Porter’s Five Forces

Question 1

Porter’s Five Forces:

Answer 1

industry dynamics
- Identifies what is creating challenges/constraints
- Shows what competitive environment looks like
- Examines which industries may be worth entering
- Strong forces (threat) reduce potential for profit → strategies must adapt

Question 2

The 5 forces:

Answer 2

1. *Threat of New Entrants
2. Threat of Substitution
3. Competitive Rivalry Among Existing Firms ↺
4. Bargaining Power of Suppliers
5. Bargaining Power of Buyers

Question 3

Threat of New Entrants

Answer 3

competition (future, current, almost)
- Depends on perspective (inside vs outside industry)
- How easy is it for business to enter & remain in industry
- Effects: can cause big changes & intensify competition

Question 4

Threat of Substitution

Answer 4

competition (future, current, almost)
- Products/services that do a similar job but in different industry
- Effects: creates price ceiling; increases marketing costs

Question 5

Competitive Rivalry Among Existing Firms

Answer 5

• Most powerful force!
• Rivalry among existing firms (sell something similar to you)
• Effects: price competition, lower volume, increased costs

Question 6

Bargaining Power of Suppliers

Answer 6

supply chain
- Who provides your key inputs?
- Effects: cost of inputs

Question 7

Bargaining Power of Buyers

Answer 7

supply chain
- Who pays for your products?
- Effects: reduces price that you can demand; increases costs