Porter's Five Forces_v1

CompetitiveRivalry

Bargaining Power of Customers

Bargaining Power of Suppliers

Porter's Five Forces

Threat of Substitutes

Threat of New Entrants

Porter's Five Forces

CompetitiveRivalry

Bargaining Power of Suppliers

Bargaining Power of Customers

Threat of New Entrants

Threat of Substitutes

Competitive Rivalry

• Measure of competition among existing firms in the industry

• Reflected in company positioning, competitive strategy, and advertising

Porter's Five Forces

CompetitiveRivalry

Bargaining Power of Suppliers

Bargaining Power of Customers

Threat of New Entrants

Threat of Substitutes

Bargaining Power of Customers

• This reflects the ability of customers to put the company under pressure - which can then impact customer sensitivity to price changes.

• Buyer power is high if an industry has many alternatives.

Porter's Five Forces

CompetitiveRivalry

Bargaining Power of Suppliers

Bargaining Power of Customers

Threat of New Entrants

Threat of Substitutes

Threat of Substitutes

• A substitute is a different product that meets the same economic need. For example, beef and chicken are substitutes that meet the same need.

• Product differentiation - lowest price or differentiation

Porter's Five Forces

CompetitiveRivalry

Bargaining Power of Suppliers

Bargaining Power of Customers

Threat of New Entrants

Threat of Substitutes

Threat of New Entrants

• New entrants to an industry put pressure on organisations within an industry’s market share. This puts pressure on prices, costs, and the rate of investment needed.

• Barriers to entry restrict this threat - if barriers are high, threat of new entrants is low (good for existing companies) but this suggests exit is likely more difficult

Porter's Five Forces

CompetitiveRivalry

Bargaining Power of Suppliers

Bargaining Power of Customers

Threat of New Entrants

Threat of Substitutes

Bargaining Power of Suppliers

• Reflects the power of suppliers to put the company under pressure. If there are few substitutes, then suppliers have a great deal of power to set prices or even refuse to work with a company.