to cover their costs. The less differentiated the products of your industry, the fiercer the rivalry. Strong brand identity can increase buyer loyalty and reduce rivalry Capacity that must be added in bunches (e.g., a new bottling facility: will result in intermittent overcapacity. This can result in price cutting to cover fixed costs and intense rivalry. Your Industry

Fixed (or storage) costs

Product differentiation and switching costs Brand Identity Intermittent overcapacity

Exhibit III-2, Continued Force#1: Rivalry (Cont’d)
Detailed Analysis of Rivalry (Cont’d)
Factor Non-cooperation of competitors Explanation If your competitors have difficult reading your intentions, or agreeing on “rules of the game,” conflict will intensify. Rivalry in your industry will be more volatile when the stakes are high. If the survival of players depends on success in this industry, they may “fight to the end.” Economic, strategic and even emotional factors may keep firms from exiting your industry. Firms may resort to “desperation tactics” which destroy industry health. Your Industry

Corporate stakes

Exit barriers

Exhibit III-2, Continued Force #2: Power of Buyers
Buyers: How much power do your buyers...
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