Porter’s 5 Forces

Question 1

Why does competitive rivalry vary?

Answer 1

Size
Structure
Distribution Channels
Growth
Product Life Cycle

Question 2

What is Porter’s 5 Forces Model

Answer 2

A framework for analysing the nature of competition within an industry, helps assess profitability and attractiveness

Question 3

Name the 5 parts of Porter’s model

Answer 3

Threat of new entrants
Threat of substitute products
Bargaining power of suppliers
Bargaining power of customers
Intensity of Rivalry

Question 4

What happens because of threat of new entrants?

Answer 4

Rivalry will intensify
High barriers to entering the market to be created - startup costs, licensing, EOS

Question 5

What happens because of threat of substitute products?

Answer 5

Meet the same customer needs through customer loyalty
Technological change in new substitutes

Question 6

What happens with the bargaining power of suppliers?

Answer 6

If suppliers have bargaining power:
- sell products at high price
- squeeze industry profits

Suppliers are powerful when:
- supply is scarce
- few large suppliers
- customer is small

Question 7

What happens with the bargaining power of customers?

Answer 7

Exert pressure to drive down prices

Question 8

What determines the intensity of a rivalry

Answer 8

Number of competitors in the market
Market size and growth prospects
Cost structure of industry
Power of buyers and availability of subsitutes