Porter's 5 Forces
Porter’s 5 Forces
1. Rivalry among competing sellers a. Strong i. Buyer demand is growing slowly or declining ii. Buyer costs to switch brands are low iii. The products of industry members are commodities iv. The firms in the industry have high fixed costs or high storage costs v. Competitors are numerous or are roughly equal in size and strength vi. Rivals have diverse objectives and strategies vii. High exit barriers b. Weak viii. Buyer demand is growing rapidly ix. Buyer costs to switch are high x. Products of rivals are strongly differentiated and customer loyalty is high xi. Fixed costs are low xii. Sales are mostly among a few large sellers xiii. Rivals are similar in objectives and strategies xiv. Low exit barriers 2. Potential new entrants c. Strong xv. Low entry barriers xvi. Large pool of potential entrants of which some are able to overcome high potential entry barriers xvii. Industry members are looking to expand their market reach by entering product segments or geographic areas that they don’t currently have a presence in xviii. Buyer demand is growing rapidly and there are attractive profits that can be expected to be earned d. Weak xix. High entry barriers due to: 1. Cost advantages from economies of scale, experience, low fixed costs, or access to lower cost inputs, technology or location. 2. Strong product differentiation and brand loyalty 3. Strong network effects 4. High capital requirements 5. Restrictive government policies xx. Industry members are able to contest new entry xxi. Industry outlook is risky and uncertain which discourages new entry
3. Threat of Substitute Products e. Signs of strong competition from
1. Rivalry among competing sellers a. Strong i. Buyer demand is growing slowly or declining ii. Buyer costs to switch brands are low iii. The products of industry members are commodities iv. The firms in the industry have high fixed costs or high storage costs v. Competitors are numerous or are roughly equal in size and strength vi. Rivals have diverse objectives and strategies vii. High exit barriers b. Weak viii. Buyer demand is growing rapidly ix. Buyer costs to switch are high x. Products of rivals are strongly differentiated and customer loyalty is high xi. Fixed costs are low xii. Sales are mostly among a few large sellers xiii. Rivals are similar in objectives and strategies xiv. Low exit barriers 2. Potential new entrants c. Strong xv. Low entry barriers xvi. Large pool of potential entrants of which some are able to overcome high potential entry barriers xvii. Industry members are looking to expand their market reach by entering product segments or geographic areas that they don’t currently have a presence in xviii. Buyer demand is growing rapidly and there are attractive profits that can be expected to be earned d. Weak xix. High entry barriers due to: 1. Cost advantages from economies of scale, experience, low fixed costs, or access to lower cost inputs, technology or location. 2. Strong product differentiation and brand loyalty 3. Strong network effects 4. High capital requirements 5. Restrictive government policies xx. Industry members are able to contest new entry xxi. Industry outlook is risky and uncertain which discourages new entry
3. Threat of Substitute Products e. Signs of strong competition from