Porter's five forces

Question 1

What are Porter’s five forces?

Answer 1

Threat of new entrants
Competitive Rivalry
Bargaining power of suppliers
Bargaining power of buyers
Threat of Substitutes

Question 2

What barriers may exist with barriers to entry?

Answer 2

Economies of scale
Capital requirement for entry
Access to distribution channels
Cost advantages independent of size
Expected Retaliation
Legislation
Differentiation
Switching costs

Question 3

When is bargaining power of buyers high?

Answer 3

When there is a concentration of buyers, particularly if the volume purchases of the buyer are higher

Question 4

What is bargaining power of suppliers?

Answer 4

Supplier power is likely to be high when:
- Input is important to the buying business
- Supplier industry dominated by a few suppliers
- Supplier products are branded or involve switching costs
- Supplier customers are highly fragmented with little buying power

Question 5

What are the factors affecting level of rivalry within competitive rivalry?

Answer 5

• Extent to which competitors are in balance often leads to highly competitive marketplaces
• Stages of the life cycle
• High storage costs may lead to cost-cutting to improve turnover
• Extra capacity comes in large increments which means price cutting may follow
• High exit barriers means that some companies must stay in the market